On the 31 January 2020 (“Exit Day”), the UK officially withdrew from the European Union (“EU”) which led to a plethora of questions about how certain areas of law, including competition law, will operate post Exit Day. This is particularly due to the presence of numerous cross-border transactions among the EU Member States. Despite the UK’s withdrawal and it now being considered a third State, a transition period will apply until 31 December 2020 (“Transition Period”) during which the functions of the Competition and Markets Authority (“CMA”) – the UK’s equivalent to Malta’s Office for Competition – will not be affected.
What is competition law?
EU competition law comprises Articles 101 and 102 of the Treaty on the Functioning of the European Union, certain relevant EU regulations, and a slew of case law that has been decided by the Court of Justice of the EU that explain the applicability of such Articles. Article 101 prohibits the entering into agreements, decisions, or concerted practices that may affect trade between the Member States and which have the object and/or effect of preventing, restricting, or distorting competition, while Article 102 prevents dominant undertakings from abusing of their dominance on the market in so far as this may affect trade between the Member States.
Through EU membership, Articles 101 and 102 are directly applicable within the territory of the Member States. Therefore, in their application of competition law, Member States must ensure that there is no heavy deviation from what is provided for in Articles 101 and 102.
Transition Period
During the Transition Period, the functions of the CMA will remain unchanged, save for a few exceptions.(1) This is largely due to the European Union (Withdrawal Agreement) Act 2020 (the “Withdrawal Agreement Act”) which postpones the effects of the UK’s withdrawal from Exit Day until the end of the Transition Period.(2)
For this reason, Articles 101 and 102, and the relevant EU regulations dealing with competition law, namely Regulation 1/2003 and the Block Exemption Regulations, will remain applicable in the UK until the end of the Transition Period in addition to UK domestic competition law. This means that the European Commission retains its power to enforce Articles 101 and 102 and to investigate suspected infringements of competition law in the same manner as if the UK were still a Member State. Accordingly, where an investigation of a suspected breach of competition law is commenced by the European Commission in terms of Regulation 1/2003,(3) the CMA will be relieved of its competence to investigate the anti-competitive conduct until the European Commission’s proceedings conclude.(4) Until the end of the Transition Period, the CMA will also have the obligation to ensure that any domestic issues raised are dealt with in a manner consistent with EU competition law.
Post transition
The end of the Transition Period does not mean that EU competition law will wholly cease to apply to the UK. Articles 101 and 102 read that for the conduct of an undertaking to fall foul of EU competition law, what is necessary is that such conduct affects trade on the internal market. As has also been asserted by the Court of Justice:
[t]he fact that one of the undertakings which are parties to the agreement is situated in a third country does not prevent application of that provision since the agreement is operative on the territory of the common market.(5)Therefore, despite the UK’s withdrawal, it will still be subject to EU competition rules in so far as the anti-competitive conduct of UK undertakings has an effect on the internal market. It is only if no such effect is had on the internal market that UK domestic competition law could apply.
The way forward
Any agreement between Maltese undertakings (or undertakings present in other Member States) and UK undertakings will continue to be scrutinised in the same manner under the competition rules until the Transition Period. This also applies to proceedings commenced by the European Commission prior to, but which are still on-going following, the end of the Transition Period.
Following the Transition Period, while EU competition law will still apply to those agreements having an effect on the internal market, Maltese undertakings can be subject to UK domestic competition law – the Chapter I and Chapter II prohibitions of the UK’s Competition Act 1998 which would from then on no longer need to be consistent with Articles 101 and 102.
The CMA has issued guidelines on its functions following the UK’s withdrawal from the EU which can be accessed here.
(1) Article 127(1) and (3), Withdrawal Agreement Act
(2) Competition and Markets Authority, ‘UK exit from the EU, Guidance on the functions of the CMA under the Withdrawal Agreement’
(3) Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty
(4) ibid., article 11(6)
(5) Case 22-71, Béguelin Import Co. v S.A.G.L. Import Export [1971] [11] ECLI:EU:C:1971:113
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Disclaimer |
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This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr Annalies Muscat and Dr Laura Spiteri |