Competition (Amendment etc.) (EU Exit) Regulations 2020
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Lord Callanan
That the Grand Committee do consider the Competition (Amendment etc.) (EU Exit) Regulations 2020.
Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the Competition (Amendment etc.) (EU Exit) Regulations 2020 were laid before the House on 30 September 2020.
From 1 January 2021, the UK’s competition regime will no longer be integrated with the EU’s competition system. Instead, it will function on a stand-alone basis as provided for by the Competition (Amendment etc.) (EU Exit) Regulations 2019, which were approved by Parliament in 2019 to prepare for EU withdrawal. Those regulations will come into force at the end of the transition period, but first they require amendment to reflect the terms of the withdrawal agreement. The purpose of the regulations put before your Lordships today is to implement the UK’s obligations on competition law under the withdrawal agreement and to deliver a separate and sovereign UK competition regime at the end of the transition period. The content of the regulations is therefore separate from both ongoing trade negotiations with the EU and the Government’s consideration of ways to enhance competition in the UK.
So what do the regulations do? They address three broad topics. The first two topics relate to the jurisdiction of anti-trust and merger cases at the end of the transition period. While the UK was a member state of the European Union, the European Commission had jurisdiction to investigate the UK effects of certain anti-trust and merger cases instead of UK competition authorities. This system has continued during the transition period. This means that there will be a limited set of anti-trust and merger cases that relate to the UK which were opened by the European Commission but not completed before the end of the transition period. These cases are dealt with by Article 92 of the withdrawal agreement. I shall refer to them collectively as live EU cases. Article 92 gives the European Commission competence to conclude live EU cases. These cases will be completed under the law that applied to them when they were opened. This arrangement ensures that competition cases which straddle the end of the transition period will be brought to an orderly conclusion, in turn giving legal certainty to UK businesses, regulatory authorities and courts.
The third topic addressed by the regulations relates to commitments accepted and remedies imposed by the European Commission in connection with its anti-trust and merger cases. These commitments and remedies often relate to multiple EU member states, including the UK, and the European Commission is normally best placed to secure compliance with them. In accordance with Article 95 of the withdrawal agreement, the European Commission will remain responsible for the monitoring and enforcement of the UK aspects of such commitments and remedies. However, this responsibility can, by mutual agreement, be transferred from the European Commission to the UK’s competition authorities.
I will now briefly explain the main changes made by the regulations in relation to these three topics. First, with respect to the European Commission’s investigations of live EU anti-trust cases, the regulations amend transitional arrangements made in 2019 to reflect the Commission’s continued jurisdiction over these cases. The amendments ensure that the Competition and Markets Authority can assist the Commission in its investigations of live EU anti-trust cases in the way it currently can under the Competition Act. To implement fully the legal effect of the withdrawal agreement, the regulations restrict the CMA from investigating the UK aspects of a live EU anti-trust case until the Commission’s case has concluded. This reproduces an effect similar to that which arises currently under EU law. The CMA will of course be free to investigate the UK aspects of any anti-competitive behaviour that occurs after the end of the transition period.
Decisions of the European Commission and the Court of Justice of the European Union made in relation to live EU anti-trust cases will be binding in the UK for the purposes of private claims seeking follow-on damages for a breach of competition law. The regulations ensure that UK authorities must consider any relevant penalty issued by an EU body in a live EU anti-trust case when deciding the amount of a penalty to be issued under UK law.
Secondly, the European Commission will continue to have exclusive competence over live EU merger cases, including in relation to any UK elements of the case. This means that, except in certain circumstances, the CMA will not have jurisdiction to review a merger after the end of the transition period if the European Commission began its own review of the merger on behalf of the UK before the end of the transition period. The exception to this rule is where the European Commission is re-examining a merger case following a successful appeal but is not considering the UK aspects of the merger in its re-examination. To prevent an enforcement gap emerging in the UK, the regulations ensure that the CMA can investigate the merger in these circumstances. The regulations amend the transitional arrangements made in 2019 to reflect the European Commission’s jurisdiction over live EU merger cases.
With respect to the transferred UK aspects of EU commitments and remedies, the regulations give to the CMA monitoring and enforcement powers to secure continued compliance with them. These powers are modelled on the CMA’s existing powers to monitor and enforce domestic commitments and remedies. The powers will apply also to sector regulators that enforce competition law concurrently with the CMA.
In addition to the changes made in relation to these three topics, the regulations make technical amendments to the 2019 regulations so that appropriate reference is made to the end of the transition period. Finally, as with the approach taken by the 2019 regulations, the regulations revoke a recent EU regulation on investment screening, which will have no practical effect on the UK beyond the end of the transition period because it relates to information-sharing between EU member states.
