The United Kingdom withdrew from the European Union on 31 January 2020. The Competition and Market Authority (“CMA”), the UK national competition authority, recently published new guidance regarding the enforcement of merger control and antitrust rules under the Withdrawal Agreement.
The Withdrawal Agreement regulates the terms of the British departure between the UK and the EU and entered into force immediately upon exit. The Withdrawal Agreement also includes a transition period, during which EU law will continue to apply to and within the UK (the “Transition Period”). The jurisdiction of the Commission and the EU courts also remains intact. The Transition Period is currently set to expire on 31 December 2020 (the “Expiry Date”). This period can be extended by one or two years, but such an extension must be agreed between the EU and the UK before 1 July 2020.
The guidance published by the CMA explains how Brexit affects competition law enforcement and merger control at the UK and EU level during and after the Transition Period. We have considered its main takeaways.
Merger Control during the Transition Period
During the Transition Period, the UK will continue to be treated as if it were an EU Member State under the EU Merger Regulation (“EUMR”). Accordingly, the ‘one-stop shop’ principle under the EUMR continues to apply until the end of this period. In turn, the UK turnover generated by merging parties will still need to be taken into account when establishing if a merger satisfies the EUMR turnover thresholds. The European Commission (the “Commission”) will retain its exclusive competence for the investigation of mergers that meet those EU thresholds, including with respect to any effects on any UK market.
The Court of Justice of the European Union (“CJEU”) retains full jurisdiction to review decisions of the Commission under the EUMR. The UK courts and the Competition Appeal Tribunal do not have jurisdiction to review decisions of the Commission.
Towards the end of the Transition Period
Merging parties are encouraged to approach the CMA at an early stage in order to discuss if it would be useful to begin pre-notification discussions with the CMA. This is particularly relevant in instances where the merger is not likely to be formally notified to the Commission before the Expiry Date and is expected to meet the UK merger thresholds.
Although the CMA would not start a formal investigation until after the end of the Transition Period, the CMA may take certain preparatory steps during the Transition Period to assess whether a formal investigation is likely to be necessary. To this end, the CMA may approach merging parties and third parties (customers, suppliers, etc.) to request information about a merger that is in pre-notification with the Commission. In practice, the CMA is keen for parties to this sort of merger to share the same information that they are providing to the Commission with the CMA.
The UK merger control regime is voluntary and therefore there is no obligation to notify a merger. However, not notifying a qualifying merger to the CMA raises certain risks for the parties. These risks should be taken into consideration in circumstances where a merger has not been formally notified to the Commission by the end of the Transition Period. In particular, for mergers completed within the Transition Period, the CMA retains the ability to refer a merger for a Phase 2 investigation for a period of four months. This statutory four-month period will apply from the latest of: (i) the end of the Transition Period; (ii) the date of completion of the merger; or (iii) the point at which the CMA is considered to have been provided with notice of material facts about the merger.
Merger Control post-Transition Period
After the end of the Transition Period, mergers will no longer be subject to the EU ‘one-stop shop’ principle in relation to the UK. The turnover of parties in the UK will not be relevant for determining whether a merger satisfies the EUMR jurisdictional thresholds. The Commission will no longer have jurisdiction to investigate the effects within the UK of any mergers.
However, at the end of the Transition Period there will still be some merger cases which remain under review by the Commission and where a final decision has not yet been taken. The Commission will retain exclusive jurisdiction over these live cases if, for example, the date of notification of the merger fell before the end of the Transition Period. In such instances, the CMA will not have jurisdiction over the case, including in relation to any effects on the UK market.
Additionally, the Commission will continue to be responsible for monitoring and enforcing all aspects of commitments adopted in merger cases closed during the Transition Period and in relation to mergers where the administrative procedure has been initiated before the end of the Transition Period.
Finally, where any new merger will satisfy the jurisdictional thresholds of the EUMR and the corresponding UK rules, the CMA and the Commission will be able to conduct parallel assessments of the same merger in their respective jurisdictions.
Antitrust and cartel enforcement during the Transition Period
Article 101 and Article 102 of the Treaty on the Functioning of the European Union (the “TFEU”) will have full force and effect in the UK during the Transition Period. The EU block exemption regulations and the Commission guidelines will also continue to apply. The Commission will retain its role and any appeals of Commission decisions addressed to natural or legal persons residing or established in the UK will continue to be heard exclusively by the CJEU.
The UK regime for private action for breaches of competition law remains the same during the Transition Period. Therefore, affected parties retain the right to bring private UK court action on the basis of suspected infringements of EU and UK competition law or follow-on damages claims on the basis of EU and UK competition law infringement decisions of the CMA, the Commission or Member State national competition law authorities.
Antitrust and cartel enforcement after the end of the Transition Period
Where the Commission has formally initiated proceedings under Article 101 or Article 102 TFEU with respect to UK undertakings’ behaviour before the end of the Transition Period, the Commission will continue to be competent for these proceedings after the end of the Transition Period. The Commission will also continue to monitor and enforce the UK elements of commitments given or remedies imposed in its decisions adopted during the Transition Period.
The CMA may obtain jurisdiction over live cases initiated by the Commission during the Transition Period where the behaviour investigated may affect trade within the UK. In these instances, the CMA may investigate the UK elements of the behaviour that post-date the end of the Transition Period. The CMA may approach the parties to begin gathering information before the end of the Transition Period.
After the end of the Transition Period, the CMA will only investigate suspected infringements of UK domestic competition law. It will no longer have competence to investigate infringements of Articles 101 and 102 TFEU.
The Withdrawal Agreement does not regulate the future relationship between the EU and the UK. This relationship is yet to be negotiated and decided between the parties. It is not certain that an agreement concerning future relations will be concluded before the expiry of the Transition Period. However, the EU and the UK have agreed on a Political Declaration that is meant to set the framework for the future relationship.
The Political Declaration states that the EU and the UK should maintain a robust and comprehensive framework for competition that prevents undue distortion of trade and competition. It further specifies that to that end, the parties should uphold the common high standards applicable in the EU and the UK at the end of the Transition Period in the area of competition. However, these statements are merely aspirational and do not provide for any legally binding commitment between the parties. It remains uncertain to what extent the EU and the UK will provide for competition law concerns in any future agreement between them.