Beyond Brexit: Preparing for changes to the application of EU & UK competition rules

Overview

The deadline for the UK government to make a request to extend the Brexit transition period under the Withdrawal Agreement has now passed. While it may technically be possible for an alternative form of extension to be negotiated later in the year, this would give rise to significant legal and practical issues, and would involve agreement on a continuing UK contribution to the EU budget. It is therefore prudent for businesses to assume that the transition period will end on 31 December 2020 (Completion Day). 

The interface between the EU and UK competition law regimes may therefore present businesses with significant challenges in the coming months. This update outlines the transitional arrangements for 'live' antitrust cases at the end of the year. It also examines the extent to which the EU competition rules will continue to be relevant to, and in, the United Kingdom in the future.  

Background

The EU antitrust rules are based on two key prohibitions: the prohibition against anti-competitive agreements, including cartels and certain other forms of cooperation (Article 101, Treaty on the Functioning of the European Union (TFEU)), and the prohibition against abuse of a dominant position (Article 102 TFEU) (the EU Prohibitions).  The EU Prohibitions will apply to the extent that there is an effect on trade between Member States. The equivalent UK domestic prohibitions are set out in Chapters I & II of the Competition Act 1998 and apply where there is an effect on trade in the United Kingdom (the UK Prohibitions).

The transition period

During the transition period, the Commission has the power to enforce the EU Prohibitions in relation to the United Kingdom in the same way as before. EU block exemption regulations and EU guidance will also continue to apply.

The CMA (and UK concurrent regulators) are able to apply both the EU and UK Prohibitions (to the extent relevant) until the end of the transition period. However, they are not able to launch a parallel investigation into conduct which is already the subject of a Commission investigation.

Where an investigation into either anti-competitive behaviour or abuse of dominance has been formally 'initiated' by the Commission before the end of the transition period, but no decision has been reached (i.e. a 'live' case), the Commission will continue its investigation after Completion Day. For these purposes, 'initiated' relates to cases which have been formally registered by the Commission - for example, a preliminary assessment of the case (Statement of Objections) has been issued or a case summary published.

Where an investigation has been formally initiated by the Commission, it may still be possible for the CMA to obtain jurisdiction over certain elements of subject matter. For example, the CMA may investigate agreements which have an effect on trade within the United Kingdom and are ongoing as at the end of the transition period, but only in relation to post-Completion Day facts. If the CMA considers that it may have jurisdiction to review the UK elements of a 'live' Commission case after Completion Day, it can approach the parties concerned to begin gathering information.

More legislation and guidance relating to the precise scope of jurisdiction in such cases is expected to be issued by the CMA later this year.

In contrast, where the Commission has not formally initiated proceedings but has conducted preparatory work or even accepted a leniency application, it will cease to have jurisdiction over the UK competition elements of that investigation at the end of the transition period. In these circumstances, jurisdiction in respect of the UK elements will pass to the CMA.

Post-transition period

After Completion Day, UK businesses will still need to comply with the EU antitrust rules as the Commission will continue to investigate cases where there is an effect on trade between Member States. This means, for example, that businesses will still be subject to the risk of EU cartel investigations by the Commission, although the Commission will not be able to raid their UK premises.

The Commission will also have responsibility for the monitoring and enforcement of the UK elements of commitments given in connection with certain antitrust investigations, subject to the possibility of transferring responsibility to the CMA.

While in future the CMA will only investigate suspected infringements of the UK Prohibitions, the EU block exemptions (and parallel exemptions) are likely to be preserved as 'retained exemptions' to these rules.

The CMA will also be able to exert parallel jurisdiction over conduct being investigated at EU level which affects the United Kingdom, raising the prospect of dual investigations. This could potentially lead to increased costs and differing outcomes for businesses.

The future relationship

The degree of future divergence between the UK and EU competition regimes will remain unclear until the scope and nature of the 'level playing field' commitments currently being negotiated between the European Union and United Kingdom are fully understood. If no agreement on the future relationship is reached, the emergency legislation put in place by the government in 2019 (the Competition (Amendment etc.) (EU exit) Regulations (Competition SI) may come into effect. The Competition SI introduced a new provision governing the treatment of pre-Brexit EU Court judgments and Commission decisions. While it will require UK authorities and courts to ensure there is no inconsistency with pre-existing EU case law when applying/interpreting UK competition law, they will nevertheless be able to diverge from pre-exit EU case law where it is considered "appropriate in the light of particular circumstances", thus paving the way for future divergence.

Cartels and leniency

During the transition period, the leniency regimes of the Commission, CMA and national competition authorities remain separate and each jurisdiction should be considered individually as before. The fact that a party has made a leniency application to the Commission, whether before or after Completion Day, will not provide any protection from fines with respect to a UK investigation. Therefore, any existing or potential leniency applicant under the EU leniency regime (in respect of conduct which is also covered by the CMA’s leniency programme) may also need to make a separate application for leniency to the CMA, and vice versa.

Although leniency applications will generally be made in advance of the Commission formally initiating proceedings, the timing of such applications does not affect whether proceedings have been initiated.

Competition law redress

The UK regime for competition law redress (i.e. private actions for breaches of competition law) remains the same during the transition period. Parties are therefore be able to bring a 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 national competition authorities.

Commission decisions reached before the end of the transition period will still be able to form the basis of follow-on damages claims post-Completion Day. However, if an infringement decision is reached by the Commission after the transition period, even if it relates to facts before the end of the transition period that have an effect in the UK, claimants will no longer be able automatically to rely on that decision in UK courts.

Practical considerations

• Businesses should be prepared for the fact that the Commission and CMA will co-operate in relation to UK and EU behavioural investigations towards the end of the transition period. They may agree to transfer responsibility for the UK elements of an investigation, or UK infringement activity, which is ongoing at the end of the transition period.
• However, as EU antitrust investigations can often take some years to complete, businesses should also be prepared for ongoing Commission involvement in antitrust cases with a UK dimension for some time to come.

This note provides outline guidance only. For additional information, please contact David Harrison or Julian Ellison.