The Brexit Competition Law Working Group (BCLWG) – conclusions and recommendations on the implications of Brexit for UK competition law and policy now published.

31 Jul 2017

On the 26th July 2017, The Brexit Competition Law Working Group (BCLWG), chaired by Sir John Vickers, published its report which focuses on the impact of Brexit on the various elements of the UK competition regime and the consequent practical implications for enforcement of the competition rules.

Jon Turner QC is a member of the BCLWG and Julian Gregory has been helping the group with its work.

The full report can be read here.

The BCLWG’s summary and conclusions of the report are as follows:

1. Our view is that the interests of the UK economy, and those of businesses and consumers within it, will be best served by continuity of UK competition law and policy, so far as is possible following Brexit.

2. Brexit does not give cause for radical reform of the principal UK competition statutes, nor of the role of the competition authorities. Indeed, the challenges that Brexit poses to the effective operation of various areas of competition policy argue against contemplation of radical reform, at least for the time being.

3. Primary legislation will nevertheless require amendment. In particular, we recommend that the duty in section 60 CA98 for the UK authorities and courts to act consistently with European jurisprudence becomes simply a duty to ‘have regard to’ that jurisprudence.  We also recommend repeal of section 10 CA98 so that future (as distinct from existing) EU block exemptions from the competition rules are not automatically imported into the UK; they would instead become a matter for the UK to decide.  Brexit should cause some current exemptions, notably that for agricultural products, to fall away.  As to the territorial scope of CA98, there is a strong case for revising section 2(3) so that agreements with anti-competitive effects in the UK do not escape prohibition by virtue of being ‘implemented’ outside the UK.  To preserve continuity of the ability of private parties to bring actions for damages in the UK for breaches of EU (as well as UK) competition law, we recommend retaining the provisions of sections 47 and 58 CA98.

4. For mergers and market investigations we recommend retaining the existing statutory criteria, notably the ‘substantial lessening of competition’ test for mergers. Likewise, we would not vary the existing public interest criteria.  For market investigation references, while the CMA should not have an unfettered discretion in its choice of legal instrument when investigating agreements that might be harmful to competition, we recommend against retaining a domestic analogue of the current EU provision that precludes remedies relating to agreements between firms that go further than the antitrust rules.

5. Brexit poses formidable issues concerning transitional arrangements, future cooperation between UK and EU authorities, and the resources that the CMA will need to carry out a substantially expanded caseload. In relation to transition issues, we have made a series of recommendations on the carrying forward of commitments from past antitrust and merger cases, and of leniency arrangements.  Particularly difficult issues could arise in relation to mergers that ‘straddle’ the date of Brexit, and (in the longer run) parallel UK/EC investigations, both of mergers and antitrust issues.  These do not have easy solutions but we identify ways to ameliorate them, and stress the importance of measures being taken and communicated well ahead of the date of Brexit.  These are matters in relation to which the UK and EC authorities should have strong interests in common.

6. On resources we note that, beyond transitional issues, the CMA is likely to have a substantial number of large and complex merger cases each year that would previously have been reviewed by the EC (including for effects on UK markets). Even with some adjustment of CMA priorities and procedures (transfer of powers to other bodies should be avoided), a substantial increase in resources will be needed if other activities are not to get squeezed.  This resource will need to be in place by Brexit, if other important elements of the CMA’s work portfolio are not to be squeezed out by urgent and non-discretionary mergers work. Over time, the CMA is also likely to require additional resources for its antitrust enforcement work.  Bearing in mind merger filing fees and competition fines, this need not involve cost to the public purse.

7. There are aspects of EU competition law that this report has not addressed – notably state aid, which will no longer apply to the UK after Brexit. As selective industrial subsidies are generally costly to the economy and distort competition inefficiently, the UK should be open to agreeing to adopt an equivalent to the EU state aid regime domestically