Competition law post-hard Brexit – an amputation and some transplants
In the increasingly likely event of a no-deal Brexit, major legislative change will be needed in numerous areas to sever UK law from EU law and ensure that it remains workable in the post-Brexit world. None more so than in the case of competition law which is possibly more integrated with EU law than any other system of domestic law.
In preparation for this, the UK government published on 30 October 2018 draft regulations under the EU Withdrawal Act 2018 (the Draft Competition (Amendment etc.) (EU Exit) Regulations 2019) to excise EU law from the UK competition regime if there is no Brexit deal.
In line with the government's stated intention, the draft Regulations do not provide for dramatic changes to the overall shape of the UK competition regime, but make provision to end the jurisdiction of European courts and institutions and to ensure that the UK competition regime can operate independently of the EU. The draft Regulations envisage a standalone UK competition regime following a no deal Brexit and provide some certainty to businesses on how the UK competition system will operate following Brexit.
When the European Union (Withdrawal) Act 2018 comes into force on Brexit day, EU law (including rights under the EU and EEA treaties, EU competition legislation, and decisions of the European Commission), will be incorporated into UK law. The draft regulations will revoke these laws and correct any resulting deficiencies in relevant UK competition legislation, for example references to Article 101 and 102 TFEU and EU institutions will be removed.
Here, we look at the key changes that the regulations would bring to competition law in the UK after a no-deal Brexit:
- Competition prohibitions. The general prohibitions on restrictive agreements and abuse of dominance under Chapters I and II of the Competition Act 1998 will remain unchanged although references to Article 101 and Article 102 of the TFEU will be removed (see below). Since the national prohibitions closely reflect the EU prohibitions this will give rise to no immediate change. However, there will be scope for courts and the Competition and Markets Authority ("CMA") to diverge from the EU rules in the future.
- Block exemption regulations. The current EU block exemption regulations will be incorporated into UK law, including important block exemptions for vertical agreements and technology transfer agreements. Again, references to EU legislation and institutions will be removed, but the categories of agreements that are exempt from Article 101 and the Chapter I prohibition will continue to benefit from relevant exemptions under the block exemption regulations in the UK following Brexit. The retained block exemption regulations are due to expire between 2022 and 2026, and on expiry the UK government will decide whether they should be renewed.
- Removal of references to EU law and institutions. The draft Regulations remove all references to EU law and institutions, such as Articles 101 and 102 TFEU and the European Commission, from domestic primary and secondary legislation relating to competition law.
- Interpretation of competition law. UK competition regulators and courts will no longer be obliged to interpret competition law in a way that is consistent with EU law. The Regulations introduce a new s.60A, to replace s.60 of the Competition Act 1998. S.60A will apply to domestic competition regulators and courts in all UK cases and investigations even if the facts of the cases arose before Brexit, or an investigation was opened before Brexit day. Under s.60A, domestic competition regulators and courts will have to ensure that there is no inconsistency with pre-Brexit EU law (which includes the principles laid down by the TFEU and the European Courts before Brexit day) when interpreting UK competition law. They must also 'have regard' to any relevant decision or statement of the European Commission which is made before Brexit day and not withdrawn. However, they may diverge from pre-Brexit EU case law under certain circumstances, and will not be bound by EU law, including revised judicial interpretations of pre-Brexit EU law, made after Brexit day. We therefore may see diverging interpretations of pre-Brexit EU law by the UK courts and courts across the Channel.
- Competition litigation. Currently, claimants may bring an action in the English courts for 'follow on' damages, based on decisions of the European Commission and European Courts on infringements of EU competition law. The English courts have to date been a popular forum for such claims because of perceived favourable rules on limitation periods and disclosure. The Regulations amend the Competition Act 1998 so that decisions of the European Commission will no longer be binding on the English courts, and that English courts will no longer be required to treat decisions of the national competition authorities of Member States as binding evidence of a breach of EU competition rules. In practice, this means that after Brexit day, claimants will no longer be able to rely on decisions of the European Commission reached after Brexit day as a basis for follow on claims. Claims based on decisions of the European Commission will be treated as standalone claims, where claimants will have to prove that the defendant has breached EU competition law. This could have a significant effect on the amount of competition damages litigation brought in England and Wales. However, much will depend on the attitude of the courts and judges' willingness to treat European Commission decisions as strong prima facie evidence of breach of a foreign tort (i.e. a breach of EU competition law in another Member State). If that is the case, England and Wales, with the advantages mentioned above, may remain a popular forum for damages litigation.
- Antitrust investigations. The CMA and other national competition regulators will no longer have the power to investigate infringements of EU law, or to apply Articles 101 and 102 in the UK. The CMA also may not open investigations into infringements of UK competition law where the European Commission has relieved the CMA of competence of an investigation and made an infringement decision (which has not been subsequently annulled). However, the CMA will otherwise be able to investigate infringements of UK competition law that occurred before or after Brexit day, including in cases where the European Commission has relieved the CMA of competence to investigate but not reached a decision.
- Mergers. The Enterprise Act 2002 will be amended so that the EU Merger Regulation ("EUMR") is revoked, as the UK will no longer be part of the EU merger control regime. After Brexit day, the CMA will have the power to review all mergers that affect the UK market, even if the transaction is already being reviewed by the European Commission. For merger cases which have been notified or referred to the Commission under the EUMR before Brexit and continue after Brexit day, unless the Commission has made a merger decision, the UK aspects of those cases will return to the jurisdiction of the CMA (provided the merger would be caught by the review thresholds under the Enterprise Act 2002). Businesses may therefore be looking at parallel merger filings post-Brexit day, even for merger cases that are mid investigation by the European Commission on Brexit day. Businesses are encouraged to engage with the CMA at an early stage where this is likely to arise, to establish whether they need to start pre-notification discussions with the CMA.