As the UK departs the European Union, the CMA – the UK competition regulator – is facing a transformation in its mandate. White & Case considers how the CMA will approach its workload during and after the Transition Period and the implications for businesses that will be subject to its extended remit.
Top takeaways for business:
- Entities currently subject to EU-level merger control and/or antitrust investigations with a UK nexus should expect the CMA to approach them, and potentially third parties, as part of its preparatory work for the post-Transition Period.
- UK companies that have offered commitments to the European Commission to obtain merger clearance, or as part of antitrust cases, can expect the Commission to continue with its monitoring and enforcement powers over these commitments, including in the post-Transition Period.
- For merger or antitrust proceedings with a UK nexus started by the European Commission during the Transition Period, the Commission will retain the competence to adopt a final decision in those cases even after the Transition Period ends.
- Businesses subject to EU-level antitrust investigations should be aware that the CMA might initiate parallel antitrust investigations into the same behaviour if it affects UK trade and is ongoing after the Transition Period.
- Parties with merger review or antitrust cases at EU level that are likely to traverse the end of the Transition Period should proactively engage with the CMA as early as possible.
The CMA's role during the Transition Period
The Competition and Markets Authority ('CMA') is the UK national competition authority and the main body responsible for enforcing competition law in the UK. Anti-competitive behaviour in the UK is governed by the Chapter I and Chapter II prohibitions in the Competition Act 1998, which closely mirror the prohibitions in Articles 101 and 102 of the Treaty on the Functioning of the European Union ('TFEU'). The CMA also has powers under the Enterprise Act 2002 to review mergers, carry out market studies and market investigations, and to investigate criminal cartel conduct.
Under the terms of the Withdrawal Agreement, after the UK leaves the European Union at 11 pm on 31 January 2020, it enters into a transition period (the 'Transition Period'). During the Transition Period, which is currently set to run until 31 December 2020 (the 'Expiry Date'), EU regulations and other legislation dealing with European competition and consumer law will continue to apply in and to the UK. As such, the European Commission (the 'Commission') and the EU Courts will retain the powers conferred upon them by EU law in relation to the UK during this period.
On 28 January 2020, the CMA published guidance on its functions during the Transition Period (the 'Transition Guidance'). That guidance makes clear that during the Transition Period the CMA will function in much the same way that it did while the UK was still an EU Member State. Likewise, the Commission and the EU Courts will retain their respective roles.
However, the guidance also acknowledges that as the end of the Transition Period approaches, practical changes will be needed to enable the CMA to prepare for a post-Transition Period regime.
Merger Control during the Transition Period
During the Transition Period, the UK will continue to be treated as if it were an EU Member State under the EU Merger Regulation ('EUMR'). Accordingly, UK turnover generated by merging parties will still be counted towards assessments of whether EU turnover thresholds are met, and the Commission will retain its exclusive competence for the investigation of mergers that meet those EU thresholds.
Merger Control post-Transition Period
As the Transition Period ends, however, there will inevitably be merger cases with UK aspects under review by the Commission upon which a final decision will be pending. The Commission will retain its competence over these live cases if the Commission procedure reviewing them was opened during the Transition Period. Under Article 93(3) of the Withdrawal Agreement, merger control procedures are deemed to have been initiated on the date the merger was notified to the Commission, referred to the Commission by the CMA, or on the date that the Commission decided to examine a merger after a request that they do so by other affected Member States. Similarly, for merger cases closed by the Commission during the Transition Period subject to remedies, the Commission will continue to be responsible for monitoring and enforcing all aspects of these commitments, including UK elements, after the Expiry Date.
With respect to merger cases that the CMA has opened before the end of the Transition Period, but which have not been concluded by the Expiry Date, the CMA will continue its investigation but will cease to review any EU aspects to these cases. The guidance encourages merging parties to approach the CMA to discuss whether it would be useful to begin pre-notification discussions with the CMA, in particular for mergers that are not likely to be notified before the Expiry Date and are expected to meet the UK merger thresholds. The CMA's jurisdiction and procedure guidance provides direction on how parties can go about engaging in that process.
For mergers completed within the Transition Period, the CMA will retain the ability to refer a merger for a Phase 2 investigation from the later of the Expiry Date, the date of completion, or the date on which the CMA is deemed to have been provided with notice of material facts about the merger. For mergers with an EU dimension, this four-month period will only run from the Expiry Date.
In terms of preparing for its extended merger mandate, the CMA will monitor mergers likely to fall within its remit post-Expiry Date. To this end, the CMA may approach merging parties and third parties (customers, suppliers, etc.) to request information about a merger that is in pre-notification with the Commission. In practice, the CMA is keen for parties to this sort of merger to share the same information that they are providing to the Commission with the CMA.
