Brexit and Competition Law: CMA publishes guidance on its role in a “no-deal” scenario

On 29 October 2018, the government laid ‘The Competition (Amendment etc.) (EU Exit) Regulations 2019’ (the Competition SI) before Parliament. The Competition SI makes provision for the transition to a standalone UK competition regime after exiting the UK in a ‘no-deal’ scenario. The next day (30 October) the CMA published two notices, one on mergers and one on antitrust cases setting out the way it intends to proceed in the event of a ‘no deal’ scenario based on the Competition SI. These notices follow guidance published in September 2018 by Department of Business, Energy and Industrial Strategy on merger review and anti-competitive activity in a “no-deal” Brexit scenario. 

Mergers

Whether the UK leaves the EU with or without a negotiated agreement, it is inevitable that the CMA will have to take on some of the burden of merger reviews from the European Commission. The CMA has now clarified that in a no-deal scenario, the CMA will have jurisdiction to review the UK aspects of mergers that are still being reviewed by the Commission on 29 March 2019, provided that the usual merger control thresholds are met, i.e. if the CMA has reasonable grounds to suspect that the transaction may give rise to a relevant merger situation. 

Any company engaged in a merger to which this is likely to apply to should discuss the possible ramifications with the CMA at an early stage in the transaction, particularly where the merger is likely to give rise to UK competition issues. The CMA may then suggest to such companies that they enter into pre-notification discussions with the CMA in parallel with any EU review. The CMA has been monitoring non-notified merger cases that may fall into this category, and will continue to do so in the lead up to the withdrawal date. 

The UK will have no jurisdiction over mergers that have been reviewed by the Commission and where a decision has been published before 29 March, unless the decision is subsequently annulled. Provided the Commission has not issued a decision on or before 29 March, the CMA will no longer be excluded by the EU Merger Regulation from taking jurisdiction over the UK aspects of the merger and the provisions of the Enterprise Act 2002 will therefore apply. 

For mergers referred to the CMA by the Commission before the withdrawal date, the CMA’s usual processes will apply. 

Antitrust

Following the UK’s exit from the EU, the CMA will no longer have jurisdiction to apply Article 101 TFEU on anti-competitive agreements and Article 102 TFEU on abuse of dominance. The CMA’s jurisdiction will extend only to applying the equivalent UK national prohibitions in the Competition Act 1998 (Chapter I and Chapter II). 

The CMA’s guidance notes that section 60 of the Competition Act 1998, requiring the CMA and UK courts to interpret UK competition prohibitions consistently with CJEU decisions and principles, will no longer apply under the Competition SI (including to cases already opened on or before 29 March 2019). A new provision, section 60A, will apply instead. This provision will oblige the UK competition enforcers and courts to ensure there is no inconsistency with the pre-exit EU competition case law, however they will have the power to depart from the EU case law where they “consider [it] appropriate in the light of particular circumstances”. 

On exit, the CMA may conduct investigations into breaches of the domestic prohibitions before or after exit day, including cases where the CMA was relieved of its competence by the European Commission. However the CMA will not be able to open investigations, where before exit, the Commission reached an infringement decision that has not been subsequently annulled. 

Seven EU Block exemption regulations will be retained in EU law in amended form. In practice this means that agreements that met the criteria of these block exemption regulations remain exempt from the UK provisions.

The relevant block exemption regulations are:
  • Liner shipping regulation (expiring 30 April 2020)
  • Transport regulation
  • Vertical agreements regulation (expiring 31 May 2022)
  • Motor vehicle distribution regulation (expiring 31 May 202)
  • Research and development regulation (expiring 31 December 2022)
  • Specialisation agreement regulation (expiring 31 December 2022)
  • Technology transfer regulation (expiring 30 April 2026)

The power to amend or revoke the block exemptions is transferred to the Secretary of State under the Competition SI. The CMA expects to consult on the block exemptions as they expire in order to advise the Secretary of State. 

The CMA’s antitrust notice added that following a no deal Brexit, any existing or potential applicant for leniency under the Commission’s leniency programme in respect of conduct also covered by the CMA’s leniency programme should make a separate application for leniency to the CMA. 

