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.

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