Brexit - The Impact On EU Competition Law

This article was originally published in the Chambers and Partners Legal Brexit, Global Practice Guide 2016.

Bernardine Adkins, partner and head of EU, trade and competition, discusses the impact of Brexit on current competition legislation and enforcement. This includes competition laws regulating firms' behaviour (prohibitions on restrictive agreements - unless exempt - and abuse of market dominance), merger control, the market investigations regime, controls over state aid to industry and the public procurement rules.

Current Legislative Framework

Competition laws

This section covers the impact of Brexit on current competition legislation and enforcement. We include competition laws regulating firms' behaviour (prohibitions on restrictive agreements - unless exempt - and abuse of market dominance), merger control, the market investigations regime, controls over state aid to industry and the public procurement rules.

Behavioural competition law

EU competition law is based on two main Articles in the Treaty on the Functioning of the EU (TFEU): Article 101 prohibiting agreements and concerted practices which have as their object or effect the distortion of competition, unless they are exempt from prohibition because their economic benefits outweigh their anti-competitive effects (Article 101(3)); and Article 102 on prohibition of abuse of market dominance. These Treaty Articles are themselves directly effective and so have legal force in the UK as a result of EU law principles and Section 2(1) European Communities Act 1972.

Articles 101 and 102 are administered by the European Commission and national competition authorities, acting together under EU legislation made in the form either of EU Regulations of the Parliament and Council or of Commission Regulations. The division of casework is set out in the Regulations and European Commission guidance.

The main procedural Regulation (1/2003) requires Member States of the EU to apply Article 101 or 102 in their territories if they are applying national competition law to practices which would be caught by those Articles (provided the practices may affect trade between Member States). This provision will fall on withdrawal and will not be replaced.

Breach of EU competition rules exposes firms to fines - calculated by reference to their turnover in the markets affected, but in any case not exceeding 10% of their total turnover. They may also be sued in EU domestic courts for damages by those harmed by the unlawful behaviour (see below).

In addition to EU competition law, all EU Member States have domestic competition laws which may be applied in parallel to EU competition law. The UK's behavioural competition rules are contained in the Competition Act 1998 (as amended). This statute contains exact copies of both Articles 101 and 102 TFEU, except that the two prohibitions apply to purely domestic anti-competitive behaviour (there is no need to show an effect on trade between EU Member States for the Competition Act prohibitions to apply) and to all other practices which may affect trade in the UK.

As in EU competition law, breach of UK competition law allows the Competition and Markets Authority (CMA) to impose fines and may also expose infringers to claims for damages.

Section 60 Competition Act 1998 requires UK authorities and courts to apply UK competition law on competition questions (but not procedural ones) in a manner consistent with the interpretation and application of the same question in EU law. This provision was inserted into the Act in order to ensure that UK businesses did not have to face the compliance costs of being subject to two similar but differing competition regimes. Much of the interpretation of EU competition law is carried out by the General Court of the CJEU and (on appeal from the General Court) the CJEU itself.

In addition, the Competition Act provides that EU 'block exemptions' (safe harbour regulations automatically exempting some kinds of restrictive agreements) also apply for the purposes of domestic competition enforcement - even where there is no effect on inter-state trade. Both this provision and Section 60 will need to be repealed on withdrawal - it is likely that the block exemption regime will need to be replaced with similar provisions. Depending on the post-Brexit relationship the UK has with the EU, those aspects of the block exemptions that are concerned with ensuring free trade across EU Member States may be removed. This will be relevant in particular with the vertical restraints block exemption (Regulation 330/2010).

EU competition law is administered in the UK by either the European Commission or the CMA. When administering EU competition law in the UK, the CMA nevertheless applies the procedures set out in national law (Competition Act 1998 and statutory instruments made under it). The CMA is not required to follow EU procedural law as set out in the EU Regulations.

UK sector regulators also apply the Competition Act prohibitions in the industries they regulate - energy, electronic communications, rail and water - a system known as 'concurrency'.

Appeals against European Commission competition decisions addressed to UK firms is to the General Court in Luxembourg. In practice the General Court applies an enhanced 'judicial review' standard to examining the European Commission's factual findings, although it is allowed to substitute its own fines for those of the Commission where necessary. Decisions of the CMA applying both EU and UK competition law can be appealed to the UK Competition Appeals Tribunal (CAT) which can substitute its own findings of fact for those of the CMA (merits review) as well as...