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E-MailPaul McGeown is an antitrust partner in Wilson Sonsini Goodrich & Rosati’s Brussels office. This post is based on a WSGR memorandum by Mr. McGeown, Dr. Michael Rosenthal, and Götz Drauz. Related posts on the legal and financial impact of Brexit include Light at the End of the (Channel) Tunnel, from Akin Gump Strauss Hauer & Feld LLP; Brexit: Possible Options and Impact, from Shearman & Sterling; Brexit: Legal Implications, from Sullivan & Cromwell LLP; The Day After Brexit, from Cadwalader, Wickersham & Taft LLP; and The Legal Consequences of Brexit, from Davis Polk & Wardwell LLP.
The decision by the United Kingdom (UK) to leave the European Union (EU) will have far-reaching consequences for companies doing business in the UK and elsewhere in Europe. Specific details of the UK’s withdrawal agreement with the EU will be the subject of intense negotiation over the next two years or longer, but the current key takeaways for businesses as they relate to antitrust concerns are:
1. As a matter of law, nothing has changed, and nothing will change for at least two years. Article 50 of the Treaty states that EU law applies in the UK until the earlier of:
- the date of entry into force of the withdrawal agreement (which could take several years); or
- two years following the date when the UK gives formal notice of its intention to leave the EU.
As of today [June 28, 2016], a formal notice seems unlikely until Fall 2016, when the UK will have a new prime minister. As a result, it is expected that EU law will continue to apply in the UK until Fall 2018.
2. Post-Brexit, merger review will be affected in a number of ways:
- The benefit of EU merger control’s one-stop shop for the 28 EU member states will be lost to the UK, and companies will need to decide whether parallel filings have to be made to the European Commission and to the UK Competition and Markets Authority (CMA). Since notification is, strictly speaking, voluntary in the UK, in straight-forward cases, there will be no need for a UK filing. In more complex cases, companies will have to manage both an EU filing and a UK filing, which has its own timeline and involves the publication of position papers (issues statements, provisional findings, etc.).
- The fact that the CMA has jurisdiction over horizontal mergers when the parties have a combined share of supply of 25 percent or greater has proved valuable for companies (including tech companies) with modest turnover but relatively high market share in the EU, as it has allowed them to have a case referred for one-stop shop review in Brussels (based on the so-called “3+ Rule”), rather than be subject to review in three member states with market share thresholds, e.g., Portugal, Spain, and the UK. That flexibility will be lost post-Brexit, as there will be only two countries with market share thresholds left in the EU.
3. It is thought that antitrust and unilateral conduct investigations will be largely unaffected by Brexit. The policy underpinning Articles 101 (non-cartel) and 102 is common to the UK and the EU, and a new independent UK government is unlikely to change the law or practice in this area. However, post-Brexit, there is a risk that a company may find itself the target of substantially the same abuse complaint in both the EU and the UK.
4. The picture in relation to cartel enforcement is already different, as UK law has a criminal dimension that EU law does not. However, Brexit may have an impact on forum shopping for antitrust follow-on litigation. In the EU today, England is one of the jurisdictions favored by the plaintiffs’ bar for follow-on damages actions. Post-Brexit, when European Commission decisions are no longer binding on the courts in England, plaintiffs will need to decide whether to assume the evidentiary risk and initiate proceedings in the UK, or instead switch to one of the other two forums often chosen by plaintiffs where the European Commission’s decision will have probative value, Germany or the Netherlands.