While these notices give some initial guidance on the CMA’s approach, it is hoped that the CMA will publish further advice for the benefit of companies that are likely to be affected, particularly if the prospect of a no-deal Brexit becomes more likely. Indeed it is highlighted in the notices, that the CMA shall keep under review the necessity of further guidance or updates and shall add to the notices as appropriate.

CLIP of the month: Strengthening Buyer Power as a Solution to Platform Market Power?

Each month we publish a ‘CLIP of the month’, a publication that we have found to be controversial or thought provoking (if you haven’t noticed this feature before, see above, look to the right of your screen, just below the header!).

This month’s CLIP (available here) comes from two of the CMA’s economists, writing on the dynamics of platform-to-business relationships, and the options for market solutions in the face of calls for greater regulation.  According to the authors, the key is finding a market-based counter-balance to the power held by platforms. The authors theorise that this could come from the collective bargaining power of the platform’s users. 

It is welcome to see individuals from within the competition authorities considering the alternatives to regulation, which could prove difficult in such a fast moving area.  It is also notable that the UK may seek to move in a different direction from many of the EU member states which appear to favour greater regulation.  However, such market-based alternatives may themselves face competition law challenges, given the risks that exist around collective bargaining and exchange of information between competitors.  At least some of these risks are recognised by the authors (and it is worth reading an economist’s perspective on this from David Parker of Frontier Economics, here).   However, without some kind of safe harbour for such discussion across all relevant territories, the competition law risks are likely to remain a significant disincentive to such collective action.  There may also be a problem of timing.  In the case of existing businesses, the incentive and ability to challenge platform market power may be at their highest before true platform market power emerges.  

The role and (potentially) regulation of platforms is likely to remain a key area of debate in competition policy for the foreseeable future.

BEIS notice on competition law in the event of a ‘no deal’ Brexit

With Brexit fast approaching, the government has issued further technical notices that set out its plans in the event of ‘no deal’ with the EU27 (our post-referendum view on possible negotiated alternatives are here, although at present the only alternative to no deal remains the so-called Chequers plan).  Issues covered in the notices include the potential loss surcharge-free mobile roaming, the UK’s withdrawal from innovative space programmes, and additional certification requirements for manufacturers.  

However, of most interest to us was the BEIS guidance on ‘Merger review and anti-competitive activity if there’s no Brexit deal’.  It’s short, and perhaps does not say much that is new or surprising, but to summarise the key points:

  • The domestic UK competition regime will remain in place, unchanged bar the removal of references to EU law and institutions, and duties under EU obligations. 

  • The EU block exemptions which are applied as parallel exemptions under UK law will be preserved; so companies that benefit from any applicable exemption will continue to do so, and any new agreements meeting the relevant criteria will also benefit. 

  • The European Commission will not begin investigations into the UK aspects of mergers or cases involving potentially anti-competitive conduct. 

  • There may be no agreement on jurisdiction over live EU merger and antitrust cases which address effects on UK markets (this could include the Commission’s investigation into Aspen’s pricing, Guess’ distribution systems, and geo-blocking by Steam and video games companies).

  • The CMA and UK will no longer be bound to follow future CJEU case law. 

  • A decision made by the European Commission could no longer be relied upon as a binding finding of an infringement in follow-on claims.  

  • A number of the rules governing jurisdiction for damages claims would be repealed (these are covered in a separate notice), and the UK would revert to the existing common law and statutory rules that apply in non-EU cross border disputes.  The UK would however retain the Rome I and Rome II rules on applicable law. 

The confirmation that block exemptions will be preserved does provide some reassurance for UK companies, but there still remains a lot of disconcerting uncertainty – particularly for any company currently engaged in merger talks and at risk of being engaged in a ‘live’ review come 29 March 2019.  However, the government is clearly focusing on solutions to the issues raised earlier this year, and is communicating developments to try and provide certainty for UK businesses; we hope this progress continues with as much transparency as possible.  

