On 20 July 2021, the UK Government’s Department for Digital, Culture, Media & Sport (“DCMS”) and Department for Business, Energy & Industrial Strategy (“BEIS”) published proposals for a new regulatory regime for digital markets alongside accompanying consultation documents (the “Consultation”). The Consultation seeks views from interested parties and closes on 1 October 2021.
What is happening and why?
On 30 June, the UK Government announced its draft Subsidy Control Bill (the “Bill”) which sets out the framework for how the UK will subsidise businesses post-Brexit. The UK government has hailed the Bill as a major departure from the EU state aid rules. In practice, the Bill provides a framework for implementing the UK’s international commitments on subsidy control, as set out in the Trade and Cooperation Agreement agreed with the European Union, and in other existing international trade obligations and World Trade Organisation (“WTO”) rules.
The Bill introduces a decentralised subsidy control framework outlining principles with which public authorities must comply when awarding subsidies. One of the key aims of the Bill is to ensure that the subsidy control regime is not used to encourage a “race to the bottom” between different regions of the UK.
While there are some important differences as compared to the EU state aid regime, the fundamental principles are comparable and any subsidies given under the Northern Ireland Protocol will continue to be governed by EU rules.
- Aid for projects funded via certain EU centrally managed programmes under the new Multiannual Financial Framework; and
- Certain State aid measures that support the green and digital transition and are also relevant for the recovery from the economic effects of the coronavirus pandemic.
UK Government Confirms Commencement Date and Scope of NSI Regime
The UK Government has announced that the National Security & Investment Act (“NSIA”) will come into force on January 4, 2022. The NSIA introduces mandatory notification and pre-clearance requirements for certain qualifying acquisitions of control of companies active in 17 ‘core’ sectors. The NSIA also enhances the powers of the UK Government to call-in for review other transactions which fall outside the mandatory notification regime but where national security concerns are considered to arise. The NSIA applies to all investors, irrespective of nationality, including those from the UK. To support the legislation, the UK Government has established an Investment Security Unit (“ISU”) within the Department of Business, Energy and Industrial Strategy (“BEIS”) to manage and lead the assessment of filings that are received, including voluntarily, under the NSIA regime. An overview of the NSIA is provided in our earlier blogs – UK National Security and Investment Bill is published and the National Security & Investment Law is approved by Parliament.
On 13-14 July, Covington’s Peter Camesasca and Sophie Bertin participated in panels discussing developments in Foreign Direct Investment (“FDI”) and Competition enforcement and compliance at the annual Competition Law Asia-Pacific Conference.
Foreign Direct Investment Regimes
On the first day of the conference, Covington partner Peter Camesasca moderated a group of diverse panellists on recent developments in FDI regulation regimes across the APAC region. Prof. Nell Lixia Zhou (Competition Law Center, University of International Business and Economics, Beijing) presented on the new FDI regime implemented in China, focusing particularly on: (1) the pre-entry national treatment of foreign investment and the Negative List; and (2) the investment promotion and protection aspect of the Foreign Investment Law. Carlo D’Andrea (EU Chamber of Commerce in China) shared insights from the Chamber’s most recent Business Confidence Survey of European companies active in China. Following on from the discussion on China, Ted Burgell (Business Council of Australia) reflected on recent changes to the more mature Australian FDI regime, including the new requirement for approval from the Foreign Investment Review Board (“FIRB”) in the case of proposed investments that raise national security concerns, regardless of the investment’s value, along with the FIRB’s powers to review investments and impose penalties. Arunan Kumaran (APEC Competition Policy and Law Group) discussed the varying approaches to FDI in the broader APAC region and what measures are needed to facilitate FDI in the context of the Covid-19 pandemic and trade wars in the region. Finally, Peter Camesasca rounded off the session by sharing perspectives on European FDI regimes and recent developments in light of the pandemic.
In-House Perspective: Addressing Challenges in Enforcement and Ensuring Compliance
The following day, Sophie Bertin participated in an insightful discussion with in-house counsels Welly Tantono (Secretlab) and Aidil Tupari (Petronas), on antitrust enforcement and compliance in the context of the Covid-19 pandemic and beyond. The panellists discussed challenges they have faced in operating a compliance programme virtually via digital means over the past year, with regards to delivery of training, on-boarding and integration of new employees, risk management, and embedding compliance culture from afar.
