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European Commission publishes notice on what to expect in a no-deal Brexit Scenario

AUTHORs: Kate McKenna DATE: 01/04/2019

Further to our previous Brexit commentary, the European Commission’s (EC) Director-General for Competition has recently published a guidance note, Notice to Stakeholders – Withdrawal of the United Kingdom and EU Competition Law  (see link), on the application and enforcement of EU competition law in a no-deal Brexit scenario where the UK becomes a ‘third country’  as regards the application of EU competition law rules (the “Notice”).

The Notice sets out some of the main implications for a ‘no deal’ scenario which are summarised below:

EU Antitrust Enforcement

The Notice confirms that UK companies will remain subject to EU competition law rules in a no-deal Brexit scenario where their conduct is implemented or produces effects in the EU, pursuant to a well-established principle which applies for example to non-EU producers who sell directly to EU purchasers and thus engage in price competition in the EU .

The Notice confirms that while in a no-deal Brexit scenario it will no longer able to carry out inspections (“dawn-raids”)  in the UK it will still be able to issue information requests .  While in practice the EC does issue information requests to non-EU undertakings/third countries and where applicable may require EU subsidiary undertakings to provide information held by a non-EU parent undertaking (under the EU competition law ‘single economic entity’ doctrine), it is yet to be tested before the European Courts the extent to which the EC can enforce against a non-EU company in respect of non-compliance with an information request.

EU Merger Control

The Notice confirms that the EU Merger Regulation (EUMR) will still be applicable to UK companies in a no-deal Brexit scenario, regardless of country of incorporation or where the headquarters of a company are located, where the EUMR jurisdictional criteria (i.e. turnover thresholds) are met.  The EC has offered the following important guidance on points of detail regarding the application of EUMR which will be relevant in the event of a no-deal Brexit:

  • Companies will no longer enjoy the ‘one-stop-shop’ principle with respect to transactions that satisfy the jurisdictional thresholds for the EU and the UK and two notifications will be required
  • The date of a binding agreement, acquisition of a controlling interest, or announcement of a public bid  will still be the relevant date for establishing EU jurisdiction over a transaction, however if the relevant date is after the date of the UK’s withdrawal the EC will no longer include UK turnover in establishing the relevant EU-wide turnover thresholds/ turnover realised in an individual Member State
  • Following the UK’s withdrawal, the fact that a transaction is notifiable in the UK will no longer be relevant for (i) pre-notification referrals under Article 4(5) applications or (ii) post–notification referrals to the EC under Article 22
  • The EC will no longer take into account the UK national market in assessing if a transaction will impede effective competition in the internal market but where a transaction concerns trade between the EU and UK, the EC will may have to consider tariffs when assessing the viability of remedies on a case-by case basis
  • Interestingly, the EC has signalled that in certain circumstances parties can request the EC to “waive, modify or substitute” certain commitments for example where the commitment addressed competition issues in UK markets only
  • In terms of EUMR enforcement, like for general competition law enforcement, the EC will no longer conduct inspections  in the UK but the EC will still be able to issue requests for information

This article was co-authored by EU Competition and Regulatory partner, Kate McKenna and Senior Associate, Liam Heylin.