Potentially significant changes are just around the corner for the UK competition system, as the country prepares to take the final step of exiting the European Union. In this regard, the UK has three potential options: (i) leave with a deal; (ii) leave without a deal; or (iii) postpone the date of leaving. Should the UK leave the EU with a deal, then its departure shall be governed by the Withdrawal Act ( “WA”), which simply confirms much of the competition framework will remain until December 2020 (the “Transition Period”). At the time of writing, the WA still awaits Parliamentary approval. In the case that the UK leaves without a deal in place, then from 29 March 2019 competition law will be governed by the statutory instrument titled The Competition (Amendment etc.) (EU Exit) Regulations 2019 (“No Deal Regulation”).
A very brief summary of the key differences between the WA and the No Deal Regulation in terms of the effect on the UK competition framework is as follows:
- Under the WA, EU competition rules will continue to apply during the WA Transition Period. The UK Competition and Markets Authority (“CMA”) will retain its power to investigate antitrust cases in the UK, under competition law at both the UK and EU level. However, the European Commission will have no power to carry out dawn raids in the UK, nor to ask the CMA to do so on its behalf.
- Under the No Deal Regulation the CMA is empowered to open ongoing cases with effects on the UK market which are already being investigated by DG Comp from exit day, provided that no formal infringement decision has been issued by DG Comp. Existing EU block exemptions would be integrated into domestic law, although any new EU block exemptions will likely not be adopted by the UK and it remains to be seen how closely the UK will mirror future developments in EU law in a post-Brexit environment.
- Under the WA, during the Transition Period the status quo will be maintained, with cut-off points to be agreed between DG Comp and the CMA regarding ongoing EU matters. Should DG Comp initiate an investigation prior to the end of the Transition Period, then all judicial options currently available will apply. UK-based damages actions may be founded upon any infringement decisions leading from an investigation which was initiated by DG Comp during the Transition Period.
- Under the No Deal Regulation, the UK courts will not be bound by DG Comp infringement decisions made following exit day. Follow-on damages actions may only be made in the UK courts regarding DG Comp infringement decisions made before exit day. This applies even where the appeal process for the said infringement decision has not been exhausted as of exit day. For DG Comp infringement decisions made on, or after, exit day, it will not be possible to base damages actions in the UK courts – however, such actions can be alternatively framed as a foreign tort claim.
Section 60 Competition Act
- Section 60 (“s.60”) of the Competition Act 1998 requires that there should be consistency, where possible, in the application of UK competition law in line with EU competition law. The WA currently does not address this ‘guiding principle’ of the Competition Act. Therefore, in theory, the UK courts could at least be required to maintain consistency with previous CJEU competition decisions.
- Under the No Deal Regulation, s.60 is removed and replaced with a new ‘s.60A’. This provision binds the UK courts to pre-exit CJEU case law, but also empowers them to depart from a decision in limited, defined circumstances. This power is permissive as opposed to obligatory, with s.60A applying straight away to all proceedings.
- Under the WA, the CMA will closely monitor cases over the Transition Period and decide which matters to refer to/ leave with the EU, and which it will take over from a UK perspective, following the end of the said period. Post-Transition Period the CMA may take on the monitoring of UK-specific remedies and commitments in relation to previous EU decisions where these can be shown to be UK-focused.
- Under the No Deal Regulation the applicable merger thresholds in the UK will not change. In relation to cases opened prior to exit day, should the Commission issue a decision prior to exit day then the CMA has no jurisdiction over that merger unless annulled, in full or in part, following an appeal. Should the Commission have not issued a decision before exit day, then the CMA is permitted to take jurisdiction over the merger and UK national merger control law will apply. Where cases are opened post-exit, the CMA will no longer be prohibited from investigating cases with an EU dimension, meaning that mergers may be subject to review from both the Commission and the CMA.
On the 28 January 2019, the CMA published its draft guidance (“Guidance”) explaining how the UK’s no deal exit from the EU will affect the powers and process of the CMA for antitrust, cartel enforcement, merger control and consumer protection law. The Guidance also explains the treatment of live cases in a no deal scenario. Concurrently, the CMA also published a companion consultation document (“Consultation”), seeking views on whether the information provided in the guidance is clear, comprehensive and useful for its intended readers. Responses to the Consultation may be provided up until 25 February 2019.
This post forms part one of a two-part Brexit and competition law series, the second of which focuses on State aid and can also be found on the Covington competition blog.