Date laid: 29 October 2018
Parliamentary procedure: affirmative
These draft Regulations propose to correct deficiencies in retained EU law in relation to competition to ensure that the law can operate effectively after the UK’s withdrawal from the EU. The Department for Business, Energy and Industrial Strategy explains that the UK’s current antitrust enforcement and merger control systems are integrated with the EU and that the draft Regulations seek to separate the two systems and prepare for a smooth transition to a standalone UK competition regime. The draft Regulations also make provisions for the continued application of pre-exit EU competition case law as decided by the Court of Justice of the European Union in the UK after exit.
The draft Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House.
1.The Department for Business, Energy and Industrial Strategy (BEIS) has laid these draft Regulations with an Explanatory Memorandum (EM) as part of the Department’s contingency planning for a possible ‘no deal’ scenario. BEIS says that the purpose of the Regulations is to correct deficiencies in retained EU law in relation to competition to ensure that the law can operate effectively after the UK’s withdrawal from the EU. According to BEIS, the UK’s current antitrust enforcement and merger control systems are integrated with the EU; the draft Regulations therefore propose to separate the two systems and prepare for a smooth transition to a standalone UK competition regime.
2.The EM explains that at present, the Competition Act 1998 (“the Competition Act”) provides for competition enforcement cooperation between the UK, the European Commission (“the Commission”) and the national competition authorities in Member States, and that, under EU law, the UK’s Competition and Markets Authority (CMA) and relevant sector regulators can investigate and enforce infringements of both EU and UK competition law. The draft Regulations propose that after the UK’s exit from the EU, UK regulators will investigate anti-competitive conduct in the UK market only under UK law. The draft Regulations also propose to remove reciprocal and other cooperation provisions in the context of a ‘no deal’ scenario.
3.According to BEIS, the draft Regulations also ensure that after exit, UK consumers and businesses will continue to be able to pursue private follow-on damages claims based on CMA decisions under UK competition law, while UK courts will no longer be bound by rulings of the Commission. If an infringement decision under EU law is reached by the Commission after exit, claimants who wish to pursue follow-on damages claims in UK courts will no longer be able to rely on that decision as a binding finding of an infringement.
4.The draft Regulations also propose to repeal section 60 of the Competition Act under which UK competition regulators and courts are currently required to ensure consistency with relevant decisions of the Court of Justice of the European Union (CJEU) when interpreting UK competition law. Instead, the draft Regulations propose that while UK competition regulators and courts will still be required to follow pre-exit EU competition case law, they may depart from such case law where it is considered appropriate in the light of specified circumstances, as set out in regulation 23 of the instrument.
5.The draft Regulations propose to incorporate so-called EU block exemption regulations (BERs) into UK law. Under the current arrangements, BERs exempt agreements from EU competition law if such agreements provide countervailing benefits for consumers. BEIS explains that seven BERs are currently in force, relating to vertical agreements, motor vehicles, research and development, technology transfers, specialisation, liner shipping and road, rail and inland waterway transport. Under the draft Regulations, powers to amend or revoke BERs which are currently held by the Commission will be transferred to the Secretary of State. Under the new arrangements, the Secretary of State will have the power to change BERs in consultation with the CMA by way of secondary legislation, subject to the negative procedure.
6.The draft Regulations revoke the EU Merger Regulation (139/2004) (“the EUMR”), so that after exit, the CMA will become solely responsible for investigating all mergers with anti-competitive effects in the UK market under the Enterprise Act 2002 (“the Enterprise Act”), ending the involvement of the Commission in this area.
7.The draft Regulations also propose amendments to ensure that when the Secretary of State intervenes in a merger under Part 3 of the Enterprise Act to protect the public interest, the point of reference for what the public interest means under section 58 of the Enterprise Act, including an understanding of public security, is the UK context, without reference to the EUMR. BEIS explains, however, that while the link to the definition of public security in the EUMR is removed, this is not intended to signal that what public security means for the UK is fundamentally different from its current meaning within the EU.
8.The draft Regulations also make a number of transitional provisions which, according to BEIS, seek to prevent enforcement gaps under domestic law after exit. These provisions ensure, for example, that where a pre-exit decision by the Commission on a merger is annulled, the CMA is not ‘timed out’ in terms of its ability to investigate the merger.
9.The Minister has written to the Committee (see Appendix 1) to explain that the proposed changes “are not a definitive statement of the Government’s position on competition” and that while many of the amendments “do not depend on negotiations (because they represent the end-state after exit)”, many provisions “may change depending on separation and future partnership arrangements, including jurisdiction of live cases and investigation cooperation”.
10.The draft Regulations seek to prepare the UK competition regime for a potential ‘no deal’ exit. The Department says that there remains uncertainty about the final parameters of the future UK competition regime, as many of the provisions put forward in this instrument may need to change, depending on the terms of the UK’s withdrawal from the EU and the nature of any future partnership agreement with the EU.
11.Nevertheless, the proposed changes appear to be significant and include provisions on the continuation of pre-exit EU competition case law as decided by the CJEU in the UK after exit. The House may wish to explore further these issues, the impact of the draft Regulations and the nature of the UK’s future competition regime. We therefore draw the draft Regulations to the special attention of the House, as they give rise to issues of public policy likely to be of interest to the House.
1 Vertical agreements are those entered into between two or more firms operating at different levels of the market, for example, between a manufacturer and distributor.