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Brexit: Reactions From the Competition Law Industry

Posted by on 24 June 2016
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After this morning’s historic vote, we spoke to professionals and organisations alike about their thoughts on competition law, Brexit, and how to start moving forward:

“This creates an era of profound uncertainty for UK competition law.  Of course the interaction of UK and EU competition rules will be far from the top of the agenda when the Brexit negotiations begin, and the UK will remain subject to EU rules in the interim, but thereafter it is likely there will be parallel UK and EU merger reviews, parallel cartel investigations, and UK business will of course remain subject to EU rules to the extent it does business anywhere with an effect on trade between the remaining EU member states.  The net result will be more regulatory challenges – rather than less – as promised by the Leave camp in the recent debates.”

Ian Giles, Partner, Norton Rose Fulbright

"It’s really too early to be sure of anything.  The key question will be whether we move to EEA membership or are out altogether.  If the latter, then the main upshot in competition law terms is greater legal uncertainty (since so much of UK competition law is based on EU competition law) and a degree of duplication (eg large mergers may fall to be reviewable by the CMA in London and the Commission Brussels, which is not the case at the moment)."

Becket McGrath, Partner (Antitrust and Competition), Cooley LLP

"The UK will be out of scope for multifiling assessment of the reportability of mergers to the EC. The UK will also be able to grant state aids without entailing the risks of being questioned by the Commission. As one of the leading follow-on damages, the actions forum for antitrust violations may be questioned in the future."

Fayrouze Masmi-Dazi, Avocat à la Cour, Senior Associate, DLA Piper France

"Competition law comprises three main areas: anti-trust law, merger control and state aid. The two key anti-trust provisions are the prohibitions on (i) agreements which distort or restrict competition; and (ii) the abuse of dominant positions.

The anti-trust laws will remain basically the same except that they will apply purely in a UK context and the UK Competition and Markets Authority (“CMA”) will no longer have the power to enforce EU competition law in the UK. The UK merger regime will remain unaffected except that the CMA will have jurisdiction to investigate more mergers because the EU Merger Regulation “one stop shop” for pan European mergers will no longer apply in the UK.  In theory, EU State aid rules might cease to be applicable in the UK and there are currently no equivalent UK law provisions. The UK may, therefore, be free to introduce for example tax reliefs that could count as State aid. However, in practice, it is questionable whether the UK Government would wish to do this to any great extent, as to do so would conflict with the UK’s general economic approach to free trade.

There would still be various impacts for UK businesses. First, the EU competition law regime will still apply to them in respect of business they conduct in the EU and where their conduct has an effect on trade in the EU. It will be more difficult for the EU to investigate UK companies though, because they will no longer have the power to raid UK business premises. Second, there is much greater potential for parallel EU and UK investigations into multi-jurisdictional mergers and anti-trust breaches. This may result in more legal fees and higher fines for businesses, as well as the risk of conflicting decisions."

Ros Kellaway, Partner and Head of Competition, Eversheds

"First it is important to realise that whilst the UK has voted clearly to leave, there is no consensus whatsoever as to what happens next.  For example, at one extreme there would be no practical change if the UK traded EU membership for EEA membership.  At the other extreme, adopting a WTO approach would result in the wholesale extraction of the EU competition rules as regards the UK.

However, even taking the WTO extreme as a basis, it should be noted that the UK competition regime mirrors in substance the EU competition laws and there is no reason to believe that these would change substantively.  Hence from a purely domestic perspective, there may well be little, if any, change other than a sharp increase in the number of cases where there are parallel EU/UK investigations. 

For example as regards merger control, where the EU currently operates a one stop shop to the exclusion of national regimes, it may become necessary for parties to seek merger clearances in the EU and the UK (notwithstanding the UK’s voluntary regime, transactions raising substantive issues are likely to be conditional on UK and EU clearance where appropriate).  The ability to review mergers under national laws may therefore be expected to outweigh a reduction in influence over EU merger decisions that affect UK consumers (as seen recently in the O2/Three deliberations).

The position is more unclear as regards competition litigation. The UK had sought to position itself as a leading jurisdiction for the private enforcement of EU competition rights (alongside Germany and the Netherlands). The assumption must be that once the UK has actually left the EU, EU Commission decisions and EU law will itself cease to have a binding effect on the UK courts and the UK courts would consequently cease to be such an attractive forum for claimants.

Having said that, the converse will also be true, and it is likely that the an infringement finding at EU level would remain highly persuasive. As the UK remains a large market, we may see an increase in cases where claims are pursued in parallel in the UK and the EU.   Furthermore, the UK Courts will be expected to apply the law as it stood when the infringement took place and/or when the right to sue accrued.  Hence EU competition law may continue to be of relevance in the UK Courts for some time to come, whatever the outcome on the exit negotiations.

It is to be expected that the UK competition authorities will ultimately cease to be full members of the European Competition Network, which in the absence of separate agreements will mean a reduced UK voice in the shaping and development of competition policy at EU level. 

Longer term, a gradual shift away from the existing alignment with EU law might be expected as the UK regime adapts to life outside the EU.  But at least initially, the practical impact may well be more limited."

Pat Treacy, Steve Smith and Sophie Lawrance, Competition Team, Bristows

"In the event of Brexit and if the UK chooses a model under which EU completion law does not apply or need to be followed there is a prospect of parallel regulation and enforcement on merger control and cartels, requiring many cross-border transactions or cartel investigations to be considered not only at the EU level but also by the UK’s Competition and Markets Authority. It may provide an opportunity for dilution of regulation affecting specific areas, such as state aid and procurement rules, but much will turn on the exact scope of the new UK-EU arrangements."

Dechert LLP

"Although the referendum outcome has no immediate legal impact - current UK and EU laws remain in place for now - we clearly move into a new phase of uncertainty and speculation about the future UK and EU landscape."

Gowling WLG (UK)

If you wish to contribute to a further series on Brexit opinions, or just have something to say on the matter, please email lorna.mackinnon@informa.com.

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