As regards the potential for lack of jurisdiction over ongoing merger and antitrust cases, the advice to ‘take independent legal advice’ will be of little comfort to business in view of the significant ongoing uncertainties.  Whilst a pragmatic solution can readily be identified for antitrust cases which address past conduct (and where, as a result, jurisdiction should follow the legal regime in place at the relevant time), the position is less obvious as regards forward-looking merger analysis.  Given the flexibility of the UK’s voluntary merger notification regime, it is to be hoped that further guidance will be forthcoming from the CMA over the next few months should a no-deal exit become inevitable.

Online advertising – Government acknowledges challenges ahead for competition law

We reported a few months ago on the House of Lords Communications Select Committee's report on advertising in the digital age.

The Committee’s report set out the challenges currently facing the UK’s advertising industry in light of factors such as Brexit and the ever-expanding digital economy.  Notably, the Committee called on the CMA and other regulatory bodies to adopt robust standards for online advertising and made several recommendations to the Government of ways to help ensure that digital advertising “is working fairly for businesses and consumers”.

Following on from that report, the Government has now published its response.

What was the Government's response?

The following aspects will be of interest to competition lawyers:

  • The Government acknowledged that the regulatory challenges posed by the online advertising industry are extensive. The Government encourages continued self-regulation of online advertising, but may consider legislating in this area. A White Paper that focuses on online harms will be published later this year, which may shed light on any planned legislation relating to online advertising. 
  • In relation to the lack of transparency in the digital media advertising market, the Government stated that it is keen to gather more evidence on the business models in this market. This will hopefully form part of the Digital Charter's work programme and will be included in the Carincross review into the sustainability of the press (expected early 2019). However, it noted that because the CMA is an independent authority, the Government‘s powers to direct the CMA to undertake an investigation or study are extremely limited. 
  • Despite receiving an increase in funding, it remains unlikely that the CMA will have sufficient resources to fund a wide-ranging market study into digital advertising. This is because the additional £23.6 million funds allocated to the CMA by the Treasury will be going towards preparation for Brexit.  Market studies are cost intensive for the regulator, and many have speculated that they may be a likely casualty of the CMA’s increased enforcement responsibilities. 
  • The Government is to conduct an overall consumer markets review, to be completed by April 2019. As part of this review, the Government will consider how best to ensure the UK's competition framework is effective in responding to challenges presented by digital services.

The response to the Committee’s report indicates that the Government acknowledges the need to gather more evidence and to develop better tools in order to be able to deal with potentially complex competition issues arising in digital ad markets.  It also notes the overall preference for self-regulation (which should allow markets to self-correct), rather than introducing a rigid regulatory framework. However, with the CMA about to take on the burden of cases that would normally be dealt with by the European Commission, it remains to be seen whether the UK will be able to adapt quickly to the particular challenges posed by rapidly evolving digital markets. 

Bienvenue à Bruxelles! Bristows’ Competition and Regulatory teams visit the new Continental Base

Last month, the entire Competition and Regulatory departments took the opportunity to tour our new Bristows office and to explore its Belgian base

Since Bristows opened a Brussels office in May this year, members of the Competition team have been flitting back and forth across the Channel for meetings with European clients.  However, this was the first time that the whole team had been assembled together at our continental abode.  The trip comprised of a visit to the new office, followed by dinner and drinks next to Brussels’ famed Grand Place.  The following morning some of the team went on a tour of the European Parliament building, before saying “À bientôt” and heading back to the London office. 

After disembarking from the Eurostar, the team headed straight over to the new Bristows branch.  A prime location within the centre of Brussels – it took our group about a minute to walk from the Metro station to the office building – the new base will prove useful for Bristows lawyers supporting a large number of clients on matters of EU law; especially for matters that come before the European institutions.  

Once we arrived we were shown around by Competition partner Stephen Smith, who heads up the Brussels division.  The office is stylish and sophisticated, with some tech start-up-style features such as communal working areas, flexible desk booking, and most importantly, a first-rate coffee machine.  After checking e-mails and settling in to the new office, we made our way across town to the heart of the old city, where we enjoyed a delicious dinner at a traditional Belgian bistro. 

