Deal or No Deal? The Impact of Brexit on UK Competition Law Becomes Clearer - Lexology
This chapter provides an overview of EU and UK competition law. Today, the EU competition law involves both an economic analysis of business practices and The relationship between intellectual property rights and competition law · Competition between businesses. UK decision to invoke Article 50 of the TEU: More information. As of 30 March , all EU law will cease to. The EU's competence in the area of competition law, including State aid rules, dates . there is a relationship between public procurement and State aid insofar as the The CMA is the UK's lead authority for competition and consumers, with .
There is therefore a pressing need for clarity on what happens to live cases at that point. It is also important for businesses to understand what competition laws will apply to their conduct within the UK from 30 March.
Unfortunately, at the time of writing, this is far from clear. On 14 November, nearly 30 months after the Brexit referendum, the Commission published the text of the page draft Withdrawal Agreement.
The Commission published an Outline Political Declaration on the Future Relationship on the same date, setting out the broad parameters for a potential future trading relationship between the EU and the UK. Publication of the draft Withdrawal Agreement followed its approval by the UK Cabinet earlier the same day. The final Withdrawal Agreement is due to be formally adopted by the remaining 27 Member States of the EU at a special meeting of the European Council on 25 November, after which it will be subject to approval by the European Parliament.
Once formally adopted by both the UK and EU, the Withdrawal Agreement will govern the UK's relationship with the EU until such a time as a new treaty can be put in place to govern that relationship on a lasting basis or its earlier expiry. To serve its purpose, the Withdrawal Agreement must enter into force before Brexit takes effect on 29 March.
Before the Withdrawal Agreement can enter force, however, it also needs to be approved by the UK Parliament. The extent of political objections to its terms makes this approval and hence UK ratification highly uncertain. In the absence of ratification, and assuming that the UK does not withdraw or suspend its notice of its intention to leave the EU, Brexit will still take effect on 29 March, albeit without any agreement with the EU on the terms of departure.
In such circumstances, the UK would suddenly drop out of the legal and regulatory structure provided for by the Treaties and be treated in the same way as any another third country.
While the consequences for a disorderly or "no deal" Brexit would be profound across the UK economy, at least we now have a clearer picture of how the UK Government proposes to deal with the impact on the domestic competition law regime, by virtue of the Government's publication of the Competition Amendment etc. These set out the detailed changes that would be made to UK competition law in the event of a no deal Brexit. On the same date, the CMA published two technical notices setting out its role in antitrust and mergers in a "no deal" scenario.
As an agreed withdrawal deal remains the baseline scenario, this will be considered first. The deal Basic purpose To understand how the Withdrawal Agreement impacts on UK competition law, it is important to understand its basic purpose. As provided by Article 50 TEU, which governs the process for a Member State's withdrawal from the EU, the agreement's primary purpose is to deal with the immediate consequences of departure, including clarifying the process for administrative proceedings that straddle exit day confirming the rights of citizens of the UK and the other EU Member States who are resident in each other's territory at the point of Brexit and confirming the terms on which the UK will settle its outstanding financial liabilities to the EU.
The Withdrawal Agreement is not intended to deal with the long-term trading relationship between the UK and EU, which is instead due to be addressed through a separate treaty. Reflecting this, the outline Political Declaration, which sets out the general framework for that future relationship, is non-binding and reads more like a vague "heads of terms" than a formal agreement. Since the full agreement on the future trading relationship will take time to negotiate, the Withdrawal Agreement provides for a "transition period", during which EU law will continue to apply to the UK as if it were still a Member State.
The main exception to this principle is that the UK would not be represented in any of the EU's institutions. Although there is provision for UK experts to be invited to attend committees to discuss new EU competition legislation and draft Commission antitrust decisions before their adoption, UK representatives will have no voting rights and materially less influence.
The transition period is currently proposed to last until 31 December As that is unlikely to be sufficient for negotiation of a new trading relationship, the Withdrawal Agreement provides that it can be extended once, until a later date that must be specified in the Withdrawal Agreement. Although this aspect is hotly disputed, the possibility of an extension of the transition period to the end is currently under discussion. The backstop If the UK and EU fail to agree terms on the future trading arrangement before the end of the transition period, or if the agreed future relationship is not close enough to allow continued frictionless trade between Northern Ireland and Ireland, then the Withdrawal Agreement provides for the implementation of a so-called "backstop" arrangement.
