CAT written evidence on the impact of Brexit on UK competition policy

On 21 July 2017, the House of Lords EU Internal Market Sub-Committee (the “Sub-Committee”) issued a call for evidence on the impact of Brexit on UK competition policy. Since then, a number of public bodies, including the UK competition authority, the CMA, have submitted evidence (see our earlier Law-Now of 22 September 2017 on the CMA’s response to the Sub-Committee's inquiry).

On 17 November 2017, written evidence submitted by the Competition Appeal Tribunal (“CAT”) was published by the Sub-Committee. The CAT’s response highlights those aspects of Brexit that could have potentially a direct impact on the CAT and the cases coming before it. The key aspects of the CAT’s response are summarised below.

Mergers

In the CAT’s view, the most immediate effect of Brexit on the CAT’s workload is likely to come in the area of merger control. Following Brexit, the UK will no longer be subject to the current “one-stop shop” regime of the EU Merger Regulation. This means that transactions with an effect on UK markets will now need to be considered by the CMA in parallel with any investigation that may be carried out in relation to the EU by the European Commission. In the CAT’s view, whilst this will obviously raise the immediate prospect of a significantly increased workload for the CMA, it will also mean that, alongside any Commission decision subject to challenge in EU courts, there will be a domestic, UK decision subject to challenge in the CAT.

Whilst the CAT acknowledges that challenges to merger decisions reached by the Commission have been relatively infrequent, the CAT does not think that this is a good guide to the likely rate of challenge to future CMA decisions for the following reasons:

• the CAT is considerably quicker in determining a challenge in a merger case;
• mergers falling within this category are likely to be very large, where a great deal is at stake for the participants; and
• the costs of legal proceedings are not a major consideration.

Moreover, a challenge to the UK dimension of a European-wide merger may if successful, act as a “veto” on the whole transaction, or at the very least cause enough of a delay to cause it to flounder. Consequently, the CAT anticipates that its workload with regard to the judicial review of CMA merger decisions will significantly increase post Brexit.

Infringement decisions

Once the UK has left the EU, it will fall to the CMA to investigate the UK dimension of a cartel or abusive conduct. The CAT recognises that Commission decisions, in the great majority of cases of this nature, have led to appeals. Therefore, if the CMA is likely to take separate infringement decisions and impose its own fines, this will no doubt lead to appeals to the CAT and, as the experience of the EU General Court has shown, such appeals are likely to place heavy demands on the CAT.

Transitional arrangements

The CAT recognises that, for several years following the UK’s exit from the EU, the Commission is likely to take decisions regarding antitrust infringements that it was already investigating prior to Brexit. Furthermore, the Commission is likely to discover and penalise cartels that cover a period pre-Brexit or a period that spans Brexit. Therefore, in the CAT’s view, transitional issues regarding jurisdiction as between the Commission and the CMA applicable to such cases should be determined in the agreement reached between the UK and the EU in Brexit negotiations. The CAT is concerned that any lack of clarity regarding jurisdiction will give rise to complex issues, which may fall to be determined by the CAT on any appeal from a CMA decision.

Retention of EU antitrust provisions in UK law

Under clause 4 of the European Union (Withdrawal) Bill, the rights available in domestic law by virtue of section 2(1) of the European Communities Act 1972 will continue to be available in domestic law after Brexit. In the Explanatory Notes to the Bill, the Government lists Articles 101 and 102 TFEU as provisions that contain directly effective rights which could be converted into domestic law.

The Chapter I and Chapter II prohibitions in the UK largely mirror Articles 101 and 102, save that they require an effect on trade in any part of the UK. In the CAT’s view, full policy consideration needs to be given as to whether contravention of Articles 101 and 102 should continue to be an infringement of UK law as it could give rise to a situation post-Brexit where there would be a right of action in UK law for an anti-competitive arrangement or abusive conduct producing effects “wholly outside” the UK. If this approach were maintained, the CAT points out that parties could bring private actions in the CAT and the UK courts for damages for breach of Articles 101 or 102, even where there is no parallel breach of the Chapter I and Chapter II prohibitions.

Conversely, the CAT clarifies that Articles 101 and 102 should continue to apply to facts arising pre-Brexit (i.e. where the cause of action arose pre-Brexit, even if the case is started afterwards) since it is important that EU antitrust law should continue to apply in cases concerning events while the UK was a member of the EU.