Covington regularly publishes content covering developments in the FDI and Competition Law. Covington blog readers may be interested in the videos below, in which Peter Camesasca, Horst Henschen and Katherine Kingsbury discuss recent developments in the regulation of foreign direct investments (“FDI”) in Europe.
Foreign Direct Investment Regulation—German Developments
Foreign Direct Investment Regulation—UK Developments
EU Regulation on Foreign Subsidies
Covington’s four-part video series offers snapshot briefings on key emerging trends in UK Competition Law. In part four, James Marshall and Sophie Albrighton look across the horizon at the CMA’s plans for the future: what are the proposed reforms for competition law in the UK, what is the CMA looking to do post-pandemic, what are trends in terms of sustainability in competition law, and how will regulators cooperate internationally? They are joined by guest speaker Thomas Reilly, Head of Covington’s UK Public Policy practice based in London.
Pressed for time? Click here to download this session’s key takeaways.
In May 2021, the Court of Justice of the European Union (“CJEU”) published the summary of an appeal filed by the International Skating Union (“ISU”) against a ruling from the General Court (“GC”) which found that ISU rules restricting athletes from taking part in rival events infringed Article 101 TFEU. At the same time, a Spanish judge referred questions to the CJEU for a preliminary ruling concerning the compatibility of UEFA and FIFA regulations with EU competition law, which forced UEFA, the governing body of European football, to suspend disciplinary proceedings against members of the recent European Super League (“ESL”) that have not yet abandoned the project (i.e., Juventus, Barcelona and Real Madrid). This note briefly analyzes how the CJEU’s ruling on the ISU case could frame the response to the reference from the Spanish court.
On 3 June 2021, the European Court of Justice (“ECJ”) in case C-563/19 P Recylex v Commission dismissed Recylex’ appeal both to adjust its ranking in the leniency process and to receive partial immunity for parts of its participation in the Car Battery Recycling cartel. The judgment, on appeal against the judgment of the General Court (“GC”) of 23 May 2019, provides guidance to companies considering a leniency application when there is already an ongoing European Commission (“Commission”) investigation.
Applying for leniency enables cartel participants to obtain reduced or annulled fines. The 2006 Commission Notice on Immunity from fines and reduction of fines in cartel cases (“Leniency Notice”) sets out the key principles:
- the first company providing the Commission with sufficient evidence for an investigation will be granted full immunity;
- subsequent applicants can receive fine reductions of 30-50%, 20-30% or 20% depending on the timing of their submission; and
- companies can receive partial immunity for providing the Commission with details expanding the scope of the infringement.
Back in 2020, the French Competition Authority (“FCA”) had announced, in its annual priorities, its interest in the competition implications of the digital revolution in the financial sector, notably in the context of the growth of FinTech, the introduction of blockchain technology and the emergence of “digital giants” in payment services. Shortly after this announcement, on 13 January 2020, the FCA started an ex officio investigation to assess the competitive situation in the sector of new technologies applied to financial activities and, more specifically, to payment activities.
More than a year later, in a public opinion of over 120 pages, the French Competition Authority (“FCA”) provides its initial conclusions (i) noting the emergence of new services, initiation channels and alternative payment methods, (ii) reporting on a new market dynamic with the arrival of new players and the impact on traditional banking groups and (iii) addressing some of the competition issues facing the sector.
On 6 May 2021, the European Commission (“Commission”) published the findings of its evaluation of the horizontal block exemption regulations for Research & Development (“R&D BER”) and specialisation agreements (“Specialisation BER”, together “HBERs”), as well as the accompanying Horizontal Guidelines (“Evaluation”).
The Commission launched the Evaluation in 2019 to assess the future relevance of the HBERs and the Horizontal Guidelines, since their adoption in 2011 and 2012. It gathered a variety of evidence on the functioning of the HBERs, which included:
- findings of an open public consultation running from November 2019 to February 2020;
- responses to the call for contributions on Competition Policy and the Green Deal launched in 2020; and
- an external evaluation support study, which cross checked the public consultation and the responses received with the Commission’s and national competition authorities’ own experiences.
According to the Commission, the results show that, while still relevant and useful to businesses, there is a need for the HBERs and Horizontal Guidelines to better reflect recent socio-economic developments like digitalisation and sustainability. The Evaluation also identified that businesses perceive some rules as unnecessarily strict and unclear.