The next morning, several members of the team went on a guided tour of the European Parliament.  Our guide gave us a talk about the history of the EU and the role of the European Parliament, before showing us the main chamber, the Hemicycle, where high-profile debates take place between MEPs during the Parliament’s plenary sessions.  Our guide pointed out the booths around the Hemicycle where the translators work.  These translators usually speak 5 or 6 of the 24 official languages of the EU, and are able to translate what is said by an MEP or guest speaker within 2 or 3 seconds of it being said.  This gave us all a greater appreciation of the incredible work that goes on at the European Parliament.  Overall we were given a fascinating insight into the EU institutions, and the tour was a wonderful way to round off our trip to Brussels. 

A big thank you goes to the Competition and Regulatory partners and to Kelly Parker for organising such an interesting trip.

Advertising in the digital age – the future role for competition law

The House of Lords Select Committee on Communications has published its final report following a wide-ranging investigation into the UK digital ad market.  Its headline finding is that a lack of transparency hinders the ability of advertisers to ascertain whether they receive value for money for ads.

Of particular note for those who follow competition law is the Committee’s recommendation that the CMA conduct a market study into digital advertising to investigate whether the market is working fairly.  The Government has also been encouraged to undertake a review of whether current competition law is adequate to regulate the 21st century digital economy, potentially as part of its work on the UK’s Digital Charter (see here). 

Context for the review 

At its origin, the House of Lords’ inquiry had something of a Brexit flavour, focussing on the competitiveness of the UK advertising industry in the global economy.  The role of digital advertising was seen as signalling a potential need for the analogue industry to adapt to change.  The high value of advertising in the UK economy was also noted.

What were the Committee’s findings? 

The final report unsurprisingly notes the increasing role played by online advertising, the complexity of the business models involved and the increasing possibilities for individually targeted ads.  Concerns are expressed that online advertising is not held to the same standards as print advertising, which may lead to a decline in trust and thus value.  At the same time, the proportion of overall spend is rapidly switching to online ads.

Turning to the part of the report focussing on digital advertising, the Committee found that despite the proliferation of adtech models, the digital ad market in the UK is currently dominated by a small number of tech firms. 

Acknowledging that dominance is not illegal in itself, the Committee nevertheless noted the evidence given by Prof. Barwise on the economic impacts of increased market concentration and network effects: “once you achieve a dominant market share in this kind of market, it is almost impossible to be displaced … The most you can hope for is that they get eclipsed by someone dominating a new market that becomes bigger,” and “Most of the new technology is being developed by startups and the big tech players. When a startup is looking successful, it tends to get bought by one of the big tech players.

What are the prospects of regulatory intervention? 

Investigations into digital markets by competition authorities is something of a global trend, and the French authorities in particular have already carried out a specific study on digital ad markets (here).  The prevalence of these studies reflect wider political and public concerns about the perceived power and reach of some online players, as well as the concern to ensure the continuation of an open internet (the alternative to extensive advertising may be increasing use of paywalls). 

The Committee specifically calls upon the CMA to undertake a market study into the online ad industry “to investigate whether the market is working fairly for businesses and consumers”.  

However, it remains to be seen whether the CMA will pick up the Committee’s gauntlet.  Michael Grenfell (Executive Director for Enforcement, CMA) told the Committee that “the CMA had already been asked to conduct a market study into online advertising but declined to do so because they had not found any detriment to consumers on preliminary consideration”.  

Mr Grenfell appears to be referring to the CMA’s report on "The commercial use of consumer data", June 2015, which did not identify a specific competition issue in relation to online advertising and concluded that “we see no reason, at present, why our existing competition and markets tools would not be effective at tackling conduct that gave rise to competition concerns in these markets”. 

The CMA also pointed to its limited resources.  While it has received a cash boost since that date, the demands of Brexit may make such wide-ranging studies unlikely for now.

Nevertheless, the current Department of Business and Industry Strategy’s consultation on ‘modernising consumer markets’ (see here – the consultation is intended to review the effectiveness of the UK’s competition and consumer protection laws in digital markets) may lead to further intervention.

What next for digital advertising?

The Committee’s report illustrates that the digital ad market remains a focus of attention and concern.  Despite the CMA’s stated position in the report, discussion of increased ex ante regulation, and ex post competition based investigations cannot be ruled out. But for all the focus on British competitiveness, and even though localisation of ads is important, many aspects of this debate transcend national boundaries.  The British government and the CMA are not the only players who will define the evolution of online ad markets.

