Covington & Burling on the UK’s “No-Deal” Competition and Merger Guidance

The UK Government published its highly-anticipated technical guidance on merger review and anti-competitive activity on 13 September 2018 which will apply in the case of a ‘no-deal’ Brexit (the ‘Guidance’). Although brief, it provides market players with some form of practical advice and insights on what to expect, how cases are likely to be divided between the EU and UK regimes, how UK competition law will develop, and suggests in what ways post-Brexit competition damages actions in the UK Courts may change. This Guidance follows on from the previously released ‘no-deal’ state aid guidance – as was covered in our previous Covington alert – forming part of a larger suite of ‘no-deal’ Brexit guidance papers released by the Government in recent weeks.

The Guidance provides several key pieces of practical advice for businesses regarding different types of competition law processes in the wake of a ‘no-deal’ Brexit.

  • Businesses subject to an ongoing merger review and/or investigation into anticompetitive conduct will need carefully to consider how they can ensure they are complying with both the European Commission (‘EC’), and the Competition and Markets Authority (‘CMA’) (or relevant UK sectoral regulator) processes. It is possible that businesses will need to engage with both an EU and UK regulator in parallel, since they will hold concurrent jurisdiction. The Guidance advises businesses involved in ongoing cases to seek external legal advice as to how to ensure they are compliant in a ‘no-deal’ scenario.
  • Businesses considering a merger in the run up to March 2019, and who are unsure about whether a parallel notification should be made to both regulators, should consider engaging early with both the EC and CMA on the issue.
  • Businesses that have already filed a merger notification and are still awaiting clearance by March 2019 should also carefully establish whether there is any further action required to ensure compliance with both the EU and UK merger regimes by proactively approaching both regulators.
  • Although the UK is seeking to preserve the existing competition block exemption regime from EU law, beneficiaries of these exemptions should familiarize themselves with any minor modifications (such as thresholds being converted from Euros to GBP).

Other key points from the Guidance in a ‘no-deal’ Brexit include:

General

The Guidance explains that the Government is not proposing to make any changes to the UK competition regime beyond those necessary to manage the UK’s exit from the EU. However, it also states what is already clear from the European Union (Withdrawal) Act 2018, namely that the UK Courts will no longer be bound to follow future case law from the European Courts.

Additionally, it provides that the CMA will generally issue additional guidance where appropriate to help businesses understand the transition of the two competition regimes.

Merger Control

The current EU merger regime will remain in force until the Brexit leaving date, following which the ‘one-stop shop’ merger notification that currently exists at an EU level will cease to apply to the UK. Instead, mergers that trigger both the EU and UK thresholds will need to comply with two sets of separate rules in parallel – one at the UK level and one at the EU level. The Guidance explains that EU turnover thresholds for businesses operating in the EU will continue to apply, but that the UK will no longer be considered when assessing the application of the EU thresholds.

Antitrust Investigations

The EC will no longer have the competence to begin antitrust investigations in relation to those aspects of potentially anticompetitive conduct that concern the UK. Instead, the CMA and the UK sectoral regulators (such as Ofcom and Ofgem) will be positioned as the only authorities with investigatory and enforcement powers regarding anticompetitive conduct having effects in the UK. This means that post-Brexit, companies are at risk of being investigated by both UK and EU regulators in parallel for potential infringements that have an effect in both jurisdictions.

Block Exemptions

Businesses that currently benefit from the EU block exemption regime can take comfort that the Government’s position is to preserve the existing regime under UK law, although ‘necessary modifications’ would be made. Existing beneficiaries of an EU exemption to UK antitrust constraints will continue to benefit from such exemptions post-Brexit. These preserved block exemptions will also be applicable within the UK where businesses enter into new agreements that meet the relevant criteria.

Actions for Competition Damages

Like the European Union (Withdrawal) Act 2018, the Guidance notes that in a ‘no-deal’ scenario competition damages claimants will no longer be able to rely on infringement decisions made by the EC post-Brexit as a ‘binding’ finding of infringement in the UK Courts. The novelty of the Guidance is that it suggests that this will extend to all EC infringement decisions post-Brexit – even as regards infringing conduct that took place prior to Brexit. It is highlighted that EC infringement decisions made prior to Brexit will, as now, remain binding on the UK Courts.

The Guidance provides that claimants relying on post-Brexit EC infringement decisions will instead need to bring a ‘standalone’ claim for breach of a foreign tort (a legal claim in the UK relating to a violation of foreign law). Another option identified is to base the competition damages claim on a UK infringement decision. The Guidance explains that post-Brexit it may be necessary for competition damages claimants to make parallel claims in both the UK Courts, based on a UK infringement decision, and in an EU Member State, based on an EC infringement decision. It fails to mention the possibility of bringing a stand-alone claim of breach of UK law borrowing from analysis or facts set out in the EC decision. Nor does it recognise that it will be possible to bring a single claim in the UK, albeit combining a claim based on UK law and one based on a claim for breach of foreign law, for example EU law.

Finally, the Guidance is keen to stress in its last paragraph that it stands as part of the Government’s planning for all possible outcomes – and that the Government still expects that a successful deal with the EU will be negotiated.

This post comes to us from Covington & Burling LLP. It is based on the firm’s memorandum, “The UK Government Issues ‘No-deal’ Competition and Merger Guidance,” dated September 17, 2018, and available here.