Brexit: Implications in the field of competition law

On June 23, 2016, UK took the historic resolution to leave the EU which will be implemented by triggering Article 50 of the Lisbon Treaty and by notifying the European Council of its intention.
EU competition rules are expected to continue to apply to UK until the end of the negotiation period upon reaching a withdrawal agreement acceptable for all 27 EU Member States and at least a two years’ timeframe, which could be extended by unanimous consent.
Although, it remains unclear when the notice would be served by UK, what is more certain is that during the interim negotiation period UK must still comply with EU laws. 
After a synopsis of the various models (A), this note aims to focus on the effect of the Brexit’s concrete implementation on competition law as (i) antitrust practices, (ii) merger control and (iii) state aid schemes currently emanates directly from EU rules (B).

A.    Potential post-Brexit schemes

EU competition rules will remain enforceable to post-Brexit agreements or conduct of business that have an effect within the EU and the Commission will continue to act as a “one-stop shop” for filings and investigations. However, crucial differences lie in the ability for the Commission to carry-out in situ investigations (i.e. dawn raids) and to trigger UK’s Competition and Markets Authority (CMA) investigations on its behalf. The Commission will only be empowered to make information request in writing, as EU proceeds on a regular basis for companies based outside the EU.
The extent and nature of the impact will mostly be contingent upon the model ultimately embraced by UK for its upcoming relations with the EU.
At this stage, five different scenarios could be contemplated, with a different range of involvement : an EEA’s Norwegian Model , an EFTA’s Swiss Model ,  a Customs Union’s Model (currently underway with Turkey), a deep Free Trade Agreement’s Canadian Model, or simply remaining a member of the WTO (World Trade Organization). Given the uncertainty regarding the model which will be implemented by UK, this note solely focus on specific features of competition law.

B.    Competition law implications

(i)    Antitrust practices
As mentioned above, the EU competition rules will continue to apply throughout the duration of the interim negotiation period but also to post-Brexit contracts which will have effect within the EU.
The impact will mainly be felt on the enforcement of competition law by the CMA. At first, the Commission influence will continue to radiate on the CMA, even without particular statutory ties owing to the similarity of material provisions. In the mid-term, this gap will obviously worsen and discrepancies will occur through divergent interpretations between UK’s Courts and the European Court of Justice which could gradually shift the direction of the two regimes.
The close cooperation existing between the Commission and the CMA will inexorably be damaged.
(ii)    Merger control
Under the current rules, EU merger control operates on the basis of a “one-stop shop”, a merger which has a community dimension that satisfy the EU filing thresholds must be notified to the Commission and required, in principle, no national clearance.
As this “one-stop shop” will no longer exists and since there will be no more cooperation between the Commission and the CMA, meaning that new mergers will be analyzed by both parties and companies facing de facto greater bureaucracy, time consuming control and therefore much higher burden for business. Brexit will have a considerable adverse effect on the CMA, which is likely to need significant additional resources with a view to cope with a foreseen increase of filings.
(iii)    State aid 
As UK will no longer be subject to the EU laws on State aid and public procurement, UK government could give preferential treatment to domestic businesses. Thereby, UK will be able to grant State aid and distorting competition in specific area, although within the limits determined by the WTO but still without any possibility of retaliations from a EU Member State and vice versa.

C.    Conclusion

The full spectrum of latent adverse effects in the field of competition spawned by the Brexit substantially depend upon the specific negotiated terms and will take time to entirely emerge. However it seems likely that, regardless the selected model, there will be much appetite for an overhaul of the substance of UK competition regime. The risk of simultaneous investigations in both antitrust and merger area can already be pointed out, with an increased burden to business as well as some risk of inconsistent outcomes and, in addition to a substantial increase of the costs and administrative burden associated with the conduct of business.
 

Marc Picat and Arnaud Vanitterbeek

04-10-2016
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