In this post, James Bourke of Monckton Chambers examines the relevance of the fact that the United Kingdom and the EU do not have a competition law cooperation agreement, and considers the prospects for such an agreement in the future.
The CMA Chief Executive, Mr Andrea Coscelli, recently said that the United Kingdom and the EU had aimed to conclude a competition cooperation agreement by 31 December 2020 as part of Brexit negotiations. It turned out that the parties had other more pressing priorities and the cooperation agreement fell by the wayside.
Why does this matter? Cooperation agreements are important because antitrust infringements frequently transcend national borders. Competition law enforcers regularly need to investigate issues which are also being investigated by enforcers in other jurisdictions. This means that:
1) There is a risk of disputes between jurisdictions on the extra-territorial application of competition law, as well as risk of conflicting substantive approaches to the same issues.
2) There may be opportunities to combine forces to an extent, including by sharing information and even evidence.
As we explained on a recent Monckton webinar, Brexit means that parallel enforcement of competition law by the UK and EU authorities is now a reality. Two scenarios are worth considering.
First, Article 92 of the Withdrawal Agreement provides that the European Commission continues to be competent for antitrust cases in the UK where:
1)the Commission initiated proceedings before 31 December 2020; and
2)the case concerns compliance with competition law by undertakings residing or established in the UK, or which concern compliance with Union law relating to competition in the UK (“Continued Competence Cases”).
In these cases, the old rules on cooperation will apply. In particular, paragraph 8C of part 3 of schedule 4 of the Competition (Amendment etc.) (EU Exit) Regulations 2019 (the “Competition SI”) provides that part 2 of the Competition Act 1998 will continue to have effect in those cases. For example, the Commission could ask the CMA to carry out an inspection on its behalf.
The CMA cannot open investigations into competition concerns which are the subject of Continued Competence Cases (see paragraph 8A(2) of part 3 of schedule 4 of the Competition SI). This is similar to the pre-Brexit position under Article 11(6) of Regulation 1/2003.
However, the CMA may open an investigation in so far as they concern effects arising from conduct after 31 December 2020. So if the conduct continues after that date and affects trade in the UK, then the CMA can investigate and apply the Chapter I and II prohibitions (see paragraph 8A(3) of Part 3 of Schedule 4 of the Competition SI; see also the CMA’s December 2020 Guidance paper, paragraph 4.6).
Incidentally, if undertakings face fines as a result of infringement decisions taken by both the CMA and the European Commission, it might be argued that this breaches the principle of “ne bis in idem”. However, at least the CJEU has so far held that that principle does not apply where the Commission fines an undertaking under EU law and a non-Member State fines the same undertaking under its own law (see Case C-308/04 SGL Carbon, at [28]-[38]; in the context of a pre-accession situation, see Case C-17/10 Toshiba).
The second scenario are new cases, where neither the Commission nor the CMA had initiated an investigation by 31 December 2020. In these cases, we may get parallel investigations because both authorities can investigate competition cases in the UK:
1)The CMA can only apply domestic rules, for conduct from both before and after 31 December 2020, if the conduct affects trade within the UK.
2)As for the Commission, it may have jurisdiction under the implementation and effects doctrines over conduct of UK businesses which affects competition within the EU (see, e.g. Case C-413/13 P Intel, at [44]-[51]).
It follows from all of the above that there is an ever-increasing risk that the UK competition authorities and the European Commission (or national competition authorities from the EU Member States (“NCAs”)) will end up investigating the same conduct. Yet, there are currently no provisions in place for competition law cooperation in those cases.
Title XI of the Trade and Cooperation Agreement (“TCA”) includes some aspirational provisions on competition law cooperation between the European Commission and the NCAs, and the UK’s competition authority or authorities (see Article 2.4). It foresees that those players may exchange information to the extent permitted by each party’s law. Protection of confidential information at a national level may mean that such information exchanges will happen very rarely.
The TCA also foresees that the parties “may enter into a separate agreement on cooperation and coordination between the European Commission, the competition authorities of the Member States and the United Kingdom’s competition authority or authorities, which may include conditions for the exchange and use of confidential information” (Article 2(4)(4)).
Both Mrs Vestager and Mr Coscelli have clearly indicated in the past weeks that they are keen to get a cooperation agreement in place soon. One can only assume that the UK and the EU are working away in the background to get this missing piece of the Brexit puzzle into place.
What might the cooperation agreement look like? Given the close relations between the UK and the EU on competition law enforcement up until now, it seems reasonable to expect an agreement with an enhanced degree of cooperation.
First, it seems reasonable to think that the future agreement will include provisions on the exchange of information and evidence relating to ongoing investigations. In 2013, the EU and Switzerland entered into a cooperation agreement which the Commission described as “innovative” because it enabled the exchange of evidence between the parties. This is described as a “second generation” agreement, by comparison with earlier agreements which did not permit the exchange of evidence.
It is fair to predict that the EU and the UK will aim for a Switzerland-plus agreement, covering at least the exchange of evidence, given the close relations between competition enforcers in those jurisdictions (see e.g. Article 12 of Regulation 1/2003 which applied in the UK until 31 December 2020).
It is also fair to speculate that there is likely to be special protection for immunity and leniency statements. For example, under the Switzerland/EU cooperation agreement, there is a prohibition on the transfer of information obtained under leniency or settlement procedures unless the undertaking which provided that information consents in writing (Article 7(6) and 7(7)).
Second, one might expect comity provisions, both negative and positive:
1)Negative comity refers to a country’s consideration of how it may prevent its law enforcement actions from harming another country’s important interests.
2)Positive comity involves a county’s consideration of another country’s request that it open or expand a law enforcement proceeding in order to remedy conduct that is substantially and adversely affecting another country’s interests.
The agreements with the United States (from 1991 and 1995) and the Switzerland agreement contain provisions on negative and positive comity.
Third, the agreement may provide for the coordination of enforcement activities, including the timing of inspections. If the CMA and European Commission are investigating the same alleged infringement, it would certainly make sense for them to coordinate on the timing of inspections.
Fourth, as a minimum, the agreement is likely to contain provisions requiring each side to notify the other of enforcement activities which may affect important interests of the other party.
The future cooperation agreement may well cover other areas which have not typically been included in past agreements. For example, although it would go beyond the scope of Article 2(4)(4) of the TCA, the parties may decide to include provisions on cooperation between their respective national courts. In addition, it may be sensible to envisage the CMA’s attendance at certain European Competition Network meetings to facilitate cooperation. (Incidentally, it is worth noting that the Association of European Competition Law Judges has kept the UK on board notwithstanding Brexit)
Finally, no date has been given for the adoption of any such agreement. Given its importance and the fact that the European Commission and the CMA are evidently keen to maintain their close working relationship, it seems reasonable to imagine that a cooperation agreement will be concluded within the next year.
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