02 Nov 2022
This blog post draws on the presentation given by Professor Catherine Barnard (University of Cambridge) at the ESRC ‘UK in a Changing Europe’, ‘UK Regulation after Brexit Revisited’ event held at the British Academy in London on 27th October 2022.
(by Andreas Stephan) The UK’s new Prime Minister, Rishi Sunak, promised to put EU laws through the ‘shredder’, as part of the leadership contest campaign video he released in August when running against his predecessor, Liz Truss. The Retained EU Law (Revocation and reform) Bill (REUL) promises to impose a sunset clause on 2,400 or so pieces of retained EU law, which will cause them to cease applying in the UK unless ministers actively act to keep them. This includes all secondary law (regulations and directives) and related case law of the European Commission and Court of Justice of the European Union (CJEU), which plays an important role informing UK Competition Law (at least to the extent that it relates to EU case law delivered until 31 December 2020). This blog explains why the law could create significant uncertainty for the enforcement of UK competition law and what might be done about it.
The REUL Bill is part of the current government’s commitment to deliver on its 2019 election manifesto promise to ‘Get Brexit Done’. It seeks to purge the UK statute books, not only of the retained laws based on secondary legislation adopted through the European Union (Withdrawal Act) 2018, but also the binding nature of the pre-Brexit case law on which much of it relies. This will be done through an unprecedented ‘sunset clause’, under which all secondary retained EU law and case law will cease to have effect past a certain date. Rishi Sunak had originally promised to do this in his first hundred days as Prime Minister. Liz Truss (who won the first leadership contest this year) announced the sunset clause would take effect on 31 December 2023. The exact timing is unclear at present, because the full scale of the exercise (reviewing 2,400 laws) is becoming apparent to government. For example, the UK’s Business Department has warned they would need 400 staff to review or repeal the 300 pieces of retained EU Law legislation it is responsible for.
REUL will not affect the core provisions of the UK’s competition law regime and in particular merger regulation. Even as a member of the EU, the UK had its own domestic provisions in the Competition Act 1998 and Enterprise Act 2002. Most notably, the UK’s merger control regime is procedurally different to that of the EU’s, albeit with a very similar overall approach to anti-competitive mergers. The effect of Brexit was essentially for the UK regime to be upscaled from a ‘national competition law’ within the EU, to an international regime that engages all anti-competitive behaviour and mergers that affect UK markets. Where the European Commission previously investigated most multi-jurisdictional cases on behalf of the UK and all other Member States, now the EU and UK regimes potentially apply alongside each other, in relation to businesses that trade in both markets. Indeed, we have already seen the first conflicting outcome in the merger case of Cargotec and Konecranes. The European Commission cleared the merger in February 2022, but the CMA went on to block it in April 2022.
When the UK decided to leave the EU, competition was just one of a number of UK regulatory areas that derived from EU Law in some way. The European Union (Withdrawal) Act 2018 sensibly adopted these laws into the UK statute book, making them ‘retained EU law’. In relation to anti-competitive agreements and abuse of dominance, the UK retained two important sources of law: EU competition case law, and various block exemption regulations that provide a safe harbour for business arrangements that might otherwise fall foul of the prohibition on anti-competitive agreements. The block exemption regulations would be straightforward to deal with in light of REUL – indeed the most important of these (the Vertical Block Exemption Regulation, or VBER) expired in May of this year and was replaced by a new VBER in the EU and a Vertical agreements block exemption order in the UK.
The sunsetting of EU case law poses a far greater challenge, because the prohibitions on anti-competitive agreements and abuse of dominance in the Competition Act 1998 essentially mirrored the application of Article 101 and 102 TFEU. S.60 of the Competition Act required equivalence between EU and UK competition law in this regard. It was revoked and replaced by s.60A, which retained the binding nature of pre Brexit EU competition case law, but allowed for the possibility of divergence from that case law ‘where it is appropriate to act otherwise’ (see S.60A(7)). Indeed, it is important that the Competition and Markets Authority (CMA) and the UK courts develop competition law in a way that is best suited to UK markets and consumers, not least because EU competition law may move in directions that are not to the UK’s liking. Nevertheless, S.60A ensured a smooth transition and provides businesses with considerable certainty in relation to questions of competition law that have not been directly addressed in UK cases.
The problem with REUL is that the CMA (and Office of Fair Trading before it) delivered comparatively few decisions (especially in relation to abuse of dominance), in a competition regime that only spans two decades. The corresponding case law of the courts is also therefore comparatively limited. Moreover, the requirement of equivalence meant that the decisions of the CMA, the Competition Appeals Tribunal (CAT) and beyond have long been grounded in the detail of EU case law – sometimes relying on precedents that are 30 or 40 years old. If this massive, detailed corpus of case law was to simply fall away as a consequence of REUL, it would risk causing very significant legal uncertainty to businesses operating in the UK – especially those that are potentially dominant in some markets, or that are entering into agreements that may not benefit from the various block exemption regulations. It would also risk increased challenges to CMA decisions on substantive grounds, testing points of law no longer clarified by retained EU precedents. This would compound the considerable hurdles the CMA faces in ‘upscaling’ to meet the immediate challenges in protecting UK markets and consumers. In particular, the increased merger clearance work and new advisory responsibilities in relation to the Internal Market and Subsidy Control regimes, risk antitrust enforcement taking a back seat (at least for the time being). The fewer post-Brexit cases completed by the CMA and making their way through the CAT and the courts, the longer and more acute the potential uncertainty caused by the sunsetting of EU case law. The REUL does allow for EU law to be readopted as ‘assimilated law’ by ministers (Clause 1), or for the sunset clause to be extended (Clause 2), but the process for this (and the extent to which it might be used) remains unclear.
The sunset clause in REUL will not apply to case law relating to primary legislation (i.e. the TFEU provisions, including Articles 101 and 102), but will apply to case law on important secondary legislation (such as Regulation 1/2003) which shapes the application of the TFEU provisions. So the relevance of secondary legislation to a particular case will be a factor when courts decide whether to depart more readily from a CJEU judgment. However, the REUL also contains a strong nudge for UK courts to depart from CJEU case law: they will have to take into account “any changes in circumstances which are relevant to retained EU case law” and consider whether the EU case law “restricts the proper development of domestic law”.
So how can this uncertainty be limited if the REUL comes into law and ministers refuse to keep s.60A as assimilated law? The decisions and case law that do exist in UK competition law will go some considerable way in providing continued certainty. Although these relied very heavily on EU law precedent, they nevertheless provide important anchors in UK law. For questions that are not clearly addressed by UK case law, the CMA and the courts are likely to still follow pre-Brexit EU case law (regardless of its status) for as long as the provisions of the Competition Act 1998 so closely mirror those of Articles 101 and 102. In following EU precedent affected by the sunset clause, they may simply choose to adopt the reasoning and outcome as their own based on its persuasive value, as they have done for many decades in relation to precedents set by other common law jurisdictions. They may also refer to obiter statements made in UK judgments (i.e. those that are not binding as to the outcome of the case). Lastly, the CMA may choose to adopt soft law provisions (such as detailed guidance) to address areas of particular uncertainty.
The existing freedom for the CMA and the courts to depart from secondary pre-Brexit EU case law, may already make it more likely businesses will challenge CMA decisions and attempt to move UK competition law away from its pre-Brexit EU equivalence. However, REUL risks unleashing far greater uncertainty and resulting prospects for legal challenges – just at a time when the CMA faces enormous institutional challenges.