Brexit and Competition Law

Barry Rodger, Andreas Stephan

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781351105422
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

This book provides the first comprehensive analysis of the immediate and likely longer-term consequences of Brexit for the UK's competition law regime and includes the competition and subsidy control provisions of the EU-UK Trade and Cooperation Agreement. It has been written to be of value to scholars and practitioners of competition law, whilst also providing a useful guide to readers with only limited understanding of competition rules. The book provides a detailed critical discussion of how Brexit impacts on five key aspects of competition policy in the UK: legislation, institutions and cooperation; antitrust rules that prohibit anti-competitive agreements and the abuse of a dominant position; private enforcement, in particular actions for damages; regulation of mergers and acquisitions; and State aid or subsidy control rules.

1 Legislation, institutions and cooperation

DOI: 10.4324/9781351105446-1

To understand the full consequences of Brexit for the UK’s competition law regime, it is necessary to consider the impact on the law itself, on the institutions responsible for enforcing it and on cooperation with competition authorities in the EU and beyond. This chapter first identifies some of the immediate consequences for each of the five substantive areas of competition enforcement: anti-competitive agreements, abuse of dominance, private enforcement, merger control and State aid. It will be shown that – with the exception of State aid – the UK regime was reasonably well placed to transition to a post-Brexit world with minimal disruption to businesses or markets. However, Brexit does create some practical challenges and uncertainties for businesses that operate in both the UK and the EU, and there is significant scope for divergence of rules in the longer term. These issues and others will be expanded on in Chapters 2–5, where we discuss each area of enforcement in far greater detail. State aid proved to be particularly contentious because, unlike the other four areas, there was no UK State aid regime in place by the end of the transitionary period.

The chapter then focuses on the institutions responsible for enforcing competition law and in particular on the Competition and Markets Authority (CMA). Brexit creates particular institutional challenges for the CMA, as it is elevated from the national competition authority of an EU Member State focused on domestic cases to an authority responsible for protecting UK markets from all anti-competitive conduct, whether domestic or international. As we shall see, this creates immediate challenges relating to capacity, resourcing and cooperation. The transition to its new status as a non-EU, third-country regulator means the CMA faces both a significantly increased workload and the loss of important information-sharing that exists between the national authorities of EU Member States. Yet it also means the UK has greater freedom to design and enforce competition law in the interests of UK markets and consumers, where such divergence would not have been feasible or permitted as an EU Member State.¹

1 In February 2021 an independent review of the UK’s competition regime was published, but this did not recommend any significant departure from the UK’s current approach. See: Power To The People: Stronger Consumer Choice and Competition So Markets Work for People, Not the Other Way Around – An Independent Report Presented to Her Majesty’s Government by John Penrose MP (February 2021).

1.1 Substantive rules

As was explained in the Introduction, the Competition Act 1998 essentially incorporated Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) into domestic law, and there was no practical distinction between the two sets of provisions, beyond jurisdiction.² Indeed consistency between them was ensured by the Competition Act 1998, s.60, which required that

2 Ben Rayment, ‘The Consistency Principle: Section 60 of the Competition Act 1998’ in B Rodger (ed), Ten Years of UK Competition Law Reform (Edinburgh University Press 2010) Chapter 4.

so far as is possible […], questions arising [in relation to the investigation and enforcement of UK competition law] are dealt with in a manner which is consistent with the treatment of corresponding questions arising in Community Law.

Consistency between European Union (EU) and national competition law is also governed by Regulation 1/2003, which creates certain obligations designed to ensure Articles 101 and 102 are ‘applied effectively and uniformly in the Community’.³ Regulation 1 was part of a drive to modernise EU competition law by allowing national authorities and courts to apply the two EU law treaty provisions in full for the first time,⁴ although generally pan-European anti-competitive behaviour would fall under the exclusive competence of the European Commission on behalf of all Member States.⁵ However, where the Competition and Markets Authority (CMA) (in a similar way as other Member States’ national competition authorities) initiated proceedings in an enforcement case that was not investigated by the Commission, but which may also affect trade between Member States, it was under an obligation to apply either Article 101 or 102 TFEU, in addition to the Competition Act 1998.⁶ Moreover, Chapter I of the 1998 Act could not prohibit agreements that did not amount to infringements of Article 101(1) or which fulfilled the conditions of the efficiency exception contained in Article 101(3).⁷ Chapter II, on the other hand, could be stricter than Article 102. The practical consequence of Regulation 1/2003 was that UK authorities and courts were largely bound by the jurisprudence of the Court of Justice of the European Union (CJEU) and decisional practice of the Commission, so there was little substantive difference in cases whether Articles 101/102 or their UK domestic equivalents were being applied. Indeed, UK competition cases typically made reference to both, even where there was only a very limited possibility that the conduct could affect trade between Member States.