However, it does not create or alter any rights or obligations under the competition rules, is not binding and, in the case of any divergence, the competition rules of the TFEU, Regulations, notice and other guidance take precedence. These include the way in which case work is divided between the NCAs and the Commission, the notification of cases to the ECN by NCAs, the suspension or termination of cases that are being dealt with by another authority, the exchange of information between ECN members and the subsequent use of the information and assistance provided by NCAs in relation to Commission on-site inspections, or inspections carried out on behalf of another NCA.
Each of these issues is discussed below. Notification of cases to the ECN Article 11 3 of the Modernisation Regulation provides that NCAs have to notify the Commission in writing before, or without delay after, commencing the first formal investigative measure in an Article or case. The information supplied to the Commission may also be made available to other NCAs.
The notification requirements allow the ECN to detect instances where cases are being dealt with by a number of authorities and, where necessary, allow cases to be reallocated at the start of an investigation. The Network Notice states that the information should be provided by NCAs before, or just after, any step similar to the measures the Commission may take under Articles 18 to 21 of the Modernisation Regulation.
The relevant measures are: Information requests Article Conducting interviews and taking statements for the purpose of collecting information relating to the subject matter of an investigation Article Inspecting business or private premises Articles 20 and Case notification takes place by way of a standard form which contains limited details of the case, including the NCA that is dealing with the case, the product, territories and parties concerned, the alleged infringement, the suspected duration of the infringement and the origin of the case.
NCAs are also expected to update the information provided when a change occurs paragraph 17, Network Notice. One NCA may deal with the case. Where an agreement or practice substantially affects more than one member state, members of the ECN will seek to agree who is best placed to deal with the case successfully paragraphs 16 and 17, Joint Statement. Several NCAs could act in parallel on a case. In cases where competition is affected in more than one member state and no single member state would be able to deal with the case successfully alone, parallel action may be appropriate.
An NCA may be designated as the "lead NCA" in the case, although each authority that is well placed to act may conduct its own investigation paragraph 18, Joint Statement.
The Commission could deal with the case. The Commission will be well placed to deal with a case where competition in more than three member states is affected. The Commission may also be the most appropriate authority to deal with cases that are closely linked to other EU provisions which may be exclusively, or more effectively, applied by the Commission.
Cases may also be dealt with by the Commission where European Union interest requires the adoption of a Commission decision to develop EU competition policy. This will be the position, in particular, where a case involves new competition issues paragraph 18, Joint Statement and paragraphs 15 and 16, Network Notice.
In most cases, the NCA that receives a complaint or commences an investigation will remain in charge of the case.
A case will only be reallocated to another NCA or the Commission at the start of a procedure where either the NCA does not consider that it is well placed to act or where another NCA or the Commission considers that it is well placed to act paragraph 6, Network Notice. In deciding whether an authority is well placed to act, NCAs will take into account factors including the market or markets in which the main anti-competitive effects of the agreement or practice are felt, and the NCA's ability to gather evidence, to bring the infringement to an end, and to effectively sanction the infringement.
The agreement or practice has substantial direct actual or foreseeable effects on competition within its territory, is implemented within, or originates from, its territory paragraph 8. The NCA is able to bring the entire infringement to an end, and can sanction the infringement adequately paragraph 8. The NCA can gather the evidence required to prove the infringement paragraph 8. For an NCA to be well placed to act, there has to be a material link between the infringement and the NCA's member state.
In most cases, the NCAs in countries where competition is substantially affected by an infringement will be well placed to act as long as they are capable of effectively bringing the infringement to an end. It may be, however, that the Commission will be better placed to act in such cases. The Network Notice sets out various scenarios and considers which NCA will be well placed to act in each of them.
These are set out in detail in the box, The Network Notice: NCAs that are well placed to act. Reallocation should be quick and efficient and should not hold up ongoing investigations.
