Legal briefing | 09 Dec 2020 |

Brexit: UK and EU competition law from 2021

This briefing was updated in February 2021.

What difference does the end of the Brexit transition period on 31 December 2020 make to UK and EU competition law? And how likely is it that the UK will increasingly diverge from the EU in its approach to competition law?

EU competition law will cease to apply in the UK

After the Brexit transition period has ended, the general competition law provisions of Article 101 (prohibiting anti-competitive agreements) and Article 102 (prohibiting abuse of dominance) of the TFEU will cease to apply in the UK (although see the discussion of ongoing investigations below). However, UK businesses could continue to be investigated and potentially fined by the European Commission for infringements which relate to the remainder of the EU, in the same way as many companies based in third countries have been to date.

UK national competition law - in the form of the Chapter 1 and Chapter 2 prohibitions of the Competition Act 1998 - will also continue to apply. The main impact for businesses is likely to be procedural: for example, after the end of the transition period, the European Commission will not be able to carry out "dawn raids" in the UK in order to gather information on possible infringements (although see textbox below headed "Ongoing Investigations"). However, UK firms may find that the UK Competition and Markets Authority (CMA) will decide to open its own investigations in parallel to those of the European Commission (and the CMA can also conduct "dawn raids" - although only in the UK, not the EU).

ONGOING INVESTIGATIONS

The Withdrawal Agreement provides that, where an investigation has formally commenced before the end of the transition period, the European Commission can complete the process and its decision will be binding as regards the UK (even if it is not issued until after the end of the transition period). The Commission will retain all its usual powers in relation to such investigations, including the ability to conduct dawn raids in the UK. As antitrust investigations under Articles 101 or 102 typically take some time to conclude, it could be some years before this "wind down" process is complete.

In the UK, the CMA will cease to have any powers under Articles 101 or 102 after the end of the transition period. This means that, even where it has already started an investigation based on those powers, it will not be able to take a decision as to whether they have been breached. However, any CMA investigation under Articles 101 or 102 is also likely to involve the exercise of its powers under the Competition Act 1998. Since these powers are being retained, the CMA will still be able to pursue ongoing investigations to a conclusion; the sole difference is that it will only be able to make a decision as to whether the Chapter 1 or Chapter 2 prohibitions of the Competition Act 1998 have been infringed. If there has been a breach of those provisions, the CMA will still be able to impose remedies such as significant fines.

Could the UK diverge from EU competition law after Brexit?

The Competition Act 1998 is closely modelled on EU competition law and UK courts and regulators have been under a duty to minimise inconsistencies between the two regimes. However, that duty will cease to apply at the end of the transition period and from 2021, it will be possible for UK regulators and courts to depart from EU caselaw on competition law.

As regards EU caselaw which predates the end of the transition period, they will be only be able to do so where they are satisfied that certain conditions (set out in legislation) are met. However, in contrast to the position with most other areas of law (see this briefing), the UK Government is not restricting this right to diverge to the Court of Appeal (together with other courts at the same level) and the Supreme Court. In relation to competition law, the CMA (which is not a court, but a regulator), together with the High Court and the Competition Appeal Tribunal (which are first instance courts), will also be able to depart from EU caselaw predating the end of the transition period (provided certain conditions are met). This increases the prospect of divergence to some degree – although for reasons explained below, we think it is still likely to be a gradual process and in many areas the UK and the EU will continue to adopt similar approaches to competition law.

For discussion of an area where the UK could conceivably look to diverge after 31 December 2020, see our recent briefing on the CMA's enforcement action on resale price maintenance in the musical instruments sector.

HOW QUICKLY COULD DIVERGENCE OCCUR?

Although UK regulators and courts will have scope to diverge from EU caselaw on competition law, the process is likely to be gradual for a number of reasons, including:

The Competition Act 1998 relies heavily on concepts which have been refined in EU caselaw over many years. In view of this, businesses are likely to find it difficult to persuade UK courts or regulators that fundamental aspects of this caselaw should effectively be jettisoned in favour of a radically different approach (whereas arguments for relatively incremental change may stand a better chance of success).
Unless the UK Government decides to force the pace of change by legislating (which currently seems unlikely), the opportunities for divergence will depend on the issues raised by cases coming before the CMA and the courts after Brexit.

What does the UK-EU Brexit trade deal say about competition law?

The Trade and Cooperation Agreement (TCA) signed by the EU and UK in December 2020 contains provisions requiring the UK and EU to respect certain very high level principles in the field of competition law. As such, the UK will be free to diverge from the EU, at least as regards issues of relative detail.

These provisions are not subject to the level playing field "rebalancing mechanism" or the general dispute resolution regime of the TCA, which means they would be difficult to enforce in the event of a perceived breach. However, both the UK and EU have well established competition law regimes and there are no indications of a desire to pursue radical reform. As a result, we would not expect these areas to provide much of a focal point for future disputes between the parties.

The TCA also provides for the parties' competition authorities to cooperate as regards competition law. Beyond that, however, the TCA will make little difference in practice to competition law and the key issues arising out of the end of the Brexit transition period are as described above. For more discussion of the TCA, see our Business-friendly guide to the UK-EU Brexit trade deal.