Brexit - a legal analysis: Competition

The implications for competition law and practice will very much depend on what form of Brexit the UK will end up negotiating.

At one end of the spectrum the UK could join the European Free Trade Association and the European Economic Area, an avenue that is likely to generate the fewest changes. If the UK were to seek a total exit, falling back on World Trade Organisation (“WTO”) rules to continue trading with the EU, the potential changes would be more wide-ranging as outlined below.

Competition and anti-trust

The EU antitrust rules (Article 101 TFEU on anti-competitive agreements and Article 102 TFEU on abuse of a dominant position), apply to both EU and non-EU companies who carry on business in Europe or whose activities affect trade in Europe. The UK competition rules (the Chapter I and Chapter II prohibitions of the Competition Act 1998) currently mirror the EU antitrust rules and both EU and non-EU companies are therefore subject to a very similar regime where conduct affects the UK only. As such a UK exit from the EU would have limited impact.

While the UK is within the EU the UK competition authorities cannot investigate a case where the EU Commission takes jurisdiction. However a UK exit from the EU would mean that there will be more cases where both the EU and the UK could in parallel open an investigation and impose fines and other remedies for anti-competitive conduct affecting both the EU and the UK. This could potentially add to the risk and costs for affected businesses.

Merger control

In respect of merger control, the main impact of Brexit is likely to be parallel investigations. Under the EU Merger Regulation (EUMR) a transaction that qualifies under the EUMR is no longer subject to the merger control regime(s) of the relevant Member State(s) (subject to some exceptions).

If the UK leaves the EU, the EUMR and UK merger control regimes would run in parallel. A transaction that qualifies under the EUMR may also be subject to UK merger control (provided the jurisdictional threshold for UK merger control is met). This could add a burden and cost for businesses, in particular in view of the level of the UK merger fee (ranging from £40,000 to £160,000 depending on the UK turnover of the enterprises acquired) and the potentially longer time frames for UK merger control clearance.

Follow on damages claims

The UK is currently one of the most popular jurisdictions for follow-on damages actions for breach of EU competition law, where the claimant relies on an existing EU Commission infringement decision. Following a Brexit, EU Commission infringement decisions will cease to have a binding effect on UK courts and one expects that claimants may look to other jurisdictions when choosing the forum to bring such claims. However a number of claims dealing with historic conduct are likely to proceed under the current regime and looking ahead EU Commission infringement decisions, although no longer binding, are likely to be given significant weight by the UK courts and therefore EU competition law is likely to continue to be litigated in UK courts for the foreseeable future.

State aid and public procurement

Following Brexit, the EU State aid rules would cease to apply in the UK. The same outcome applies to the EU public procurement rules.