Regulatory Outlook | Competition | July 2018

Current issues

Post-Brexit regulation of State aid rules

The UK government has now confirmed that during the expected Brexit transition period, the existing structure of the EU rules and regulations around State aid will be maintained in full. This will mean that, during the transition period, the European Commission will continue to remain responsible for approving and monitoring UK State aid. Thereafter, the Competition and Markets Authority (CMA) will be responsible for enforcing a State aid regime that is likely to remain close to that of the EU.

New UK merger thresholds designed to protect national security

On 15 March 2018, the Department for Business, Energy and Industrial Strategy published the UK government’s decision to amend the UK merger control jurisdictional thresholds, extending the powers of the Secretary of State to intervene in mergers that might raise national security concerns in specific areas of the economy. The new thresholds took effect from 11 June 2018.

Geo-blocking Regulation

In December 2018, The EU Geo-blocking Regulation comes into force, prohibiting the "unjustified" blocking of access to websites or online content and the re-routing of customers to national websites. The new law will affect online retailers of physical goods as well as suppliers of online digital content and services.

For now, copyright-protected content (such as books, music or films) is excluded from the scope of the legislation – although much of this content will fall within the new Portability Regulation.

Vertical mergers in the technology sector

The digital sector remains an area of focus for competition authorities. The European Commission has shown a tendency towards asserting jurisdiction over proposed mergers in the digital sphere in the light of the parties’ internal documentary evidence – particularly regarding the underlying rationale behind each deal – rather than relying exclusively on turnover as previously.

A more value-based merger assessment has already been introduced in Germany and Austria; it remains to be seen whether other EU Member States or the Commission itself elect to introduce similar measures.

Merger control: receiving clearance before implementing transactions

All transactions falling within the remit of the EU Merger Regulation must be notified to the Commission and cleared before implementation.

European competition authorities are particularly vigilant in enforcing such cases. A recent fine imposed on Netherlands-based Altice Group for taking steps to effectively implement a proposed acquisition prior to the transaction receiving official Commission approval is another important reminder of the risks (financial and reputational) of taking any action towards a target entity prior to approval.

In Focus: Brexit

Is any new EU legislation expected to come into force and effect before the end of the transition period?

The Geoblocking Regulation takes effect from 3 December 2018. The Regulation addresses “unjustified” geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment.

Is a new regulator needed, or do additional powers to be given to an existing regulator?

At present, the Competition and Markets Authority has responsibility for enforcing competition law in the UK. This will continue after Brexit, but the CMA will also take on other responsibilities. In March 2018, the UK government announced that the CMA would become the regulator for State aid in the UK, and the CMA has had a budget increase of £20m per year to cover this.

For multi-jurisdictional, non-State aid competition-law issues, the position is currently less clear.

Is there an existing "equivalence" or "recognition" regime for recognising Third Country regulatory regimes?

EU competition law does not have an equivalence regime, but the UK may need to (and has said it intends to) keep its competition and State aid regime close to the EU regimes as part of a future deal.

Does current UK government policy mean that (subject to the terms of a future trade agreement between the UK and the EU) material changes to regulation or enforcement are likely post-Brexit?

The UK government has made it clear on several occasions in recent months that it does not intend to make any substantive changes to UK competition law. It recognises the value in keeping UK competition law closely aligned to EU law.

In terms of enforcement in the UK, following the end of any transition period (if one is agreed), the CMA will become the primary enforcement agency in the UK. The European Commission will no longer have a direct role. This will be the case not only for competition law enforcement, but also for the State aid (anti-subsidy) rules.

What should businesses be doing now to prepare for Brexit?

• If you are subject to any on-going investigations or enquiries at EU level, find out how these will be managed if they continue post-Brexit.
• If you are a recipient of State aid (such as government grant funding), verify what the position is for post-Brexit auditing and/or clawback.
• Continue to prioritise competition law compliance within your business – the CMA has indicated that it will be launching more enforcement action and investigations in the UK post-Brexit.

Dates for the Diary