Antitrust and competition

Publication | September 2018

Inside Brexit blog insights

For further insight and commentary on topics relating to Antitrust and Competition, please visit the Antitrust and Competition section of our Inside Brexit blog.

Will the UK competition law regime change materially as a result of Brexit?

The UK competition law rules – i.e. the prohibitions on agreements restrictive of competition and on abusing a dominant market position – are unlikely to change when the UK leaves the EU, irrespective of the Brexit model that is ultimately adopted. Indeed, to the extent that a comprehensive set of arrangements are agreed, the UK is likely to commit to maintaining some form of alignment with the EU competition regime.

The UK Government has expressed a commitment to maintaining the current robust antitrust prohibitions, but even absent a formal commitment to maintain alignment the fundamental principles of the UK competition rules would remain unaltered. The underpinning ideologies for the competition law prohibitions are globally accepted and we expect there to be a reluctance to amend the substance of the rules. However, we foresee that over time there could be scope for divergence in their application. The UK has always tended to follow a more economic and competition-based agenda than the other EU Member States and, on exiting the EU (or at least after the envisaged “implementation period” given the proposal that EU law continue to have effect in the UK in the same way as now until 31 December 2020), the UK competition authorities and courts would no longer be bound to interpret UK competition law in line with EU law and/or decisional practice.

There would of course be less scope for divergence if the UK remained part of the EEA. The UK would be required to adopt the competition rules under the EEA Agreement, which are identical in substance to the EU rules and are universally enforced within the EEA.

How will Brexit affect mergers and acquisitions which are currently assessed by the “one stop shop” provided by the European Commission?

Currently, a wide range of mergers and acquisitions involving UK companies fall within the scope of the EU merger control rules. If the parties to the transaction satisfy the relevant jurisdictional thresholds, the transaction must be notified to, and approved by, the Commission before it can be implemented. Generally, if a transaction falls within the scope of the EU regime, the Commission has exclusive jurisdiction over it, thereby precluding examination by the national competition authorities in the individual EU Member States, which currently includes the UK.

Following Brexit (and any implementation period prolonging the effect of EU law in the UK), this “one stop shop” provided by the European Commission will no longer apply to the UK. Parties would therefore have to consider the possible application of the UK merger control rules in addition to any potential EU notification.

Parties falling within the scope of both regimes will consequently face the prospect of concurrent merger filings. This will lead to increased costs and complexity and pose the risk of divergent decision-making in relation to the same transaction, thereby increasing regulatory uncertainty. For the largest transactions that already trigger multiple filing requirements around the world, the possibility of an additional filing in the UK is unlikely to result in considerable inconvenience in this regard. However, the risks are greater for transactions that under the current regime would trigger an EU notification but few if any filing requirements elsewhere.

Are UK businesses free to ignore the EU competition rules following Brexit?

The short answer to this question is “no” for any of the possible Brexit scenarios. EU law will continue to apply to UK companies trading in the EU following Brexit. The only difference will be that the UK will no longer directly participate in the formation of the rules or jurisprudence.

Many UK companies will therefore need to take account of both UK and EU law. In any Brexit model other than EEA membership, such a parallel application of both competition law regimes, and in particular any divergence between them, will create a risk of double jeopardy and/or incompatible decisions in respect of the same conduct or agreements. For example, currently either the European Commission or the Competition and Markets Authority (CMA) in the UK will conduct an investigation in relation to a suspected anti-competitive agreement entered into by a UK company, which affects trade within the EU. However, following Brexit (and any relevant implementation period), both authorities may start a simultaneous investigation. This will inevitably give rise to significant additional costs, delays and complexity for UK businesses, notwithstanding that the UK Government proposes to establish arrangements with the Commission and other EU Member States to manage parallel investigations and share confidential information.

Executives and other decision makers in global companies potentially also face an increased risk of personal sanctions in the UK for serious infringements of the competition rules given the CMA will be able to investigate the UK aspects of the largest international cartels that under the current regime the European Commission investigates alone. Whereas the EU competition regime provides for sanctions against businesses only, individuals also face personal risks under the UK regime, such as disqualification from holding directorships in the UK, personal fines and even imprisonment.

Will the UK enact rules prohibiting aid granted by the State in favour of particular businesses and/or the production of certain goods or services?

EU law prohibits any aid which is granted directly or indirectly by an EU Member State in favour of a particular business or the production of certain goods/services and which distorts, or threatens to distort, competition and affects trade within the EU. The prohibition is intended to prevent individual EU Member States from favouring national companies and restricting competition within the single EU market. The EEA Agreement contains a similar prohibition.

The UK Government has committed to continue applying state aid rules following Brexit, with a rigorous approach to state aid seen as critical to achieve the aim that the UK’s future economic partnership with the EU is underpinned by measures to ensure fair and open competition (and no doubt reflecting the reality that protections against state aid are a key tenet of trade agreements). Subject to negotiations with the EU, a “common rulebook” and ongoing harmonisation are envisaged, meaning the UK state aid regime would mirror the EU regime. However, there will inevitably be some differences, such as the fact that the UK state aid regime will be enforced by the CMA and the UK courts, rather than the European Commission and the Court of Justice of the EU. The UK Government also intends to develop new tailored arrangements in relation to payments to farmers and other land managers for environmental benefits, which will need to be considered for compatibility with (or exemption from) the new UK regime.

Even in the absence of a final agreement on ongoing harmonisation with the EU state aid regime, any greater theoretical freedom for the UK Government to support UK business will in practice also be limited by the UK remaining bound by the WTO rules on subsidies.

Will UK businesses have an advantage over EU and EEA businesses in UK tender procedures for public contracts?

The position of EU and EEA businesses in UK tender procedures for public contracts will be virtually unchanged by Brexit.

The UK Government has expressed its interest in becoming a party in its own right to the WTO’s Government Procurement Agreement (GPA) subject to the rights and obligations it currently has under the GPA as an EU Member State. The UK would therefore be required to liberalise its procurement market to the extent required by the GPA (assuming it accedes to the GPA). Although this would not necessarily cover all contracts (e.g. many services contracts are excluded), in all likelihood any free trade agreement between the EU and UK would extend coverage to almost all public contracts on a reciprocal basis since the EU would almost certainly oppose the introduction of any form of protectionism in relation to UK public contracts.

Even in the absence of a free trade agreement between the UK and the EU, UK businesses are still unlikely to have an “advantage”. This is because EU and EEA businesses could easily tender for UK contracts by either establishing a UK subsidiary or partnering with a UK-based entity.



Peter Scott

Peter Scott

Ian Giles

Ian Giles

Mark Tricker

Mark Tricker

London Nordic region
Mark Simpson

Mark Simpson