3 Council Regulation (EC) 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L 1/1, recital 1.

4 The Commission previously held exclusive responsibility for the granting of exemptions under Article 101(3) through a notification system. This was replaced by a self-assessed exception regime, but there was anxiety about how 101(3) in particular would be applied at the national level. See Case C-344/98, Masterfoods v. HB Ice Cream, Judgement of the European Court of Justice of 14 December 2000 [2000] ECR I-11369.

5 Council Regulation (EC) 1/2003, Article 3(1).

6 ibid, Article 11(6).

7 ibid, Article 3(2).

However, the relationship between EU and the UK merger enforcement regimes is different in that they are not overlapping, but where EU merger control applies it precludes the exercise of national merger control rules. Moreover, the substantive tests are different in that the European Commission may block mergers that lead to a significant impediment to effective competition,⁸ whereas the CMA focuses on a substantial lessening of competition.⁹ Nevertheless, the thrust of merger control at the EU and UK level is economics-based and so the theories of harm are the same (coordinated and uncoordinated effects), as is the economic analysis that is employed. This is not to suggest that outcomes will always be identical, but there is certainly a high level of convergence between the two. The private enforcement of competition law has always depended primarily on the domestic laws of each EU Member State – there is no EU set of private law rules as such. Nonetheless, Brexit does have an impact on the scope of private enforcement in the UK, as claimants will no longer be able to rely on decisions of the European Commission to establish the existence of an infringement, in relation to cases opened after 31 December 2020.¹⁰ Finally, there was no UK domestic State aid regime that mirrored Articles 107 and 108 and, as will be discussed in Chapter 5, this proved to be particularly contentious when the UK and EU were negotiating their future trading relationship.

8 Council Regulation (EC) No 139/2004 of 20 January 2004 on the Control of Concentrations between Undertakings OJ [2004] L 024, Articles 2(2) and (3).

9 Enterprise Act 2002, Part 3, Chapter 1.

10 See generally ‘Agreement on the Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community’ OJ [2019] C 384, Chapter 2.

As a consequence of Brexit, the provisions contained in the Competition Act 1998 (anti-competitive agreements and abuse of dominance) and the Enterprise Act 2002 (mergers that lead to a substantial lessening of competition) essentially became ‘scaled up’ in their application to capture enforcement and regulation previously undertaken by the European Commission on the UK’s behalf. While the CMA did occasionally investigate cases with an international dimension, the vast majority of anti-competitive conduct and merger situations that affected more than one Member State (including the UK) were dealt with by the European Commission on behalf of the EU as a whole. There is a mechanism under which a request can be made for a merger caught by the EU Merger Regulation (EUMR) to be considered at the Member State level (for example where its impact will be mainly felt in that Member State) and vice versa, but it is rarely used.¹¹

11 EU Merger Regulation, Article 9. A request can also be made by one of the merger parties prior to notification to the Commission under Article 4(4) and a request can also be made by the Secretary of State, where the protection of national legitimate interests may be at stake, under Article 21(4) of the EU Merger Regulation and Article 346 TFEU. On 31 December 2020 there was only one live Article 9 request from the UK that had been made on 8 October 2020: CMA, Joint Venture between Liberty Global Plc and Telefónica S.A. – Request pursuant to Article 9(2) of Council Regulation (EU) 139/2004. (2020) COMP/M9871.

When the UK voted to leave the European Union in June 2016, many scholars speculated that little would change in the relationship between UK and EU competition law, as described earlier. This is because it was thought the most likely outcome was for the UK to leave the EU but remain a member of the European Economic Area (EEA).¹² It was argued that membership in the EEA would allow the UK to continue benefiting from being in the single market, while also having the freedom to pursue its own policies on trade, fisheries, home affairs and agriculture. In the context of competition law, Articles 53 and 54 of the EEA Agreement directly mirror Articles 101 and 102 of the TFEU. Indeed, in its application of both antitrust and merger control, the European Commission’s jurisdiction extends to the EU and the EEA, where the arrangement or merger has an EU and EEA dimension.¹³ EEA Members are also subject to the same State aid rules and the de facto jurisdiction of the CJEU.¹⁴ Accordingly, had the UK decided to remain an EEA member, there would have been no material change to the scope and application of the respective rules in relation to agreements, abuse of dominance, merger control or State aid. It quickly became clear, however, that both the governments of Theresa May and of Boris Johnson felt such an outcome would not respect the referendum result. Ending free movement of people and ending the jurisdiction of the CJEU became particular political imperatives.¹⁵ Remaining in the EU Customs Union was equally unacceptable p...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Contents
• Introduction
• 1 Legislation, institutions and cooperation
• 2 Anti-competitive agreements and abuse of dominance
• 3 Private enforcement
• 4 UK merger control
• 5 State aid
• Conclusion
• Index