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Competition Law

Analysis - debate - current awareness

18 JUL 2016

Brexit? Divergence and convergence in UK and EU competition law

Brexit? Divergence and convergence in UK and EU competition law

Editorial Comment 

The 10th Junior Competition Conference (the JCC), organised by the Competition Law Journal, was held on 15 April 2016 at the Competition Appeal Tribunal. The aim of the JCC is to give the junior end of the competition law community, from all professional backgrounds, a forum to express their views, exchange ideas, and get to know one another. Over 100 competition practitioners attended, from a wide range of law firms, chambers, economic consultancies and other organisations. 

This year’s JCC had two interrelated themes: ‘Brexit? Divergence and convergence in UK and EU competition law’ and ‘Private Enforcement: calm before the storm?’. Six papers were presented at the conference, three on each theme. These papers demonstrate the depth of talent and legal and economic thinking among Britain’s young competition practitioners. All six papers will be included in Issue 3 of the Competition Law Journal, which will be published in September 2016. 

This special online edition of the Competition Law Journal brings together the three papers focused on ‘Brexit’. The conference papers address the complex inter-relationship between UK and EU competition law and the ramifications that Brexit will have on the competition landscape. Nicholas Querée and Paul Johnson consider the possible impact of Brexit on cartel enforcement and merger control, respectively, and Anneli Howard considers how Brexit might impact competition litigation. These papers were presented, and therefore substantially written, before the EU referendum took place on 23 June 2016, in which a majority voted for Brexit. Although the authors have made changes to reflect the results, they should be read with this in mind. 

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As we write, the United Kingdom is now in a state of legal, political, constitutional and economic uncertainty. The Labour Party is in internal turmoil. A second referendum on Scottish independence might happen. And of course, this week, the Conservative Party appointed Theresa May as its new leader, and Prime Minister. She has perhaps the toughest mandate of any incoming Prime Minister. May was in favour of remaining in the EU, and many have questioned the credibility of a ‘Remain’ supporter negotiating the UK’s exit from the EU. However, May has made clear that ‘Brexit means Brexit’, and that she is determined to make a success of it. 

And yet, we still do not know when, or following what process, the Government will serve the now infamous ‘Article 50’ notice to start the two-year period of negotiating the terms of the UK’s exit and, possibly, a new agreement on the future UK/EU relationship. We also do not know what the Government’s negotiating position will be, what the terms of those agreements might be and whether the courts might continue to rely on EU legal principles and case-law as a source of interpreting UK law. We do know that a legal challenge has been bought by Mishcon de Reya (on behalf of an anonymous group of clients) to ensure the UK Government will not trigger Art 50, and therefore the procedure for withdrawal from the EU, without an Act of Parliament. Anneli Howard is one of the barristers who has been instructed by Mishcon de Reya to advise on this case. However, the effect this legal challenge will have on the ‘Brexit means Brexit’ mantra is yet to be seen. 

This uncertainty extends to competition law, across all its many facets. Regardless of how and when Brexit occurs, it will force yet more change on UK competition law. A Norwegian-style EEA arrangement might lead to little change in practice, but this appears unlikely for political reasons, since it would involve compliance with all internal market rules, including the politically unpalatable ‘freedom of movement’. All other solutions, whether they be the ‘Turkish’, ‘Canadian’, ‘Swiss’ or ‘WTO’ models, or some other as yet unidentified solution, will inevitably lead to significant change to UK competition law, whether institutional, jurisdictional, procedural or substantive in nature. This uncertainty is of interest not only to UK practitioners and business: since the referendum, we have received numerous ‘Brexit briefings’ from firms in countries as diverse as Austria, Canada, India, Ireland and the US, to name but five.
Competition law is inherently international and UK competition law is heavily influenced by EU law. The Chapter I and II prohibitions of the Competition Act 1998 are modelled on and interpreted in accordance with Arts 101 and 102 TFEU. EU block exemption regulations apply to the Chapter I prohibition. Articles 101 and 102 are enforced in the UK courts and the Competition Appeal Tribunal, which have become destinations of choice for claimants in damages actions. Whilst UK merger control is not a replica of the EU Merger Regulation, both are built on common principles and EU decisions and Court case-law are highly influential sources of law. The ‘one-stop-shop’ principle underpinning the EU Merger Regulation has meant that the Competition and Markets Authority (CMA) does not review most cross-border and global mergers. The CMA is also a member of the European Competition Network and cooperates with the European Commission and its national counterparts across antitrust and merger cases. This will all change with Brexit. 

We had, in common with most competition practitioners, hoped for a different outcome in the referendum. As it is, it will be interesting to see whether the predictions made by the authors of our Brexit articles come to pass and whether, if the UK is outside the EU, EU law and practice continues to influence its UK counterparts. Theresa May has already alluded to a potential shift in UK merger control policy, referencing the failed AstraZeneca/Pfizer deal and the need for a ‘proper industrial strategy’ to defend important sectors in Britain such as pharmaceuticals. Might this mean we see the introduction of a broader public interests test in the UK? It is too early to tell, but we are certainly facing interesting times. 

One thing is clear – there will not be an immediate change to the way in which competition law is enforced overnight, nor indeed in the near future. However, the likelihood of a ‘policy shift’ over time cannot be ruled out. Co-operation, including exchange of information and mutual assistance between the CMA and other competition authorities will have to take place through bilateral agreements, since the UK will no longer be part of the European Competition Network. The CMA may become more influenced by its counterparts in the US, and the economic thinking and approach of the Department of Justice. This may not necessarily be a bad thing in the long term. Indeed, future generations of UK competition practitioners may reflect on Brexit having been a turning point in UK competition law and policy. However, for those of us dealing with the aftermath, it remains to be seen whether UK and EU competition law becomes more divergent than convergent. 

14 July 2016
The Editors of the Competition Law Journal 

Click here to read the full Special Bulletin: Competition Law Journal Online Special July 2016.pdf