High Court Rules in Article 50 Case

We know it’s not strictly competition law or IP related but Competition and IP practitioners (and indeed the general public) will not have missed the latest Brexit developments. Yesterday, in a landmark ruling on the UK’s constitution, the High Court rejected the Government’s argument that it could trigger Article 50 by exercising its prerogative powers. Parliamentary approval will therefore be needed to invoke Article 50. It was common ground between the parties that Article 50 is irrevocable and the High Court’s ruling is predicated on this. However, the status of Article 50 has been the subject of considerable debate and the issue may need to be resolved before the Supreme Court hears the Government’s appeal. We discuss this here.  

In addition to this, we’ve written two Brexit posts which may also  be of interest:

Now, back to Competition Law and IP…


The privacy & competition law overlap: new competition rules on big data?

A few days ago, we reported on the European Data Protection Supervisor’s (EDPS) Opinion on coherent enforcement of fundamental rights in the age of big data (see our post here, and the Opinion here). 

On Thursday 29 September, at a Conference organised by the EDPS and BEUC, Commissioner Vestager gave a speech on Big Data and Competition in which she echoed some of the points raised by the EDPS (see here).

She confirmed that the Commission is “exploring whether we need to start looking at mergers with valuable data involved, even though the company that owns it doesn’t have a large turnover” (because, for example, it has not yet managed to monetise its data). 

Noting that “the competition rules weren’t written with big data in mind”, she also stated that the Commission is conducting an impact assessment on whether national competition authorities need new powers to deal with big data, and hinted that a proposal for new EU legislation, likely a Directive, may be on the table early next year. 

The current prognosis (subject to the outcome of the pending legal challenges) is that the UK may well have triggered Article 50 by then, and may have ceased to be an EU Member State before any such Directive has to be implemented.  This gives rise to the potential for different approaches to the treatment of big data in competition enquiries between the EU and UK post Brexit.

Data Pooling

‘Big data’ tends to be perceived as a (potential) competition issue in the context of tech giants which hold an enormous amount of data.  In her speech, Commissioner Vestager noted that in addition to a single company data set, large amounts of data can also be amassed as a result of several companies pooling their data.  She suggested that this might even be beneficial for competition, enabling smaller companies to compete more effectively with big companies.

However, she also warned that certain risks accompanied this, noting that “companies have to make sure that the data they pool doesn’t give away too much about their business.  Otherwise, it might become too easy for them to coordinate their actions, rather than competing to cut prices and improve their products”.  And of course, if companies are controllers of personal data, they can only share that data subject to applicable data protection laws.

The Commissioner ended her speech by saying that she “will keep a close eye on how companies use data”.  For our part, we will continue to keep a close eye on the EU / UK authorities’ approach to data.

The privacy & competition law overlap: co-operation between enforcement agencies?

Last week, the European Data Protection Supervisor (EDPS) released an Opinion on coherent enforcement of fundamental rights in the age of big data (available here). It builds on a Preliminary Opinion issued by the EDPS in 2014, which aimed to launch a debate on how to apply the EU’s objectives and standards in areas such as data protection, consumer protection and competition more holistically. 

Recognising that the Commission’s wide-ranging Digital Single Market strategy presents an opportunity to launch a new, coherent approach, the EDPS makes recommendations (amongst others) for: (i) how merger controls should take personal data into account, and (ii) a voluntary network where regulatory bodies can share information (a Digital Clearing House). 

Is personal data an asset that should be considered in mergers?

The EDPS Opinion considers that the largest web-based service providers (Google, Amazon etc., some of the biggest companies in the world) “owe their success to the quantity and quality of personal data under their control as well as to the intellectual property required to analyse and to extract value from these data”.  And it’s true that gaining access to customers’ personal data has been a significant factor in some of the big tech acquisitions of the last couple of years (Facebook purchasing WhatsApp for example, or Microsoft’s pending acquisition of LinkedIn). 

