In anticipation of the United Kingdom's exit from the EU on December 31 (‘Brexit'), the Competition and Markets Authority (the ‘CMA') published its  guidance on the expected changes to U.K. competition law regime. The guidance does not cover the U.K.'s future relationship with the EU as it is outside of the remit of the CMA.

Broadly speaking and as anticipated, the EU competition legislation (except the EU block exemptions) will no longer apply to the U.K. post Brexit, and there may be a divergence of U.K. and EU law after this date. Businesses are also likely to be subject to parallel investigations by the European Commission (‘EC') and the CMA in merger and antitrust (including cartel and the abuse of dominance) investigations. In particular, complex and high value mergers that are usually notified to the EC are likely also to require clearance from the CMA. The CMA has been gearing up for the transition for some time and for such mergers, has already been engaged with parties for ‘pre-notification' discussions, see press release  here.

Key takeaways from the Guidance are:

  • Mergers and behavioural antitrust (e.g. cartel) cases initiated formally by the EC prior to December 31 will continue to be reviewed/investigated by the competent EU institution after Brexit. The existing guidance and laws will continue to apply e.g., provisions on CMA providing assistance to the EC in ongoing investigations.
  • Merger and antitrust decisions made by the EC prior to December 31 will continue to be binding on the U.K. and these institutions will have enforcement and monitoring powers vis a vis such decisions, unless otherwise agreed with the CMA. The EC and CMA may mutually agree to transfer these monitoring and enforcement functions to the CMA.
  • The default position remains that the U.K. competition authorities, including courts, must act to ensure there is no inconsistency with EU principles and case law set down immediately before Brexit, except in certain very limited circumstances where it is appropriate to do so.
  • Post Brexit:
    • EU legislation that previously directly applied to the U.K. (i.e., without incorporation into U.K. law) will no longer apply to the U.K..
    • The U.K. competition authorities and courts will no longer be bound by the Court of Justice of the EU's judgments or principles laid down after Brexit, except in relation to EU law that has been retained in the U.K. post Brexit.
    • the EC's ‘one-stop-shop' for merger control will no longer apply; a transaction is capable of being reviewed by both the EC and the CMA, provided that both merger thresholds are met.
      • Whilst the U.K. operates a voluntary notification system, it can ‘call-in' and refer completed transactions within four months of completion where the jurisdictional thresholds are met. Further, the CMA as a matter of course issues an ‘initial enforcement order' in such cases to prevent any integration between parties.
      • There is a prospect of divergence in the review process and outcome which means that the CMA may prohibit or impose commitments on a merger, even where it has been unconditionally cleared by the EC, or other competition authorities. Indeed, we expect the CMA merger review process to take longer than the EC process in most cases.
    • In ‘public interest' cases (e.g., National Security, media plurality, public health emergencies and financial stability), the Secretary of State can only issue a public interest intervention notice if the U.K. thresholds are met. It is worth noting that following the recently revised merger, jurisdictional tests under the Enterprise Act 2002 and the newly proposed National Security & Investment Bill, transactions giving rise to any potential National Security concerns in a broad array of sectors next year are now more likely to be caught than prior to Brexit. Please see  here for more information.
    • Anticompetitive conduct that is capable of affecting trade (i) between the U.K. and the EC and (ii) within the U.K., may be subject to parallel investigation by the EC (for (i)) and by the CMA (for (ii)).
      • This also applies to any EC investigation into a suspect infringement that is ongoing as at December 31, 2020 and beyond, though the CMA can only investigate the effect of the conduct post December 31, 2020 on U.K. markets.
      • Whether the CMA decides to initiate a case will depend on whether a separate investigation is necessary to protect U.K. customers and businesses. For instance, the CMA may ask the parties to an EC infringement decision to give the same commitments in the U.K. in relation to the same conduct/agreement rather than using its own resources to investigate.
    • The CMA and EC will continue to cooperate and communicate with each other in parallel merger and antitrust investigations.
    • The EU block exemptions and the related guidance will be retained in U.K. law and continue to apply post Brexit, subject to minor changes (e.g., to replace references to the ‘internal market' to the ‘U.K.').
      • These block exemptions or so called ‘safe harbors' relate to: vertical agreements, motor vehicles, research and development, technology transfers, specialisation, liner shipping consortia and road, rail and inland waterway transport.
    • Consumer protection laws will remain largely unaffected as the existing domestic law is largely harmonised with the EU. As such, EU businesses selling to U.K. consumers must continue to apply these laws until they have been appealed by U.K. domestic law. U.K. businesses selling to EU consumers will need to comply with both U.K. and EU laws (or indeed, any local laws of the place they are selling to).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.