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Brexit and the Future of Competition Law in the EU

Posted by on 10 August 2016
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The decision taken by a majority of the UK citizens to part ways with  the European Union – the now famous Brexit – has been long discussed and analyzed by legal authors and competition experts in recent years and especially since the prospect turned into a reality.

Most reactions and viewpoints from legal authors have focused on the enforcement of competition rules in the UK (1) from the moment the UK will cease to be part of the EU and will cease to be bound by the EU Treaty and by the case-law of the European Court of Justice. Many authors note that the evolution of the UK and EU law and its application is very likely to differ, and even diverge, in the long run. There is unanimity in the assessment that UK application of the competition rules will not suffer any significant impact and it is expected that any difficulties will be dealt with in the agreements implementing the split of the United Kingdom from the EU block.

On the other hand, the effects of Brexit are likely to be felt on the enforcement of the EU competition rules in the Member States which will continue to be part of the Union following the UK split.

The roots of the EU competition law are identified, generally, in the German economic school of the Ordoliberalism, and even if UK joined the European Union later than the time when its competition rules were written, the influence of the common-law and of the UK on the enforcement of these rules is beyond discussion. There are even mentions regarding an early, albeit not precise, influence of the US concepts and legislation in the drafting of parts of the the Coald and Steel Treaty by an American author.

Even if the common-law roots of the EU competition law remain a topic of debates, it is obvious that Europe did not create its competition regime from scratch, without taking into account the experience and the utility of such a system across the Atlantic.  Even if the policies underpinning the competition regime and the use of the competition rules in order to foster the common (later on, internal) market of the Europe Union are particular features of the EU enforcement of competition law, it does not mean the rules themselves were totally European (2).

It is also worth noting that the most ancient root of the antitrust law itself, as enacted by the Sherman Act, is the old concept of the English law of the ”retraint of trade”. The world is round, after all.

Although focused on market integration and the free movement of goods and services, the enforcement of the EU competition rules started (in the last decade) to give more importance to the efficiency goals through what has been called, ”a more economic approach”.

As noticed by A. Komninos, the United Kingdom is a pole of the free-trade and open competition and it was able to influence the enforcement of EU competition law on these coordinates either at the level of the policies adopted by the European Union and through the British judges and the British staff of the European Court of Justice.  Both A. Komninos and Alec Burnside noted rightly that the UK influence in the EU enforcement of the competition rules resulted in less formalism and more use of an effects-based approach whenever the circumstances imposed such an approach, most notably in merger control. To be fair, this was not entirely the merit of the British bureaucrats or judges at the ECJ, but the British spirit is definitely present in this significant shift in the application of competition law in the EU.

Burnside went even further and recalled that the very foundation of the EU competition law, as a pillar of the European Union, was recently under threat – when the Lisbon Treaty was negotiated – and that it has been saved, in extremis, due to the perseverence and the drafting and diplomatic skills of the United Kingdom.  The warning, issued by Burnside in 2013, continues to be valid, perhaps even more acute since the gods of unrest have been unleashed by Brexit: [….] the Sarkozy tendency, present even before today’s economic crisis, is far from a spent force: the forces of protectionism are alive and well, in France and elsewhere. A future treaty renegotiation could witness renewed calls to promote European champions, protect strategic national industries and slacken state aid disciplines.”

If competition rules will be softened, or if their application by the European Commission and the NCAs steers toward formalism once again, it will spell bad news for the European Union.  We hope that this will not be the case and there are signs that justify our optimism.

Brexit could have also a negative impact on the private enforcement of the competition rules in the European Union.

The United Kingdom is a champion of the relatively new - and still underdevelopped in EU - way of applying competition rules directly in private litigations. It also has some of the oldest cases where damages were awarded in court as a result of a breach of the competition rules: the decision of the House of Lords in Garden Cottage Foods (1983). Private litigation cases are heard there by a specialized tribunal – the Competition Appeal Tribunal – and there are procedural instruments in place designed specifically for this category of litigation, such as a specific collective proceedings action or the possibility to opt-out.

The private enforcement of competition law is still in its infancy in most member states and the UK could serve as a model for some of these. Although the English legal system is quite different from the legal systems of other Member States, it should be remembered that the UK has often served as an inspiration or at least as a laboratory for new legal concepts and instruments. Through the harmonization pursued by the European Commission and the European Court of Justice, legal concepts which belong to the common-law system were ”exported” to the whole European Union.

As such, in the aftermath of Brexit, EU competition law is, unavoidably, at a crossroads. There are concerns but also opportunities and hopes that the public and private enforcement of the competition rules in the new EU will evolve in such a way as to serve European business and consumers. The European Union should not forget that the UK is leaving with large companies from a wide range of industries. Without a sound enforcement of competition rules and without preserving the British spirit of the free enterprise (”Business is good” is a slogan used by the UK government), these companies will not be convinced to move to the continent.

Brexit should also give birth to a more integrated European Union. This should mean, amongst other things, a more integrated enforcement of competition rules by giving the European Commission more powers to oversee the activity of the NCAs and spread good examples across the Member States.

Besides – in order to end this contribution on an optimistic note - the dialogue and the collaboration between the EU and the UK competition authorities will continue, be it on a bilateral basis or in the frame of the International Competition Network.  Separated but still together? We will see.

END NOTES

1) With a few remarkable exceptions, such as those of Assimakis Komninos, who analysed the effects of the UK departure at a moment when this was just a prospect – see his thoughts here - and Alec Burnside, who might have been even more visionary since it referred to the same side of the story back in 2013, at the time when the referendum for Brexit has just been called – see his thoughts here.

2) For more details regarding the roots and development of EU competition law enforcement, see “The Historical Foundations of EU Competition Law” edited by Kiran Klaus Patel and Heike Schweitzer, Oxford University Press, 2013.


Valentin Mircea

Valentin Mircea is a former Vice-president of the Romanian Competition Authority and one of the leading experts in competition and regulatory matters in Romania.

Prior to his term at the competition authority, Mr. Mircea was a lawyer with KPMG Romania and with the London-based law firm Sinclair Roche & Temperley/Stephenson Harwood. Currently, he is an aide to the Prime Minister of Romania and heads the control activities of the government.

Mr. Mircea is the author of several books and articles on competition and regulatory matters and a regular speaker at professional and business conferences. You may find his views on his professional blog – stateofcompetition.blogspot.com.

Mr. Valentin Mircea holds an LLB (Faculty of Law, University of Bucharest, 1996), a diploma from Pantehon-Assas (Sorbonne) University and a PhD in competition law from the University of Bucharest (2014).

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