Brexit will have a significant impact on the UK's competition regime.

The EU Internal Market Sub-Committee today (February 2, 2018) published its report on the implications of Brexit for competition matters comprising: anticompetitive conduct or agreements (antitrust); merger control; and State aid.

Context

Since joining the European Union, UK and the EU institutions have shared responsibility for competition matters.  Brexit will have a significant impact on the UK's competition regime.

The report examines: the short-term legal and regulatory implications of Brexit; questions of jurisdiction that will need to be resolved during any transition or 'implementation period'; and potential opportunities for the UK to develop a more effective and inclusive domestic competition framework of its own.

Key Findings

1. Antitrust and Merger Control

While there should continue to be consistency between the UK and EU's approach to competition matters, the UK will be free to take a more innovative and responsive approach to tackling global competition enforcement challenges - such as fast-moving digital markets and dominant online platforms.

It will be in the interests of the UK and EU competition authorities to continue to cooperate post-Brexit.  A formal cooperation agreement should be negotiated covering investigations and enforcement actions.

2. State Aid

Post Brexit, a UK-wide domestic state aid framework will be needed: in order to meet WTO obligations; and avoid intra-UK subsidy races.  It will be essential for the Government to involve and secure the support of the devolved administrations in developing this framework.

3. Transition

Transitional arrangements will be necessary to clarify jurisdiction in cases which are ‘ongoing’ at the point of Brexit - as well as future cases relating to conduct that occurred whilst the UK was still a member of the EU.  The terms of the transition period should be agreed in the first quarter of 2018 to ensure that businesses are not faced with the complexity and cost of adapting to Brexit twice.

4. Regarding future policy

The report addresses the UK's future competition regime.  It concludes that there is an opportunity to design a more inclusive system that better reflects domestic needs and priorities.  The Government should launch a consultative process - involving all relevant stakeholders - to inform its decisions in this regard and put in place any related legislation.

Chairman of the EU Internal Market Sub-Committee, Lord Whitty, said:  "While our witnesses favoured ongoing consistency between the UK and EU's approach to competition matters, we were encouraged that they also saw opportunities for the UK to improve our competition regime after Brexit."

Further Background

EU competition policy is derived from rules set out in the Treaty on the Functioning of the European Union (TFEU).  This encompasses three ‘pillars’: antitrust, mergers, and State aid.

EU Member States’ courts and competition authorities are required to apply EU antitrust law when considering anti-competitive agreements and conduct which may affect trade between Member States, and to ensure consistency with the principles applied and decisions reached by the Court of Justice of the European Union (CJEU).

The European Competition Network (ECN) facilitates cooperation between the national competition authorities of Member States and the European Commission.

In relation to merger control, the Commission primarily examines larger – international - mergers which have an ‘EU dimension’ based on specified turnover thresholds achieved in more than one Member State.  This provides a ‘one stop shop’ whereby merger reviews are usually dealt with either by the Commission or by a Member State authority.

The EU has exclusive competence in determining the compatibility of State aid with the internal market, which is prohibited without the approval of the Commission.  However, the majority of new State aid measures are now covered by the General Block Exemption

Regulation (GBER) and Member States are not required to notify them to the Commission for prior authorisation.

The Competition and Markets Authority (CMA) is the UK’s lead competition authority.  It has responsibility for investigating potential breaches of UK or EU antitrust prohibitions and examining mergers which could restrict competition.   Certain sector regulators also have concurrent competition powers. 

The UK’s antitrust and merger control regime is robust and highly regarded, and the CMA is well respected among its international peers.  By contrast, the UK’s domestic State aid framework is very limited, as EU law applies directly and the Commission approves any aid not covered by block exemptions, such as the GBER.

Public procurement in the EU is subject to the provisions of the EU public procurement Directives, which coordinate national procurement rules.  If public authorities buy goods or services through tenders which comply with EU public procurement rules, this is in principle sufficient to ensure that the transaction is free of State aid.  Post-Brexit the UK public procurement may become less onerous.

Stakeholders are generally positive about the operation of the current UK and EU competition regimes presently.  However, there are some issues such as: consumer concerns regarding pricing and dominance in some markets; and delays and bureaucracy in the EU State aid approval process.

Full 78 Page Report can be found at:

https://publications.parliament.uk/pa/ld201719/ldselect/ldeucom/67/67.pdf

 

John ShuttleworthComment