The provisions on competition law contained in the withdrawal agreement mean that the UK will move smoothly to a separate and sovereign competition regime. The regulations make only those changes which are necessary to give effect to these provisions and to ensure that the UK’s competition regime functions as intended by the regulations that Parliament approved in 2019. The regulations will provide legal certainty for the UK’s businesses, the CMA and the UK courts. I therefore commend the regulations to the Grand Committee.
Lord Callanan (Con)
First, I thank all noble Lords for their contributions to the debate. I remind everyone who contributed that these regulations are required to give full and operable effect to a policy that Parliament has already approved in the form of both the withdrawal agreement and the Competition (Amendment etc.) (EU Exit) Regulations 2019.
My noble friends Lord Lansley and Lady Neville-Rolfe asked about the threshold for market shares in vertical agreements. At the end of the transition period, the Secretary of State will have the power to make regulations to vary or revoke a retained block exemption or to replace it with a block exemption order under the Competition Act, acting in consultation with the CMA, of course. In each case, it will be for the CMA to consider what the relevant geographic and product market will be, and it will have guidance on the factors that it needs to consider.
My noble friend Lord Lansley also asked about the position on foreign investment screening in comparison to the NSI Bill. He also asked whether the Government were considering further measures on foreign investment screening, especially with regard to national security. The answer is that the EU regulation revoked by these regulations relates principally to co-operation between member states on the screening of foreign direct investments. The NSI Bill relates to powers to protect national security in investments, and of course there will be ample opportunity to discuss that Bill in much greater detail when it comes to your Lordships’ House.
As always, I listened with great interest to the noble Baroness, Lady Bennett. She ranged far and wide over whether or not the market economy is right, prisons, care homes and council houses. It was all extremely interesting but totally irrelevant to this SI.
My noble friend Lady McIntosh asked about proposals to protect consumer rights after the end of the transition period. The issues of roaming charges and so on are also interesting but are not covered by these regulations. She also asked about positions on appeals under live cases after the transition period—will UK companies be able to rely on the CJEU or on UK bodies? The answer to that question is yes; currently EU law will continue to apply in relation to all live EU cases, and this regulation concerns only the small number of cases that are live at the end of the transition period. UK companies that are subject to merger or anti-trust investigations and decisions in those cases will, of course, be able to appeal any decisions to the CJEU.
My noble friend also asked about UK companies facing red tape, as I think she referred to it, at the end of the transition period. Of course, the UK has left the European Union and, at the end of the transition period, will cease to be part of the EU’s competition system. This means that there will be some instances of parallel scrutiny by both UK and EU competition authorities, as is normal in any sovereign competition regime. The same thing would happen with companies that are jointly operable also in the United States. The regulations and the withdrawal agreement set out clearly whether the CMA or the European Commission has jurisdiction over a particular case.
My noble friend Lady McIntosh asked about assurances that UK companies will not be doubly penalised. With respect to those few live cases, the CMA will take into account any penalties issued by the Commission in these cases, which reflect the position which applies during the UK’s membership of the EU in relation to a case examined by the Commission and also, lately, after that considered by the CMA.
My noble friend Lady Neville-Rolfe asked about the position of the CMA’s chair. She will be aware that Jonathan Scott was appointed as the interim chair on 9 October, and shortly my department will launch a recruitment process for a new permanent chair. She also asked whether a variety of skills are required in the CMA. Of course, the CMA is a highly regarded competition body and will continue to play an important role in fulfilling its statutory function of promoting competition for the benefit of consumers, drawing on its already wide-ranging and broad set of skills from across the public and private sectors.
The noble Baroness, Lady Bowles, asked about the likely reasons for choosing whether enforcement of EU commitments and remedies will stay with the EU or the UK. Of course, it will be for the European Commission and the UK’s competition authorities to discuss between them whether it might be suitable to transfer responsibilities to monitor and enforce any EU remedies and commitments.
Lastly, the noble Lord, Lord Stevenson, asked about the status of the CMA under the EU CFTA. These regulations are about the handling of those few live cases at the end of the transition period. Of course, they are not negotiations; negotiations are ongoing, and the noble Lord will quite understand that I am currently unable to comment on the status of those discussions and on the future relationship but, suffice to say, the CMA exists in UK statute and is a world-renowned regulator and functions as our independent competition regulator.
The changes I have described today will give legal clarity to UK businesses and those authorities that enforce competition law in the UK. I reiterate again that these regulations do not bring forward new competition policy, but rather ensure that policy which has already been agreed by Parliament functions in the way that Parliament intended. While, of course, these regulations are technical in nature, without them the UK would fail to implement its obligations on competition law under the withdrawal agreement. The regulations made in 2019 to create a stand-alone competition regime would also contain references that are now inaccurate in light of the withdrawal agreement. Therefore, those inconsistencies between provisions on competition law in the withdrawal agreement and UK competition law would cause significant uncertainty for UK business, the CMA and the UK courts. These regulations will complete the process of preparing the UK’s statute book for this purpose, and, therefore, I commend these draft regulations to the Committee.