In a speech in March this year (here), Commissioner Vestager highlighted the fact that data is an asset, and that it can be a company’s assets rather than turnover that make it an attractive target.  She warned that important deals which warrant review may be missed under the current system, as the acquisition of a company with access to – as yet unmonetised or undervalued – data may not meet the Commission’s turnover test (as with Facebook/WhatsApp, which only fell within the Commission’s remit due to Facebook’s Article 4(5) request).

The EDPS supports greater scrutiny of acquisitions of this sort, and recommends that the expertise of independent data authorities should be utilised to consider the effect of such acquisitions on consumer welfare. 

Is privacy a competition law issue?

Commissioner Vestager downplayed the importance of privacy and data for competition enforcement in a speech in Copenhagen on 9 September (text here).  She noted that “our first line of defence will always be rules that are designed specifically to guarantee our privacy” and that “we shouldn’t be suspicious of every company which holds a valuable set of data”.  However, she did leave the door open for competition enforcement action in this area, recognising that a company in control of a unique set of data may be able to use it to shut rivals out of the market.

The EDPS Opinion also considers the interface between competition and privacy, but with a particular emphasis on personal data.  It speculates that in the near future machine-learning algorithms may be able to exploit differences in consumers’ sensitiveness to price (identifiable from their personal data), enabling firms to segment the market into each individual consumer and charging according to his or her willingness to pay.

Should such an issue arise, it would prompt concerns from data protection authorities about whether personal data was being used in an appropriate way, and from competition authorities about the effect of such use on consumers and the market. 

Surely it makes sense for these authorities to share expertise on these matters?

Digital Clearing House

Even before machine-learning algorithms take over, it’s clear that there are occasions where competition and privacy overlap, and where regulators can help one another.  This already happens on occasion.  The EDPS points to examples such as: 

  • The French competition authority’s interim decision in September 2014 that GDF Suez had abused its dominant position by using personal data collected when it was a state monopoly to later offer a promotion on an open market. 
  • The UK Data Protection Authority advised the CMA on its proposal to invite households who had not switched energy suppliers for three years to opt out from having their details shared with rival suppliers.
  • Germany’s competition regulator, the Bundeskartellamt is currently investigating Facebook’s privacy policies with input from a number of other national authorities – as we reported here.
The EDPS seeks to build on this kind of co-operation, proposing a voluntary network of contact points in regulatory authorities at national and EU level who are responsible for regulation of the digital sector.  Such a network could discuss the most appropriate legal regime for pursuing specific cases or complaints, and could potentially use data protection and consumer protection standards to determine theories of harm relevant to merger control and exploitative abuse cases.

From a competition law perspective, this is not uncontroversial: the relevance of other laws to the competition regime has been rejected on a number of occasions in the past.  Introducing privacy standards could open the floodgates to a need to consider, for example, environmental considerations, or industrial or social policy.  Added to which, there would doubtless be a number of practical challenges to setting up such a network – the first which springs to mind is persuading the diverse authorities involved to listen to one another!

The Brexit shaped spanner in the works

It’s too early to tell what appetite there is across Europe for a Digital Clearing House, but any UK involvement may obviously be affected by Brexit.  Aside from the politics involved, UK authorities may have to apply different legal frameworks to the rest of Europe (see our competition blogs on Brexit here and here, and our colleagues’ blog on the data protection implications here).  We’ll also have to wait and see if the CMA shares the view of the EDPS on the importance of personal data.

Either way, we expect there to be significant developments in this area in the future.

Brexit: What it means for competition law Q&A

As the dust begins to settle on the momentous events that unfolded in the early hours of Friday 24 June, focus inevitably turns to the practical implications of what happens next.  Many articles have already been written on this subject and no doubt many more will follow.  The honest position today is that no-one can predict precisely what the long-term future holds for the UK because there is still no clarity as to which Brexit path will ultimately be chosen.  At this stage however, we can narrow the most likely options down to the following five:

  1. Leave the EU, but remain a member of the EEA (often referred to as the ‘Norwegian model’);
  2. Leave the EU, rejoin EFTA, but stay outside the EEA (often referred to as the ‘Swiss model’);
  3. Leave the EU, but join an EU customs union (often referred to as the ‘Turkish model’);
  4. Leave the EU, but negotiate individual trade terms (often referred to as the ‘Canadian model’); or
  5. Leave the EU and fall back on WTO trade terms.

