Brexit one year on: The CMA and competition

United Kingdom

The landscape in which the Competition and Markets Authority finds itself post-Brexit will of course depend largely on the outcome of the Brexit negotiations, which formally commenced on Monday. However, in order to address any resulting ‘enforcement gap’ in the UK, it is likely that the CMA will need to ramp up its enforcement and merger review activities. As such, securing the necessary resources and having an effective framework in which to operate, will be foremost on the authority’s mind.

Earlier this year, the CMA noted that there had been no material impact on its work since the Brexit referendum, i.e. it’s been ‘business as usual’ so far. Indeed, it is possible that not much will change in the longer-term: for example, if the final deal sees the UK agreeing to be subject to all or some EU competition law as a quid pro quo for tariff-free access to the EU single market. However, assuming the political conviction to break free from the jurisdiction of the European Commission and courts holds steadfast, what challenges does the CMA face?

In a speech in February, the CMA’s Acting Chief Executive expressed his “hope and strong expectation that the CMA will continue to be a key member of the international competition and consumer law enforcement community and as such will seek to continue to maintain and develop strong relationships with other enforcers, both within Europe and beyond.”

Even with such admirable hopes, ultimately, a post-Brexit CMA will be shaped by two principal outcomes of the Brexit negotiations: (i) any transitional arrangements agreed, and (ii) the permanent legal and cooperation framework put in place (in the Repeal Act or as part of future legislative reform).

The term ‘transitional’ understates the importance of the first strand. This ‘minding of the gap’ at the point  of Brexit throws up numerous challenges. By way of example, what of mergers that raise UK competition issues that are midway through a Commission review? What of mergers formally filed but which no longer technically fall within the Commission’s jurisdiction? Even basic questions, such as how information is to be shared between the authorities requires considered thought – and that is before one gets on to the multitude of questions about ongoing competition enforcement, private litigation (based on EU decisions) and state aid cases.

Looking ahead, while the substantive aspects of UK competition law are likely to remain unchanged other than to augment various aspects of EU law to provide legal certainty, it follows that if the EU’s competition role in respect of UK affairs is curtailed, to address any resulting ‘under-enforcement’ and adverse effects on consumers in the UK, the CMA may need to step into the breach.

Taking the example of UK merger control, the CMA forecast an additional caseload of between 30 and 50 phase I mergers per year, which could translate to six or so in-depth phase II inquiries. On that basis, the CMA noted that this represents an increase of at least 40 to 50% on the CMA workload. In addition, the CMA may increasingly find itself dealing with larger-scale mergers, which would have otherwise benefitted from the EU ‘one-stop-shop’ clearance.

In respect of its public enforcement, the CMA may need to take over the UK aspects of ongoing EU investigations, commence its own parallel investigations, and/or offer greater assistance to the Commission’s enforcement arm through the use of domestic information gathering powers.

The corresponding need for the CMA to equip itself comes at a time when it has been under long-standing pressure to deliver more at a greater pace, subject to budgetary pressures, and potentially competing with other public bodies making calls for resources.

Some element of pragmatism and ‘doing the best with what we have’ is likely to prove necessary, until there is an appetite for reform after the UK comes up for air following Brexit. Indeed, the CMA appears to be contemplating life beyond Brexit, noting: ‘The UK’s Exit also provides a more general opportunity for us to take stock and review our use of our different powers, and to consider whether each of these and the regime as a whole can be made to work more effectively.’ However, more drastic regime changes are likely to be implemented over time, with the more immediate and pressing concerns being getting the body into shape for life on Brexit Day+1.