UK: Brexit - Competition Law In The UK During The Transition Period And After

The United Kingdom (UK) left the European Union (EU) on 31 January 2020. Since then, under the EU-UK Withdrawal Agreement, a transition period has been in force, in principle until 1 January 2021. During this period most EU law, including its competition law, continues to apply in the UK.

The Withdrawal Agreement allows the EU and the UK to extend the transition period by one or two years, but only if an extension is agreed before the end of June 2020. While this may change, the UK government has repeatedly stated that it does not intend to request an extension.

As we approach the potential midpoint of the transition period, it is useful to consider what will change at the end of the transition in terms of competition law enforcement and how to plan for the end of the transition period. In particular, companies that are involved in ongoing proceedings before the European Commission (EC) should be aware that the UK's Competition and Markets Authority (CMA) may acquire jurisdiction over the UK parts of these proceedings as early as ¹ January 2021. This will be of particular relevance to companies that are preparing to notify the EC of merger or acquisition transactions.

More generally, at the end of the transition period, the CMA will be empowered to review more mergers and conduct than before, and it is expected to be a key agency to consider when assessing risk and planning large global deals.

Background and ongoing negotiations

In the June 2016 UK Brexit referendum, a majority voted to leave the EU. From late 2016 to late 2019, the EU and the UK government negotiated the terms of the UK's departure. A (revised) Withdrawal Agreement was finally agreed in October 2019. 1 Following the UK General Election in December 2019, the Withdrawal Agreement entered into force on 31 January 2020 when the UK formally left the EU.

The Withdrawal Agreement establishes a transition period until the end of 2020, during which most EU law, including its competition law, continues to apply in the UK.² This period can be extended by one or two years, but only if an extension is agreed before the end of June 2020.³ As of today, the UK government has not requested an extension, and prominent government members have stated that they will not seek an extension.⁴

Meanwhile, negotiations are ongoing on the future trade relationship between the EU and the UK. Currently, however, there is no certainty regarding the nature of this relationship or whether a trade agreement will be negotiated by the start of 2021.

EU competition law in the UK during the transition period

While the UK has now left the EU, EU competition law continues to apply in the UK as before.

If parties to merger or acquisition transactions have sales (turnover) exceeding certain thresholds globally and in the EU,⁵ they must notify the EC of their transactions, and the EC—rather than the UK's CMA—examines the transactions' effects on competition in the EU and in the UK. This "onestop shop" aspect of EU merger control means that during the transition period, parties to such transactions still need to make only a single notification to the EC rather than separate notifications to the EC and the CMA.

For cartels and non-M&A competition investigations, the EC continues to investigate conduct that took place in or affected the UK and other countries in the EU and—unless the EC is already investigating it—the CMA can enforce both UK and EU competition law in relation to such conduct.

Footnotes

1 See https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12019W/TXT(02)&from=EN.

2 Withdrawal Agreement, Article 126.

3 Id., Article 132.

4 In the UK legislation implementing the Withdrawal Agreement (The European Union (Withdrawal Agreement) Act 2020), Ministers are even prohibited from agreeing in the Joint Committee established under the Withdrawal Agreement to an extension of the transition period; see section 33, available at http://www.legislation.gov.uk/ukpga/2020/1/section/33/enacted.

5 The parties' UK sales continue to count as EU sales for the purposes of these thresholds

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Originally published 15 June, 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.