David Flint and Rebecca Henderson look at how Brexit could affect competition law.
As the UK moves closer to exiting the European Union, decisions are being made which could impact on how our current systems and laws operate post-Brexit. One of the prominent discussions is how European laws we have relied on for decades will be treated post-Brexit. This month, the government have issued a discussion paper on how Brexit will impact competition law, and more specifically, state aid controls which are currently governed primarily by European law.
Brexit & Competition Law – where do we stand?
By the end of March 2019, it appears that the UK will cease to be a member of the European Union and all European Regulations not previously incorporated into UK law by domestic legislation will no longer be directly applicable to the UK – although the Great Repeal Bill will give these regulations legal effect on an interim basis. Generally, this will not impact upon the substantive competition law provisions as Articles 101 and 102 of the TFEU are replicated in Chapter 1 and Chapter 2 of the Competition Act 1998 in the UK. Therefore, there will be little substantive change in law for undertakings in relation to competition law upon Brexit. The changes envisaged for competition law relate more to policy, procedure and the administration of the current system.
One thing which could change post-Brexit is how European jurisprudence is treated in the UK courts. Currently, the UK follow ECJ jurisprudence as EU law has primacy in member states – however post-Brexit the UK could have a less onerous duty to uphold EU law and may move towards a system where EU law is considered but not necessarily followed in all instances. The UK will be able to pursue its own competition goals and develop its own body of case law to build precedent with. In the short-term the UK will continue to rely on EU jurisprudence to prove harm as the UK, itself, does not have a rich body of decisions to rely on due to the historical primacy of EU law and jurisprudence.
The UK government have assured businesses that operate across the EU that they will aim to keep EU provisions consistent within the UK by implementing UK equivalents of the block exemption regulations, for example. In the future, the UK may decide to depart from these regulations but this seems unlikely due to the commitment to facilitating trade between the UK and EU.
Merger control is an area on which the government has been pressed to provide clarity. It seems likely that the EU will continue to have jurisdiction over large mergers which impact upon (the remaining) member states. However, mergers involving entirely UK markets will be the sole jurisdiction of the CMA – where previously they might have fallen under EU jurisdiction if there were a large turnover or substantial lessening of competition. This will have a large impact on the CMA who may need to employ significantly more resources to cope with the increase in workload.
Substantively, the procedure for merger control post-Brexit may alter within the UK as we will no longer have to give regard to the single market objective or ensure that mergers do not lessen competition in any member state. Where the CMA has exclusive jurisdiction over a merger decision, they may begin to depart from EU merger decisions, which have sometimes been controversial, to ensure the most effective competition regime within the UK.
Once the UK exits the European Union, it will no longer be constrained by EU policy and will be able to develop its own competition law goals and priorities which are targeted and specific to tackling UK problems and ensuring UK markets are sufficiently competitive. This may lead the UK to have a more responsive and dynamic competition law regime that does not face the constraints of EU administrative procedures and the need to satisfy the single market objective.
For example, the government have alluded to their preference towards a less stringent state aid regime – although still intent to have a state aid system to ensure that all areas of the UK are governed by the same rules in relation to how much finance can be given to individual organisations from the government.
State Aid and EU Law
The State Aid system governs any benefits given to a private organisation using public resources or money. The benefits are not always financial but can be any advantage (which is very wide!) given to one organisation over another. The EU rules make State Aid very complex and time consuming for applicants and in principle do not allow State Aid. Only a small proportion of potential State Aid will be legal under EU legislation.
Brexit could improve the State Aid system as currently, organisation are waiting up to 6 months for clearance from the Commission in relation to aid received from the government. The system is complex and has meant organisations racking up very high costs to navigate the system and notify the Commission of the planned State Aid. The UK government, if they decide to have a State Aid policy, would need to set up a dedicated body to deal with this. The government have, so far, indicated that they will uphold the EU State Aid system and employ a body to deal with this.
The UK and EU still have a lot to agree when it comes to Brexit – one thing at the forefront of minds is what happens to cases live at the point of Brexit – do they transfer to the UK or continue with the EU? Who pays for this? What happens to future cases that involve illegal conduct which happened at the time of Brexit? Who has jurisdiction to deal with this? For many competition cases which can last for years (if not for decades) this is far from a moot point.
We await the release of the UK Withdrawal Agreement to see how these issues are tackled by both the UK and EU.
- Rebecca Henderson is a trainee and David Flint is a partner at MacRoberts