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Brexit: the impact of a “No Deal” on EU Competition Law

While the time to reach an agreement is quickly running out, companies and private citizens are starting to ask themselves where a “no deal” Brexit could lead and what kind of consequences there will be for both everyday life and business. And European Union is trying to help find the answers…

But let’s just take a step back: following the outcome of the United Kingdom European Union membership referendum that took place on June 23, 2016, the United Kingdom submitted on March 29, 2017 the notification of its intention to withdraw from the Union pursuant to Article 50 of the Treaty on European Union. Indeed, the referendum was consultative, non-binding and held with the purpose of verifying the support for the continuation of the United Kingdom’s stay in the European Unione[1]. Therefore, the activation of Article 50’s procedure had to pass mandatorily through the UK Parliament.

Heading back to the present days, during the European Council meeting held on March 22, EU leaders in accordance with the United Kingdom decided a Brexit extension[2] until May 22 on condition that the withdrawal agreement is approved within the end of this week.

Instead, in the event that the Withdrawal Agreement is not approved by the House of Commons by March 29, 2019, the European Council decided to extend the period provided for in Article 50 of the Treaty on European Union just until 12th April 2019. This means that, as from April 13, 2019, 00:00h (CET), the United Kingdom could be a third country without any transitionary arrangements.[3] All EU primary and secondary law would cease to apply to the UK from that moment onwards due to the fact that there will be no transition period, as provided for in the Withdrawal Agreement. Such third-country status combined with the lack of any transition period will obviously cause serious disease and significant disruption for both citizens and businesses.

Along these lines, on 25th March, with only two weeks to go to the abovementioned – and newly-extended – deadline, Directorate-General for Competition published a notice to stakeholders which represents also a guidance on a “no deal” scenario for the application of EU competition law becoming effective at 00:00h (CET) on April 13, 2019.

Since it is increasingly likely that the UK will leave the European Union without a deal, the Commission intends to complete its “no-deal” preparations and, at the same time, it continues supporting administrations in their own preparations and urges all EU citizens and businesses as well to keep on informing themselves about the consequences of a possible “no-deal” scenario and to complete their no-deal preparedness. Point is that, while a “no-deal” scenario is certainly not advisable, the EU is prepared for it[4] (and has been preparing since December 2017…[5]).

In view of the uncertainties surrounding the ratification of the Withdrawal Agreement, all interested parties, and especially economic operators, are reminded of legal repercussions, which need to be considered when the United Kingdom becomes a third country” says DG for Competition in its publication, which has the purpose to provide “some guidance on the main implications that can be foreseen, in case of a “no deal” scenario, for the application of EU competition law (antitrust, merger control)”[6].

With reference to the EU antitrust enforcement, governed by Articles 101 and 102 of the TFEU, Regulation N. 1/2003, since the Court of Justice clarified that, even for conducts occurring outside the European Union, the jurisdiction of the Commission may still be invoked by public international law “on the basis of implementation of the conduct in the EU[7]”, such rules will remain applicable to the UK companies in case their misconducts are implemented or produce effects in the European Union. However, issues may arise by the parallelism between the jurisdiction of United Kingdom and the jurisdiction of European Union on agreements affecting competition within the internal market.

If the validity of Commission decisions are not likely to be affected that much (they will remain valid if adopted before the withdrawal), the same cannot be said about its investigative powers: indeed, although still able to obtain information in force of Article 18 of TFEU, the Commission will no longer be able to carry out inspections in the United Kingdom, as provided by Article 20.

Concerning the EU merger control, DG for Competition reminds that the matter is governed by the EU Merger Regulation (“EUMR”[8]) which applies regardless of the nationality or country of incorporation or where the headquarters of a company are located. Therefore, Brexit will not have an impact on the applicability of such regulation to UK companies when the jurisdictional criteria are duly fulfilled. However, companies will no longer benefit from the one-stop-shop principle, as both the Commission and the UK national competition authority may be competent to proceed with concentration review (is the case now for transactions which are reviewed by the Commission and third-country competition agencies).

It is understood that all the decisions taken under the EUMR, including decisions imposing conditions and obligations, shall maintain their validity even after the United Kingdom’s withdrawal.

The Commission clarifies that no distinction should be drawn between decisions that relate to the effect of a concentration on competition at the level of the European Economic Area or within any of the remaining 27 Member States, and Commission decisions that relate to the effect of a concentration in UK national or subnational markets. Such interpretation is based on the fact that, at the time of taking the decision, the Commission does have jurisdiction and, consequently, is obliged to seek a remedy to address a competition concerns in the United Kingdom, while the UK national competition authority did not have jurisdiction to do so.

For sure this notice does not represent a final resolution to the “no deal” matter, but just a further step into a new – and, presumably, tough – era[9]. European Commission declares itself ready to provide citizens and companies with its services, in order to solve all the individual issues.

1 A. Hunt and B. Wheeler, “Brexit: All you need to know about the UK leaving the EU” Jan. 31, 2019 www.bbc.com/news/uk-politics-32810887

2S. Castle and S. Erlanger, “E.U. Approves Brexit Extension, but Chaotic Departure Still Looms” Mar. 21, 2019 www.nytimes.com/2019/03/21/world/europe/brexit-extension-eu-uk.html

3What would a no-deal Brexit mean for trade?” Feb. 15, 2019 www.economist.com/britain/2019/02/15/what-would-a-no-deal-brexit-mean-for-trade

4B. Romano, “Brexit, così l’Europa si prepara al sempre più probabile no deal” Mar. 25, 2019 www.ilsole24ore.com/art/mondo/2019-03-25/brexit-cosi-l-europa-si-prepara-scenario-no-deal-161246.shtml

5J. Lis, “The 8th of December 2017: The day hard Brexit died” Dec. 8, 2017 www.prospectmagazine.co.uk/politics/8th-december-2017-the-day-hard-brexit-died

6ec.europa.eu/info/sites/info/files/eu-competition-law_en

7Joined cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, Ahlström Osakeyhtiö and Others v Commission, 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85

8 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, Official Journal

9 M. Di Domenico, “Le conseguenze della Brexit sullo scenario economico”, Dec. 1, 2018, www.iusinitinere.it/le-conseguenze-della-brexit-sullo-scenario-economico-15763

Giacomo Bertelli

Nato a Genova nel 1992, si laurea in Giurisprudenza nel 2017 ed è abilitato alla professione forense dal 2021. Da sempre amante di cinema, sport, musica ed attualità politico-economica, durante gli anni universitari sviluppa un forte interesse per la tecnologia e l'informatica giuridica. Ha conseguito nel 2020 il master LL.M. in Law of Internet Technology presso l'Università Luigi Bocconi, incentrato principalmente su proprietà intellettuale, protezione dei dati personali e diritto della concorrenza nel mondo digitale. Dopo un'esperienza di un anno presso lo European Patent Office, dove si è occupato principalmente di brevetti, design, intelligenza artificiale e strategie legate alla proprietà industriale, attualmente lavora nel dipartimento legale di Google Italy.

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