The Joint Statement states that the reallocation of a case should take place as quickly as possible. According to paragraph 18 of the Network Notice, any case allocation issues should be resolved within two months although the Joint Statement sets out in paragraph 12, that the ECN uses an indicative time limit of up to 3 months to deal with case allocation issues.
The case allocation made within this time period will usually continue to the end of the proceedings as long as the facts known about the case remain substantially the same.
An NCA that has notified a case to the ECN will, normally, remain responsible for it if it is well placed to deal with the case, and no other NCA raises an objection during the indicative time period. The question of which NCA should deal with a case may be important for businesses that want to complain about alleged breaches of Articles or when they make their decision as to the body to which to address their complaint see also Practice note, Complaints under EU competition law.
Conversely, where a business has potentially been involved in an infringement, it may be necessary to determine which authority or authorities will be well placed to deal with a case, in order to determine where leniency applications should be filed see Practice note, EU Procedure, negotiation and enforcement for more details about the Commission's leniency policy.
The Joint Statement intends that NCAs should make case allocation as predictable as possible, and should provide guidance to businesses and other interested parties as to where to direct complaints paragraph 13, Joint Statement.
Notification of decisions to the ECN Under Article 11 4 of the Modernisation Regulation, once an investigation reaches a stage where an NCA envisages making an infringement decision, accepting commitments, or withdrawing the benefit of a block exemption, no later than 30 days before adopting the decision, the NCA has to provide the Commission with a summary of the case, a copy of the envisaged decision, or any other document that indicates the substance of the proposed course of action.
The Commission can also request that the NCA makes other documents necessary for the assessment of the case available to the Commission. The Commission set out in its Staff Paper that its practice has developed such that it has submitted observations to NCAs in many cases.
Observations have, mostly, been provided orally and have been minor comments, or have been related to particular aspects of an envisaged decision in order to promote a uniform approach on certain aspects of the case, co-ordination with on-going Commission cases, or the case law of the European Courts.
In its Annual Report on Competition Policy forthe Commission stated that it advised on 61 envisaged decisions and informal requests and queries during that year. Inthe number of envisaged decisions increased to 69 see Legal update, Commission publishes Annual Report on Competition Policyand inthe number of envisaged decisions rose again to DG Competition statistics on the ECN suggest that NCAs submitted 88 envisaged decisions in91 during60 inin94 in77 in and 80 in NCAs take the Commission's observations into account as they consider appropriate, although the Commission does have the power to open proceedings itself and relieve the NCA of its competence if it considers that the NCA will adopt a decision that will create a serious risk to the coherent application of Articles or see further, Power of the Commission to relieve an NCA of its competence to deal with a case.
Case allocation and reallocation in practice. ECN statistics published by DG Competition report that 2, Article or cases had been pursued by ECN members between 1 May and 31 Decemberand 1, envisaged decisions were notified to the Commission under Article 11 4 of the Modernisation Regulation. There has been a downwards trend in the total number of case investigations notified to the ECN - from cases duringto cases incases in There were more in and and respectively — although the number decreased again in and and cases respectively.
There has been a comparable drop in the number of cases notified by the Commission and the NCAs. Despite the high number of cases that have been investigated by NCAs, case allocation or reallocation issues have only arisen in a few cases. Cases have, generally, been dealt with by the authority that started the investigation. Allocation issues that have arisen have usually related to international cartel cases, or cases that have been commenced following the receipt of a complaint.
One such example was the Flat Glass case. The Commission started its investigation based on information that had been provided to the ECN by several NCAs, which had received complaints from customers and third parties about a suspected cartel in the market.
Some complaints made to the Commission have been passed on to NCAs to deal with. The practice was based on a provision of German legislation which was the subject of a Commission procedure under Article of the TFEU. The Commission, which was preparing the Article decision, considered that the complaint should be investigated by the German NCA. The complainant, therefore, withdrew its complaint to the Commission and the German NCA proceeded to investigate the case.
