Regulatory Outlook: Competition

Current issues: February 2019

Increased workload for the CMA in 2019?

For the UK Competition and Markets Authority (CMA), the year ahead threatens a heavily increased workload, depending on whether the UK exits the EU under a deal or no deal scenario. Should the latter occur, the CMA will not only have to commence its role as the new UK state aid authority, but will have to address a significantly increased workload of antitrust and merger cases where UK aspects will no longer be considered by the European Commission.  In these circumstances, the CMA has warned that its ability to take on new discretionary work will be limited and prioritisation will be key. Practically, this may mean that infringements that would otherwise have been investigated by the CMA are unable to be picked up; this may have an impact on the ability for businesses to seek redress for anti-competitive behaviour.

If the Withdrawal Agreement is ratified, the CMA will have until 2020 to prepare for this increased workload and can be expected to use its extra resources to ramp up enforcement in the meantime.

Institutional changes at the EU

Significant change lies ahead for the EU in 2019, not merely as a result of Brexit. With the Parliamentary elections this year, the five year term of the current Juncker Commission ends on 31 October, including that of Competition Commissioner Margrethe Vestager. This could result in a change in focus for the Commission in respect of competition law, depending on the outcome of the elections.  An area to watch is whether key areas of interest for the Commission under Vestager – such as competition enforcement in the context of the digital single market – will remain a priority under any new Commissioner.

Competition rules: fit for purpose in the digital age?

In both the UK and the EU more widely, competition policy is being scrutinised to assess its suitability for the current and future challenges of emerging technology. In the UK, as part of a wider review of the UK competition regime by the BEIS, the government has appointed an expert panel to examine the effectiveness of competition policy in light of the opportunities and challenges posed by the emerging digital economy: the report is due early this year. The review has the potential to result in both legislative changes and changes to enforcement by the CMA.

Similarly, the European Commission has also commissioned a report focusing on future challenges of key upcoming digital changes, how these will affect markets and consumers and implications for competition policy. The Commission also held a conference on ‘Competition law in the era of digitisation’ on 17 January 2019.

In Focus: No deal Brexit

What would be the impact of a no deal Brexit for UK businesses trading with the EU?

The draft EU-UK Withdrawal Agreement provides for the European Commission to continue to have jurisdiction for the enforcement of EU competition law for proceedings commenced before the end of the transition period (31 December 2020, unless extended). A no deal Brexit could raise difficult questions as to the extent of the Commission’s jurisdiction in relation to live EU merger or antitrust investigations, to the extent that they relate to the UK. This could affect not only those under investigation, but also other businesses who may be impacted by those proceedings (such as those who may have a potential follow-on damages claim). It would also leave uncertainty for businesses considering a merger transaction, as some mergers that currently meet the EU thresholds may be reviewed by both the CMA and the Commission.

In terms of substantive competition law, the immediate impact of a no deal Brexit will be relatively minor: UK companies will continue to be subject to EU competition law when trading in the EU, and as the domestic UK legislation enacting the European rules will remain in place, UK companies can continue to comply, in effect, with a single set of competition rules.

Brexit does, however, set the stage for future divergence in the rules, which UK businesses operating in the EU will need to follow (whether or not there is a deal).

What would be the impact of a no deal Brexit for non-UK businesses trading with the UK?

As set out above, there will be no change in the UK’s domestic competition legislation and therefore businesses can rely on complying with the UK and EU competition rules as currently formulated, although note will need to be taken of any future divergence between the rules.

For non-UK companies trading with the EU, one key area to be aware of is the UK’s enforcement of State aid rules post-Brexit.  While the UK has committed, in any event, to enforcing State aid rules, this is the area of competition law which is most likely to be subject to government intervention. Tension between maintaining a competitive playing field in the UK and political desire to support British businesses is likely to arise in the context of any type of Brexit, but particularly in the event of a no deal and will be of key interest to any non-UK companies active in the UK.

What should businesses be doing now to prepare for a no deal Brexit?

For most businesses, there will be little that needs to be done from a competition perspective in preparation for ‘no deal’ given the consistency of the rules. Any divergences will take time to emerge – although the CMA’s capacity to take on cases may have an impact on those seeking to challenge anti-competitive behaviour.

The exception will be those companies that are subject to an ongoing investigation or considering a merger transaction. The UK government has advised that in the event of no deal, businesses currently subject to a live EU merger or antitrust investigation should seek advice on the jurisdiction for that investigation. Additionally, businesses considering a merger transaction and unsure whether a parallel notification is required may wish to engage with the CMA and the Commission.

Dates for the Diary

Early 2019  UK report on competition in the digital economy due
31 March 2019 EU report on future challenges of digitalisation for competition policy due
April 2019  Deadline for BEIS to complete review of UK competition policy
31 October 2019 End of five year term of Competition Commissioner Margrethe Vestager