After the end of the transitional period foreseen in the agreement to withdraw the United Kingdom from the European Union of January 24, 2020 (the withdrawal agreement), the United Kingdom ceased to have a right of access to the single European market. Likewise, European companies have no right of access to the British market as of this date. However, in the Trade and Cooperation Agreement signed on December 24 (the ACC), the European Union and the United Kingdom have agreed not to apply tariffs or fees to goods originating from the other party. In the ACC, a good number of obligations are also foreseen in order to guarantee a fair and open competition situation between the companies of both parties (respect of the so-called principle of ‘level playing field‘). This includes, among others, a series of obligations regarding the defense of competition that tend to materially approximate the new regime as closely as possible to the one that has been applied so far.
Thus, in matters of restrictive agreements and dominance position abuses, the ACC establishes the obligation of the United Kingdom to continue applying to those agreements that may affect trade between both parties a system of protection that, in practice, does not differ materially from that applied so far. Indeed, the UK has been obliged to apply and follow the jurisprudence of the Court of Justice of the European Union (the TWO) adopted on the matter until December 31. However, exceptionally, you may deviate from it when circumstances require it and, in any case, you will not be bound by European regulations and jurisprudence issued as of January 1.
There is an agreement between London and Brussels, but it is still a hard Brexit
The agreement between the United Kingdom and the European Commission is good news but it does not prevent a hard Brexit: on the contrary, it only consecrates it
Regarding concentration control Nor is a material change anticipated in the analysis of the working capital, although the abandonment by the UK of the system envisaged in the European Merger Regulation that consecrates the single window principle (‘one-stop shop’). By virtue of this principle, if a concentration operation reaches the thresholds of said regulation, it is not necessary to notify the authorities of the Member States, something that greatly simplifies the authorization process for this type of operation.
The main change is undoubtedly in terms of public aid. While the European Union The withdrawal agreement reserved the possibility of examining until 2024 the public aid granted by the United Kingdom until December 31, 2020, the truth is that the British aid granted from this date will already be outside the control of the European Commission (and thus ultimately beyond the control of the CJEU).
Although the ACC foresees the need for the UK respect a series of principles and rules very close to the principles of the European regulations on public aid, who will carry out this control will from now on be the United Kingdom itself through an independent authority (presumably, the well-known Competition and Markets Authority), subject to the control of its own courts. All this without prejudice, in any case, to the possibility of the European Union appearing in the corresponding proceedings before British judges and adopting rebalancing measures in the event that the United Kingdom does not comply with these commitments.
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In short, what the ACC shows is an important effort by both parties to try to ensure that the rupture affects as little as possible a system for the protection of free competition, control of concentrations and public aid, which, with its imperfections and areas of improvement, it has been working well, and in an integrated way, until last December 31st.
I am very much afraid that, nevertheless, there are several flaws that emerge in the new system (or, rather, new systems), which represent a change for the worse from the pre-existing situation. And it to the detriment, above all, of the United Kingdom. For example, by failing to benefit from the benefits of participating in the European Competition Network. Or by the fact that the Decisions that the European Comission in cases initiated as of January 1, they cease to have binding force in their territory, which may undoubtedly affect the attractiveness that the United Kingdom may present as a forum for the resolution of claims for damages for infringements of competition rules.
However, The biggest victims will be the companies (both from the Union and the United Kingdom).
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And this, first, due to the certain possibility that, despite the provisions of the ACC, they will end up producing divergences in the application, by both parties, of the rules that prohibit agreements that restrict competition or control public aid. The corset fixed in the ACC is narrow, but it does not guarantee that they cannot go, little by little, separating the terms of application and interpretation of these norms as time goes by. This may affect the legal certainty of those companies that legitimately intend to configure an integrated and common competitive strategy for the European and British markets.
Not to mention the more than predictable increase in notifications regarding merger control. When the United Kingdom is split from the European system, not only will the possible notifications in this country increase (it is estimated that those analyzed annually to date will double), but possibly, due to collateral effect, also before the authorities of the Member States of the European Union , to the detriment of the European Commission. By disregarding the turnover achieved by companies concentrating in the UK, it will be more difficult for mergers to reach European thresholds. This, in turn, will increase the chances of meeting the national thresholds of the Member States and, thereby, the administrative burden of companies.
An example manual of the damages that any disintegration process entails and in which, of course, those who do not earn anything are the companies. And that can only be mitigated by establishing, as in fact the ACC also provides, cooperation mechanisms between both parties in the application of competition regulations that help to gradually retrace the path started with the departure of the United Kingdom from the European Union.
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*Antonio Martinez, partner of Allen Overy, director of the Department of Competition Law and EU of Spain
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