Brexit briefing | Brexit, Competition |

Brexit, UK merger control and competition law: what will change?

Overview

With the UK set to leave the EU on 31 January 2020, change is also on the way for UK merger control and competition law – but not immediately.  Here's what you need to know:

During the transition

Nothing will change immediately because of the transition period (which is currently scheduled to last until 31 December 2020).   During that period, the UK will continue to be treated as if it were still a Member State of the EU, including in relation to merger control and competition law.

Effect of transition "standstill" provisions

  • Merger control: During the transition, it will still be possible to take advantage of the "one stop shop" offered by the EU Merger Regulation (EUMR) and any mergers caught by the thresholds in that Regulation will still need to be notified to the European Commission, as at present. Turnover in the UK will still count towards whether the thresholds in the EUMR are met.

  • Competition law: During the transition, the UK will continue to be subject to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).  Both the European Commission and the UK Competition and Markets Authority (CMA) will continue to have power to enforce those prohibitions in the UK.

After the transition: merger control

After the transition has ended, the EUMR will cease to apply in relation to the UK (although see the discussion of ongoing investigations below).  This will mean that in some cases, merging parties may need to seek clearance from both the UK and the EU authorities in parallel – but this will depend on whether the merger triggers the jurisdictional thresholds for both the EUMR and the UK national merger control regime.  UK turnover will no longer be relevant for calculating whether the turnover thresholds in the EUMR are met.  However, in principle, mergers involving UK firms with turnover generated from the EU will continue to face scrutiny under the EUMR (subject of course to the relevant jurisdictional thresholds being met).

After the transition: antitrust

After the transition has ended, the general competition law provisions of Article 101 (prohibiting anti-competitive agreements) and Article 102 (prohibiting abuse of dominance) of the TFEU will cease to apply in the UK (although see discussion of ongoing investigations below).  However, UK businesses could continue to be investigated and potentially fined by the European Commission for infringements which relate to the remainder of the EU, in the same way as many companies based in third countries have been to date.  UK national competition law - in the form of the Chapter 1 and Chapter 2 prohibitions of the Competition Act 1998 - will also continue to apply. The main impact for businesses is likely to be procedural: for example, after the end of the transition, the European Commission will not be able to carry out "dawn raids" in the UK in order to gather information on possible infringements.  However, UK firms may find that the CMA will decide to open its own investigations in parallel to those of the European Commission (and the CMA can also conduct "dawn raids").

Ongoing investigations

The Withdrawal Agreement provides that, where an investigation has formally commenced before the end of the transition, the European Commission can complete the process and its decision will be binding as regards the UK (even if it is not issued until after the end of the transition).  This principle applies in relation to investigations under both EU merger control and Articles 101 and 102.   As regards merger control, we would expect most investigations started during the transition period to have reached a conclusion by the end of 2021 (or soon after).  By contrast, antitrust investigations under Articles 101 or 102 typically take longer to conclude – and it could therefore be many years before the "wind down" process is complete.

Will the UK diverge from EU competition law after Brexit?

When interpreting the Competition Act, UK courts are currently obliged, so far as practical, to maintain consistency with EU case law on Articles 101 and 102 (on which the Chapter 1 and 2 prohibitions are based). 

However, the UK Government may legislate to give the courts more freedom to diverge from EU competition law after the end of the transition.  For example, in preparation for the possibility of the UK leaving the EU without a deal, the UK Government legislated to allow UK courts and the CMA a reasonably broad discretion to diverge from EU competition law after withdrawal (see the test set out here at sub-section 7 – although it should be noted that this statutory instrument is not due to come into force until the end of the transition and could still be amended).  The European Union (Withdrawal Agreement) Act 2020 also gives Ministers a wide-ranging power to adopt regulations allowing lower courts to depart from EU case law (see this briefing).

However, even if the legal framework in the UK favours divergence, change is still likely to happen relatively gradually, as it will depend on the issues raised by cases coming before the CMA and the courts after Brexit.

For further information, please contact