The CMA certainly expects its merger caseload to increase dramatically. The draft Annual Plan for 2020/2021, on which the CMA has launched a consultation, details that the CMA enters 2020-2021 with a high level of casework, including an unprecedented number of Phase 2 merger investigations. The CMA predicts that its enlarged mandate will result in a 50% increase in the number of merger cases (as well as other enforcement work). To address this, the CMA is clear that it intends to work on cases "well before January 2021", for example by engaging in pre-notification discussions. The draft Annual Plan foresees the CMA starting to do so from early 2020, but in our experience the CMA has already been proactive in reaching out to merging parties in its preparatory work.
Antitrust and cartels
Antitrust and cartel enforcement during the Transition Period
During the Transition Period, the Article 101 and 102 TFEU prohibitions on anti-competitive behaviour will continue in full force and effect in the UK. The Commission will retain its role and any appeals of Commission decisions addressed to natural or legal persons established in the UK will continue to be heard exclusively by the Court of Justice of the European Union ('CJEU'). The UK regime for competition law redress will also operate as normal, so affected third parties will retain the right to bring private UK court action on the basis of suspected infringements of EU and UK competition law or follow-on damages claims.
Antitrust and cartel enforcement post-Transition Period
Where the Commission has formally initiated proceedings with respect to UK undertakings' behaviour before the Expiry Date, the Commission will retain its competence to conclude those proceedings after the Expiry Date, provided the decision to initiate proceedings was made during the Transition Period. The Commission will also retain its ability to monitor and enforce the UK elements of commitments derived from decisions made during the Transition Period.
The CMA and the UK concurrent regulators, however, may also obtain jurisdiction over live cases opened by the European Commission during the Transition Period where the behaviour under investigation may affect trade within the UK and is ongoing at the end of the Transition Period. In these instances, the CMA or relevant concurrent regulator can initiate proceedings with respect to the UK elements of the behaviour that post-dates the end of the Transition Period. The CMA will proactively reach out to parties in cases such as these to begin gathering information before the end of the Transition Period.
As with merger control, live cases being reviewed by the CMA or its concurrent regulators on the Expiry Date will continue, but the regulators will cease to examine any EU prohibitions after the end of the Transition Period.
Once the Expiry Date has passed, the CMA and UK concurrent regulators will only be able to investigate suspected infringements of UK domestic competition law, i.e., they will no longer have competence to investigate infringements of Articles 101 and 102 TFEU. This is of little immediate practical significance, however, since (for the time being at least) the relevant provisions of UK competition law remain substantively the same as those under EU law.
The role of the European Institutions during the Transition Period
The European Courts and the European Commission will retain all of their competences and rights during the Transition Period. The Withdrawal Act also foresees a limited role for these institutions after the Expiry Date, whether there is a trade deal or not. For decisions made by the EU institutions during the Transition Period that are addressed to the UK (or UK natural or legal persons), the CJEU will have exclusive jurisdiction to determine the legality of such decisions and/or the UK's compliance with those decisions.1 The CJEU will also retain its exclusive jurisdiction to give preliminary rulings on requests from courts and tribunals of the UK made before the end of the Transition Period.2
A new role? The CMA's role after the Transition Period
The nature of the UK's new relationship with the EU, including the extent of any alignment of competition law provisions and regimes, remains subject to negotiation. The CMA has not published any guidance on the post-Transition Period as of yet, nor has the UK government indicated the nature of the competition law regime that it is aspiring to implement.
However, some indications may be gleaned from the preparations that were made for a 'No Deal' Brexit under Theresa May's government. In January 2019, the draft Competition (Amendment etc.) (EU Exit) Regulations 2019 were published. The CMA published guidance in March 2019 to explain the expected arrangements under these Regulations ('No Deal Guidance'). Although this regime reflected the policy of the then-government under Theresa May, and has been explicitly dis-applied by the CMA, it is at least illustrative of the kinds of practical arrangements that could be expected if the Expiry Date passes without an agreement having been reached. It foresees a relatively unchanged role for the CMA on merger control and antitrust enforcement, with full competence passing to the CMA as the new supervisor and enforcer. The CMA's scope to examine the EU elements of deals and investigations would be removed, and the Commission and EU Courts would no longer be the appellate body to appeal decisions.
Effect on business: managing the Transition Period
Although the Transition Period means that the practical day-to-day operations of the CMA will remain largely unchanged, businesses falling under either the merger control or antitrust regimes could face simultaneous EU-UK investigations if their dealings with the Commission are likely to traverse the Expiry Date. To this end, businesses would be well advised to pre-engage with the CMA on merger notifications, and ensure that they have a clear handle on threshold and competence issues for transactions set to close near or after the Expiry Date.
1 Withdrawal Agreement, Article 86(1).
2 Withdrawal Agreement, Article 86(2).
Kate Kelliher (Associate, White & Case London) contributed to the development of this publication.
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