Deal or No Deal? The Impact of Brexit on UK Competition Law Becomes Clearer
According to the Commission, the reallocation of cases between NCAs has been very rare, and has mainly been because the companies being investigated were located in other member states. Parallel proceedings where a case is considered by more than one NCA have also been rare. In one case, the German and Belgian NCAs both received leniency applications relating to a Europe-wide price-fixing cartel for a certain chemical product.
Both authorities investigated; both imposed fines.
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The Belgian authority, who imposed the later fine, considered the issue of double jeopardy and decided that it was entitled to impose a fine, because the fine imposed by the German NCA had only taken into account the effect of the cartel in the Germany. The Network Notice explains that case allocation and reallocation within the ECN does not create individual rights for the companies involved or affected by an infringement of Article or to have their case allocated to a certain authority.
If a case is reallocated, it is because the application of the allocation criteria led to the conclusion that the relevant NCA is well placed to deal with the case see box, The Network Notice: Where a case is reallocated, the undertakings concerned are informed as soon as possible. Suspension or closure of cases that are being dealt with by another NCA If the same agreement or practice is brought to the attention of several competition authorities, Article 13 of the Modernisation Regulation allows an NCA to suspend its proceedings, or close the case on the grounds that another NCA is dealing with the case, or has dealt with it.
In order for an NCA to be able to suspend a case or reject a complaint under Article 13, the agreement or practice that is being considered by the other authority has to involve the same infringement in the same geographic and product markets.
It does not matter whether the investigation by the other NCA is the result of a complaint raised by a different complainant, or has been started on the NCA's own initiative. Although an NCA has the ability to close proceedings where another NCA is dealing with the case, it does not have to do so. The Modernisation Regulation allows the NCA to consider whether closing the case would be appropriate. Where, for example, the NCA investigating the case rejects a complaint for a procedural reason, without making a finding as to whether or not there has been a breach of Article oranother NCA may wish to continue investigating in order to reach a final substantive decision as to infringement.
NCAs also have the choice between suspending and closing a case. The Network Notice states that the possibility of terminating or suspending proceedings may apply to part of a complaint only. For example, an NCA might want to terminate or suspend an investigation where a complaint raises issues that overlap with an investigation being carried out by another NCA.
Power of the Commission to relieve an NCA of its competence to deal with a case Under Article 11 6 of the Modernisation Regulation, if the Commission formally initiates proceedings in a case with a view to adopting a decision under Article or of the TFEU, NCAs will be relieved of their competence to act in the case i. The Joint Statement says that, where the case is already being investigated by one or more NCA, this will be an unusual occurrence and the Commission will only open proceedings in relation to such a case where: NCAs envisage making conflicting decisions.
An NCA envisages making a decision that is obviously in conflict with consolidated case law judgments of the European courts, Commission regulations, and previous decisions should serve as a yardstick to determine whether a decision is in conflict. Where the facts of the case are in issue, only a significant divergence will trigger intervention by the Commission.
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Where the NCA dealing with the case is unduly drawing out proceedings. Where there is a need for the Commission to adopt a decision to develop EU competition policy.
This will be the case, in particular, where a similar competition issue arises in several member states. The NCA does not object.
If the Commission is minded to initiate proceedings under Article 11 6the Joint Statement sets out that it should do so as soon as possible.
A decision by the Commission to initiate proceedings under Article 11 6 will be announced to the ECN in time to give members an opportunity to ask for a meeting of the Advisory Committee before the Commission's proceedings are commenced.
Comments can be submitted until 25 March The Directive was adopted at the end of by the European Parliament and the Council, based on a Commission proposal. Member States have to implement the Directive by 27 December The Directive has two objectives: To achieve the second objective, the Directive, amongst other things, prohibits the use of leniency corporate statements and settlement submissions before national courts and limits the use of documents created specifically for the purpose of a competition authority's investigation until after the investigation is closed.
Furthermore, basic concepts of the Commission's leniency and settlement programmes are introduced into hard law, i. Finally, the Notice on Access to the File determines that documents from the file unrelated to the investigation can be returned to the parties. The European Commission oversees the merger control regime or regulation of so-called 'concentrations' which have a 'Community Dimension'.
A concentration has a Community dimension, if: In case these thresholds are not met a concentration has nevertheless Community dimension, if: