Brexit And Competition Law: What To Expect

While we wait for the UK to clarify what sort of relationship it will be seeking with the EU after Brexit, it may be useful to highlight what appear to be the main consequences for the enforcement of competition law. We see those consequences as the following:

The European Commission ("EC") will no longer have authority to enforce competition law in the UK (unless the UK chooses to join the European Economic Area ("EEA"), which most think unlikely). Instead the UK's Competition Authority, the Competition and Markets Authority ("CMA") will become the main enforcement body applying UK Competition law (e.g. for cartels and mergers). However, where business practices have effects in the EU or the EEA, companies still will have to comply with the EU Competition rules in many situations. So, for example, the territorial limits in exclusive distribution contracts and IP licences will have to be drafted with this in mind. In addition, parallel applications may have to be made to the CMA and EC, notably for cartel immunity or leniency and for mergers affecting both the UK and the remaining EU 27 Member States. In the short term, it is unlikely that the substantive law will change materially. However, over time this may happen (i.e. the UK may choose different approaches and the UK competition authorities and UK courts should no longer be bound to follow the EU courts' rulings and the decisions of the EC). In addition, Brexit appears likely to reduce the attractiveness of the UK as a forum for litigating pan-EU cartel damages actions. Competition agency law enforcement

The UK leaving the EU does not mean that EU law will not apply to UK companies. Particularly in view of its geographic closeness to the EU, much of existing EU Competition law will still be relevant, since the EU's jurisdiction would extend to practices occurring in the UK, but having an appreciable effect on trade between the remaining EU Member States.1

For example, if two UK companies entered into a market sharing agreement covering Northwest Europe, the EU Competition rules would still apply to the EU effects, while the UK effects would be caught by the UK rules. Similarly, if an EU tennis ball supplier banned its distributor in the UK from selling outside the UK, so that it could not sell in the EU, that would still fall foul of the EU rules, provided re-export of the balls from the UK to the remaining EU 27 Member States is viable.

Mergers and acquisitions

If Brexit occurs, companies that are acquiring or merging with other companies will have to consider submitting a voluntary parallel notification to the CMA, in addition to notifying their transaction to the EC.

Currently, if the revenues of parties to a transaction exceed certain EU-defined thresholds, the EC, rather than the CMA, has jurisdiction over the transaction, even if it has material anti-competitive effects in the UK.2 The EU notification is a "one-stop shop" covering all other potential notifications that could be made to the 28 Member State competition authorities. Without this, companies often will have to file a separate notification to the CMA and await clearance from the CMA, as well as from the EC, which still will have jurisdiction to rule on the position in the remaining 27 EU Member States.

Parallel filings may not occur in all cases, because under the UK system notifying a transaction to the CMA is voluntary (i.e. unless the CMA indicates otherwise, parties do not have to obtain the CMA's approval before closing a transaction). However in practice...