Which of these routes prevails in the long-term will determine to what extent (if at all), the EU competition rules continue to apply in the UK.  Broadly speaking, Option 1 would result in no change to the status quo as regards competition law, whereas all the others would result in greater autonomy for a UK regime, potentially operating entirely separate from, but in parallel to, the EU regime.

However, the immediate consequence of the Prime Minister’s decision to resign, initiate a leadership election and to leave the decision as to when to invoke the EU’s timetable for exit under Article 50 to his successor, has given everyone a certain breathing space with which to survey the options.  Unspoken amongst these is the possibility that a UK general election will follow in the autumn, which could mean that all bets are off, including potentially even Brexit itself.

Q.   What is the immediate impact of the Brexit vote on UK competition law

A.   Nothing is likely to change at all in the short or medium term.  The prevailing national UK and EU competition regimes will remain in full force.

Q.   What about longer-term?

A.   Again, in practice, the short answer is likely to be that very little will change.  That is of course the case should the UK remain with the EEA.  Beyond that, the UK competition rules will remain in full force, operating in parallel to the EU regime.  Businesses with international operations will continue to be bound by EU rules as regards their trade within the EU.

Q.   Business relies on the legal certainty and guidance arising from the EU’s system of block exemptions.  What will happen to these assuming EU law no longer applies?

A.   The UK no longer has any national block exemptions, relying instead on the application of ‘parallel exemptions’ meaning that the EU block exemptions result in parallel exemptions from UK competition law prohibitions in addition to the EU prohibitions.  Assuming a total exit from the EU competition regime, these would no longer automatically apply and the UK would need to consider implementing new national exemptions.  Where the UK is no longer part of the single market, this could well have the result that certain limitations in the application of the block exemptions are removed (i.e. those dealing with territorial restrictions aimed at protecting parallel trade and the single market).

Q.   What happens to merger notifications?

A.   The UK’s existing merger control regime is likely to remain, although it is possible that in the longer term its voluntary nature may come under increasing pressure.  There are, however, likely to be two main effects arising directly from Brexit should EU law no longer apply in the UK.  First, there will be an increase in mergers being notified to the UK as it will no longer be possible to rely on the one-stop shop principle inherent in the EU merger regulation regime.  Mergers raising any substantive issues in the UK that would previously have fallen under the exclusive jurisdiction of Brussels will therefore require parallel notification in the UK.  Second, it is to be expected that there may be a fall in the number of mergers notified in Brussels because UK turnover will no longer count towards the EU jurisdictional criteria.  As one of the EU’s largest economies, the removal of UK turnover may therefore be expected to have a non-negligible impact.

Q.   What happens to UK competition litigation concerning EU infringements?

A.   In the short term, we see little or no change.  The doctrine of acquired rights will mean that the UK courts will continue to apply the law as it applied at the relevant time - for competition damages litigation, this will be the time of the infringement giving rise to the cause of action for damages.  In future, Brexit will have implications for the implementation of the Damages Directive dealing with follow-on actions – however, given that the deadline for implementation is 27 December 2016, it seems most likely that the UK will still be a full member of the EU and hence that this will be implemented.  As with all EU legislation given effect by national implementing legislation, the UK will need to consider whether and how to adopt and/or amend.  As regards follow-on damages, it remains to be seen how the UK legislature and courts will treat EU infringement decisions for the purposes of establishing liability.

Q.   What steps should business take now to ensure continued compliance?

A.   Understandably, businesses operating in the UK will be concerned to ensure not only that they remain fully compliant with whatever legal obligations arise as a result of Brexit but also that compliance costs can be kept to a minimum.  Pragmatically, and whatever the final outcome, the message today is one of ‘no change’.  The EU regime remains in full force for the foreseeable future and whatever the decisions that will be taken over the course of the next few months, it seems highly unlikely that substantive alterations will be made to the base rules of the game when it comes to competition compliance.

Read our previous article on Brexit here: Brexit – What next? A competition law perspective 

Sophie LawranceStephen SmithPat Treacy