Deal Or No Deal? The Impact Of Brexit On UK Competition Law Becomes Clearer

Posted by Mondaq

Deal Or No Deal? The Impact Of Brexit On UK Competition Law Becomes Clearer

By Becket McGrath & Christine Graham (Cooley LLP)

The UK is due to leave the EU at 11pm, London time, on 29 March 2019, at which point the EU Treaties will cease to apply to the country. Amongst the myriad issues flowing from this are significant challenges to the operation of the UK competition law regime, which is closely entwined with EU competition law.

At the moment, the European Commission and UK Competition and Markets Authority (CMA) share responsibility for antitrust enforcement and merger control affecting UK market (with large, cross-border transactions tending to be reviewed by the Commission and more domestic transactions falling to be reviewed by the CMA). Commission antitrust investigations typically last several years, even before appeals are taken into account, meaning that investigations concerning conduct affecting UK markets will have been started well before Brexit takes effect and some will be continuing at the point of exit. Although merger control reviews take less time, there will inevitably be reviews underway at the time that the UK falls outside the Commission’s jurisdiction on 29 March.

There is therefore a pressing need for clarity on what happens to live cases at that point. It is also important for businesses to understand what competition laws will apply to their conduct within the UK from 30 March. Unfortunately, at the time of writing, this is far from clear.

On 14 November, nearly 30 months after the Brexit referendum, the Commission published the text of the 585 page draft Withdrawal Agreement. This document, which is the product of months of negotiation between UK and EU teams, sets out the terms for the UK’s orderly departure from the EU. The Commission published an Outline Political Declaration on the Future Relationship on the same date, setting out the broad parameters for a potential future trading relationship between the EU and the UK.

Publication of the draft Withdrawal Agreement followed its approval by the UK Cabinet earlier the same day. The final Withdrawal Agreement is due to be formally adopted by the remaining 27 Member States of the EU at a special meeting of the European Council on 25 November, after which it will be subject to approval by the European Parliament. Once formally adopted by both the UK and EU, the Withdrawal Agreement will govern the UK’s relationship with the EU until such a time as a new treaty can be put in place to govern that relationship on a lasting basis (or its earlier expiry). To serve its purpose, the Withdrawal Agreement must enter into force before Brexit takes effect on 29 March.

Before the Withdrawal Agreement can enter force, however, it also needs to be approved by the UK Parliament. The extent of political objections to its terms makes this approval (and hence UK ratification) highly uncertain. In the absence of ratification, and assuming that the UK does not withdraw or suspend its notice of its intention to leave the EU, Brexit will still take effect on 29 March, albeit without any agreement with the EU on the terms of departure. In such circumstances, the UK would suddenly drop out of the legal and regulatory structure provided for by the Treaties and be treated in the same way as any another third country.

While the consequences for a disorderly or “no deal” Brexit would be profound across the UK economy, at least we now have a clearer picture of how the UK Government proposes to deal with the impact on the domestic competition law regime, by virtue of the Government’s publication of the Competition (Amendment etc.) (EU Exit) Regulations 2019 (Draft Regulations). These set out the detailed changes that would be made to UK competition law in the event of a no deal Brexit. On the same date, the CMA published two technical notices setting out its role in antitrust and mergers in a “no deal” scenario.

As an agreed withdrawal deal remains the baseline scenario, this will be considered first.