Clarity as regards EU antitrust law

On the understanding that there will be no retrospective amendment of the substantive law, the CAT observes that the following two issues need to be clarified:

• The retention of section 58A of the Competition Act 1998 (“CA98”). Under section 58A, the UK courts and the CAT are bound by a Commission decision once it becomes final. That is the foundation of a follow-on claim. If this provision is not retained for transitional cases, then the defendant to a claim for compensation would be able to argue that the Commission decision was wrong, increasing the burden on those seeking compensation and doubtless deter many from doing so.

• The interpretation of EU antitrust law. The UK courts and the CAT are presently bound by the principles laid down or decisions made by the European Courts. The CAT observes that it will be important to address the question whether this should continue to apply to transitional cases, having regard to the position applicable to Commission decisions.

The CAT acknowledges that even if Articles 101 and 102 are no longer part of the UK competition law regime on an ongoing basis, claimants might seek nonetheless to bring claims based on those provisions in the UK. In that event, EU antitrust law would be foreign law. The CAT acknowledges that some lawyers are contemplating a cause of action before the UK courts based on breach of foreign law. Without commenting on whether such a claim would be well-founded or not, the CAT notes that, in the event that it is, then the UK courts would interpret the relevant EU antitrust law in the same manner as it would be interpreted in the courts of EU Member States. So, in a case concerning EU antitrust law, the court would determine an issue of interpretation of that law by applying a relevant decision of the EU Court. In the CAT’s view, whether that decision was given before or after Brexit should be irrelevant in these circumstances.

Clarity as regards UK antitrust law

Once EU antitrust law ceases to apply directly, the Chapter I and Chapter II prohibitions will be the central means of protection against, and remedies for, anti-competitive arrangements and conduct available in the UK courts and the CAT. The CAT highlights the following two issues with the present UK antitrust law:

• The scope of the Chapter I prohibition. The CAT notes that section 2(3) of the CA98 provides that the Chapter I prohibition “applies only if the agreement, decision or practice is, or is intended to be, implemented in the United Kingdom” [emphasis added]. There is no corresponding provision in EU law as regards Article 101. The CAT considers that if UK antitrust law is to provide protection which is of equivalent effectiveness, consideration should be given as to the deletion or amendment of section 2(3) of the CA98.

• The interpretation of the Chapter I and Chapter II prohibitions. Section 60 of the CA98 sets out the so-called consistency principle, whereby the Court or the CAT must determine any questions in relation to competition regarding the Chapter I and Chapter II prohibitions to ensure there is no inconsistency with the corresponding questions of EU law. In addition, they must “have regard” to any relevant decision or statement of the Commission. To ensure as much clarity as possible to the interpretation of UK antitrust law, the CAT considers that the continuation, or otherwise of the “consistency principle” will need to be resolved.

Preserving the CAT’s jurisdiction for private claims

Section 47A of the CA98 provides that a person may bring before the CAT a claim for damages or other sum of money which it could bring in civil proceedings in the courts in any part of the UK, in respect of an infringement or an alleged infringement of the Chapter I and Chapter II prohibitions and the prohibitions in Articles 101 and 102. In order to ensure that the specialist expertise of the CAT can continue to be deployed effectively in the judicial determination of civil claims involving cross-border infringements of competition law, and assuming such claims are good in law, the CAT considers that it will be necessary to ensure that it has the requisite jurisdiction pursuant to an amended section 47A.

Preserving the UK’s jurisdiction for cross-border claims

The CAT acknowledges that the major cartel decisions of the Commission tend to provoke claims for compensation and sometimes there are multiple claims arising from the same infringement. To date, the UK along with Germany and the Netherlands have proven to be one of the favoured jurisdictions for such claims. Retaining the position of the UK courts and the CAT with regard to such claims requires the UK to become part of a similar framework for recognition and enforcement of civil and commercial judgments after Brexit. The CAT recognises that this is an issue of general importance to the position of the UK (and specifically, London) as a centre for international litigation, with implications well beyond antitrust damages claims.

Comment

The CAT’s response gives a detailed overview of the aspects of Brexit that are likely to have a direct impact on the CAT and the cases coming before it. Some of the issues highlighted will not come as a surprise to competition law practitioners for whom it has been widely accepted that the CMA’s workload will increase following the UK’s withdrawal from the EU and this will have a knock-on effect for the CAT. However, the CAT’s response also raises some important policy considerations that could have significant implications on the UK competition regime post-Brexit. In particular, the CAT raises policy questions regarding the retention of Articles 101 and 102 in UK law and the continued application or otherwise of the principle of consistency between domestic and EU law as presently enshrined in UK antitrust law. It is imperative that these issues are properly considered and debated in advance of Brexit to ensure that the UK competition regime is fit for purpose post-Brexit.