On 2 February 2018, the House of Lords, European Union Committee, released a report entitled, Brexit: competition and State aid. The report’s Summary section states:
Since the UK joined the European Economic Community (now the European Union) in 1973, the UK and the EU institutions have shared responsibility for competition matters—encompassing anticompetitive conduct or agreements (antitrust), merger control, and State aid. Withdrawal from the EU is therefore likely to have a significant impact on the UK’s domestic competition regime.
While Brexit gives rise to some immediate legal and regulatory issues which will need to be addressed, the most significant implications of Brexit in this field relate to transitional arrangements, future UK policy, and determining the UK’s institutional framework for competition matters.
It remains unclear whether the two-year transition, or ‘implementation’, period sought by the Government would represent a period of phased change to the terms of the future UK-EU trade relationship, or a ‘standstill period’ where the current EU competition regime would remain in force. Nevertheless, at some point, a transition will take place from the status quo to the assumption of full competence with regard to competition matters by UK courts and authorities. Transitional arrangements will be necessary to clarify jurisdiction in relation to cases and administrative procedures which are ‘live’ at this point, as well as future cases relating to conduct which occurred while the UK was still part of the EU competition regime.
We support the Government’s ambition to reach at least an outline agreement on a transition period with the EU in the first quarter of 2018. This agreement should ensure continuity with current arrangements, so businesses are not faced with the complexity and cost of having to adapt to the implications of Brexit twice.
In terms of future policy, the UK has played a significant role in pushing forward an alignment in the broad principles underpinning European, and global, competition policy. We see no reason to depart from these shared fundamental principles after Brexit. The UK may wish, over time, to depart from EU competition case law, particularly as the Single Market imperative underpinning it may no longer be relevant to the UK. Brexit also offers an opportunity to diverge from the EU in terms of enforcement decisions on some antitrust cases and merger reviews. With the repatriation of responsibility in this area, the UK will be free to take a more innovative and responsive approach to tackling global competition enforcement challenges, including fast-moving digital markets and dominant online platforms.
As an EU Member State, the UK is also a member of the European Competition Network—a forum which enables extensive cooperation between the national competition authorities of Member States, and the European Commission, on investigations and enforcement actions. Continuing this cooperation will be mutually beneficial to the UK and the EU, and we recommend that a comprehensive competition cooperation agreement is negotiated to facilitate this post-Brexit. It will also be important for the UK to re-establish cooperation arrangements with other countries currently covered by existing EU bilateral competition agreements.
The UK will have significant decisions to make with regard to future State aid policy, as the EU’s extensive competence in this area leaves a limited national framework to fall back on. It is likely that the EU will insist on some form of State aid controls in any UK-EU Free Trade Agreement (FTA). If this is not case, the World Trade Organization’s (WTO) Agreement on Subsidies and Countervailing Measures (ASCM) would not represent an adequate alternative. The ASCM has no domestic application and therefore would not regulate State aid within the UK, creating the risk of intra-UK subsidy races.
The Minister confirmed that the Government had not yet arrived at a settled State aid policy, although it was mindful of the need to have one before ‘day one’ of Brexit. As introduced, the EU (Withdrawal) Bill would preserve a general prohibition on State aid without specifying what body would assume the Commission’s current role of reviewing and approving compatible measures. We urge the Government to address this omission as soon as possible and clarify whether State aid responsibilities will be assumed by an existing, or new, authority.
It will be important for the Government to involve, and secure the support of, the devolved administrations in determining the shape of this future State aid regime, and the UK’s wider post-Brexit institutional framework for competition matters. In developing this framework, the UK will have the opportunity to address criticisms of complexity and bureaucracy facing the current EU competition regime, and to create a system more focused on domestic needs and priorities. To inform its policy in this regard, the Government should launch a consultative process, involving the devolved administrations, local authorities, and other stakeholders such as businesses and consumer groups. We hope this report will be a useful contribution to that endeavour.