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Out-Law News 3 min. read

'Start planning post-Brexit deal structures now' to minimise disruption


The impact of a potential no-deal Brexit on competition law has been revealed by the UK’s Competition & Markets Authority (CMA), prompting experts to warn businesses to begin planning for the future.

The CMA has published a series of guidance papers outlining what the competition environment would look like in the event of the UK leaving the EU without a withdrawal agreement, as well as a draft statutory instrument which was laid before Parliament on Monday 29 October.

Competition law expert Alan Davis of Pinsent Masons, the law firm behind Out-Law.com, said: “The no-deal papers highlight the extent to which competition enforcement powers will be repatriated from Brussels to the UK, and the extent to which the CMA’s responsibilities will increase as a result of Brexit."

“It is clear from the no-deal papers that businesses and their advisers should already be thinking about how deals are structured, and where they should be notified, in order to minimise as far as possible the risks of post-Brexit disruption,” Davis said.

The CMA published separate guidance on its role in mergers and in antitrust in the event of a no-deal Brexit.

When it comes to mergers, if the European Commission issues a decision on a pending merger before ‘exit day’ on 29 March 2019 then, unless there is a successful appeal, the UK has no jurisdiction over that merger.

If there is no EU decision by exit day, the CMA will have jurisdiction from that date to review the UK parts of the transaction if UK thresholds are met.

The guidance notes that if parties consider that such a scenario is possible they are encouraged to engage with the CMA at an early stage, for example at the announcement of the merger, especially if it may raise UK concerns. The parties may then be encouraged to begin pre-notification discussions with the CMA.

The CMA said it would follow its current processes for mergers referred to it by the European Commission before exit day. It will also monitor non-notified transactions, including those falling under the EU Merger Regulation (EUMR), over which the UK may obtain jurisdiction after 29 March.

According to the draft statutory instrument, the CMA will no longer be able to apply European regulations on anti-competitive agreements, including cartels, and abuse of dominance after Brexit. Where it is currently investigating under the relevant articles of EU law, post-Brexit the CMA will notify parties that it is dropping its investigation on those articles, but it can continue its investigation if there has been an infringement of UK competition law.

UK competition law will be amended to say that UK competition authorities and UK courts remain bound by an obligation to ensure no inconsistency with pre-Brexit EU competition case-law when interpreting UK competition law, but they may depart from pre-Brexit EU case-law where it is considered appropriate in the light of particular circumstances.  This may mean that post-Brexit businesses try to argue that it would be 'appropriate' to distinguish pre-Brexit case law, for example on the basis that the conclusions in a particular case were driven by EU single market objectives that will not be relevant to the UK post-exit.

The CMA will be unable to open investigations into infringements where the EU directorate-general for competition (DGComp) has previously reached an infringement decision that has not been annulled.

However it will be able to start investigations into breaches of UK competition law occurring on or before exit day. This will apply if the EU has opened an investigation but has not issued a decision by exit day.

A no-deal Brexit would also mean that the CMA and other sector regulators will cease to be empowered to conduct dawn raids on behalf of DGComp or another competition authority from an EU member state.

Those wishing to bring follow-on damages actions in UK courts will not be able, post-Brexit, to rely on a DGComp infringement decision reached after Brexit as a binding finding of an infringement under the UK’s Competition Act. Equally, UK courts will not be required to treat another EU national competition authority’s infringement decision as prima facie evidence of an infringement.

In the event of a withdrawal agreement being signed between the UK and EU, the CMA said there would be continuity of its current approach during the transitional period until 31 December 2020. The future competition landscape would be determined by what was included in such an agreement.

The CMA also said it would publish a statutory instrument in due course to transpose EU state aid rules into UK law and provide for the CMA to take on its new state aid role.

Earlier in October Juliette Enser, who is leading the CMA’s transition work on state aid, said: “The expectation is that, from a substantive perspective, the regime will look very much like it does today – aid grantors and beneficiaries can work on the basis that it will be ‘business as usual’ in terms of rules they are used to applying.”

Enser said the CMA was establishing a dedicated state aid group including lawyers, economists and financial analysts, as well as setting up the necessary infrastructure to support the operation of the new state aid regime.

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