The UK formally left the European Union at 11pm on 31 January 2020, and entered into a transition period which will end on 31 December 2020. Formal negotiations will soon be taking place on the future UK-EU relationship, but EU competition law will continue to apply in the UK during the transition period.
After the transition period, the UK Competition and Markets Authority (‘CMA’) will no longer be able to enforce EU competition law. However, the CMA will have jurisdiction over matters which were previously exclusively reserved for the European Commission (‘Commission’) which means that businesses may be subject to parallel investigations by the Commission and CMA. We summarise what the position will be during the transition period, the treatment of live cases at the end of the transition period and the position after the transition period.
Where references in this article are made to the CMA in the context of antitrust investigations, this also includes UK concurrent regulators.
Transition period
During the transition period, directly applicable EU law, including Articles 101 and 102 of the Treaty on the Functioning of the European Union (‘TFEU’), the EU Merger Regulation (‘EUMR’) and EU block exemption regulations, will continue to apply in the UK. Therefore, it will largely be ‘business as usual’ over the coming months, in particular:
- Merger control - the EU ‘one stop shop’ principle will continue to apply such that the Commission will continue to have sole exclusive jurisdiction to review transactions which meet the EU turnover thresholds (unless jurisdiction is transferred to the CMA under the EUMR’s normal case referral mechanisms) and UK turnover generated by parties will continue to be taken into account when calculating the EU jurisdictional turnover test
- Antitrust (Articles 101 and 102 of the TFEU) – the enforcement of antitrust and cartel investigations will continue as before, alongside the equivalent UK domestic prohibitions. In particular, the CMA will not investigate conduct relating to Articles 101 and 102 of the TFEU where the Commission has already initiated formal proceedings
- State aid - the UK will still be required to limit public subsidies in line with EU State aid regulations.
‘Live’ cases at the end of the transition period
Decisions issued by the Commission before the end of the transition period, which are addressed to the UK or its natural or legal persons will be fully binding on and in the UK, including decisions on merger control cases, antitrust investigations and State aid cases. However, there may be some cases being reviewed by the Commission at the end of the transition period for which the Commission has not issued a decision. For these cases, the CMA and Commission will have jurisdiction as follows:
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Area
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When will the Commission have jurisdiction?
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When will the CMA have jurisdiction?
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Merger control
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The Commission will retain jurisdiction until it reaches a final decision, at either Phase 1 or Phase 2, if the transaction was notified before the end of the transition period.
The Commission will also retain exclusive jurisdiction if it accepted a referral request to review the merger under the EUMR before the end of the transition period.
Where the Commission has accepted commitments from merging parties, it will continue to be responsible for monitoring and enforcing the commitments going forwards, unless the Commission and CMA agree to transfer the responsibility to the CMA.
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The CMA may have jurisdiction if a merger was not formally notified to the Commission (i.e. in pre-notification discussions) or it was referred to the CMA by Commission before the end of the transition period under the EUMR.
If the UK Secretary of State issued a European Intervention Notice under the EUMR regarding a case notified or referred to the Commission before the end of the transition period, the CMA and UK Secretary of State will review the UK public interest elements of that transaction in line with the CMA’s existing guidance.
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Antitrust investigations
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The Commission will retain exclusive jurisdiction where it initiated formal proceedings before the end of the transition period.
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Subject to further negotiation and guidance, the CMA may have jurisdiction over elements which have already been formally initiated by the Commission (for example if there may be an effect on UK trade).
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State aid
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The Commission will retain jurisdiction where the State aid procedure was initiated before the end of the transition period (and beyond – see below).
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See below (Post-transition period)
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The main impact on live cases at the end of the transition period is the risk that the CMA may initiate parallel investigations into conduct or transactions being reviewed by the Commission. The CMA’s recent guidance states that the CMA will engage with parties where it considers that it might have jurisdiction alongside the Commission after the end of the transition period.
Post-Transition Period
From January 2021 onwards, it is expected that the CMA will only be able to enforce UK competition law, and not EU competition law. In particular, unless anything to the contrary is agreed during the transition period, the main changes will be as follows:
- Merger control - the EU ‘one stop shop’ principle will no longer apply, therefore where mergers satisfy both EU and UK jurisdictional thresholds, they may be subject to parallel investigations by the CMA and Commission. Furthermore, UK turnover generated by the parties will no longer be relevant when assessing whether the EUMR turnover thresholds are met
- Antitrust – the CMA will no longer be able to enforce EU competition law (Articles 101 and 102 of the TFEU). The EU will no longer have jurisdiction to conduct dawn raids in the UK, and may only issue information requests to businesses in the UK. The leniency regimes of the Commission and the CMA will remain separate and parties should continue to consider whether to make separate applications to the CMA and Commission where appropriate. The EU block exemption regulations will be retained until they expire and, accordingly, companies operating in the UK will continue to benefit from the exemptions if they meet the relevant criteria
- State aid - the Government is yet to decide how any new UK subsidy control or State aid rules will operate in the future. However, it is expected that, for four years after the end of the transition period, the Commission will continue to have jurisdiction to review the award of any UK State aid that was granted before the end of the transition period.
What does the future look like?
As it stands, the main change in the post-Brexit era is that the CMA will no longer be able to enforce EU competition law and will have jurisdiction over matters which were previously exclusively reserved for the Commission from January 2021 onwards. This means that businesses which were previously required to only engage with the Commission for merger control cases or antitrust investigations may also be required to engage with the CMA in parallel.
Whilst it is ‘business as usual’ during the transition period, businesses will need to carefully manage any potential parallel investigations they may face after the transition period. In relation to mergers, if it may not be possible to formally notify the Commission before the end of the transition period (taking into account deal timing, the EU pre-notification process, and the EU holiday period at the end of December for example), businesses should consider having parallel discussions with both the Commission and the CMA at an early stage. Where antitrust cases are likely to be ‘live’ at the end of the transition period, businesses would be well advised to take steps to manage the risk of parallel investigations by developing a proactive strategy for engaging with the CMA as well as the Commission.
As a leading independent UK law firm, Burges Salmon has considerable experience collaborating with non-UK law firms and advising non-UK based businesses in relation to UK competition law. In particular, the team has considerable experience advising on the UK merger control process and investigations by the CMA and UK concurrent regulators, including leniency applications and settlement proceedings. If you have any queries on the issues raised in this article or would like to receive advice on UK or EU competition law, please contact us.