Competition (Amendment etc.) (EU Exit) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Monday 16th November 2020 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, there is quite a lot going on with competition because of Brexit. This instrument deals with investigations that are, or will be, ongoing at the end of the transition period, and potential future monitoring in the UK of EU remedies. It also revokes EU regulation 2019/452 relating to screening in foreign direct investments.

The National Security and Investment Bill will replace at least part of the revoked EU regulation, and that Bill has started its passage through Parliament. Then there is the published draft regulation on state aid, which we have not yet considered, which deals with the change of emphasis of this Government compared with the previous direction under Theresa May.

Additionally, the United Kingdom Internal Market Bill, which we shall return to on Wednesday on Report, reserves powers on state aid to the UK and creates a landscape where the UK internal market rules may have to be taken into account, but it does not really solve how that will happen, or clarify its relationship with other aspects of trade and competition policy.

So many things are up in the air because of Brexit negotiations or because they are awaiting consultation. We live in the Pirandello-like state of characters in search of a policy, holding jig-saw pieces of legislation that we hope will one day mesh with other bits that have not yet been cut. Against that background, I thank the Minister for introducing this statutory instrument. As has been said, it modifies the no-deal version of legislation. Reading through the Explanatory Memorandum, it all seems logical, at least for this bit of the jig-saw—even if we do not know the full picture.

The questions that I have focus on whether, or how much, we will end up with enforcement systems for some decisions that are different from those applicable to others, and what practical differences that will make in terms of the strength of powers available.

As I understand it, cases that are decided by the EU, or fall to be decided by the EU under continued competence, can, after decision, either stay with the EU for monitoring and enforcement or by mutual agreement be transferred to the UK. Therefore, my first question is this: what are the likely reasons for choosing whether it stays with the EU or comes to the UK? What reasons would the UK see for that and does the EU have similar or different views? Does it depend on the size or importance of the case or only, as the Minister has already mentioned, on whether it is part of an interconnected set? Is it likely to cause disputes?

Broadly speaking, the European Commission has greater enforcement powers than the CMA—notably very significant fining powers—and the CMA is seeking greater powers, finding those that it has inadequate. As the noble Baroness, Lady Neville-Rolfe, mentioned, the noble Lord, Lord Tyrie, drew some of that to our attention in debate on 16 November on the United Kingdom Internal Market Bill.

The UK firepower relating to refusal to supply information is capped at £30,000, which is plenty for an individual or smaller business but can be inadequate for a recalcitrant large business. It may easily be less than the cost of preparing the disclosure if lawyers are involved; for example, the EU fined Facebook €1.6 million for failing to provide information, while we fined Amazon £30,000. That does not look very comparable.

The UK also has a poor track record on undertakings given to the CMA on mergers—for example, about not closing down establishments or not removing research—despite attempts to strengthen legislation. That legislation and associated undertakings have always ended up legally weak—about as strong as a wet paper bag. I have my theories as to why that is the case, but for now it raises the question whether there will be a stricter regime for cases retained by the EU for enforcement than for those it is mutually agreed to transfer to the UK. That would appear to be the case, as the Explanatory Memorandum states, and the Minister clarified, that the UK monitoring procedures are modelled on existing CMA procedures—that means not the more powerful EU versions.

The cases that are transferred are done so only for monitoring purposes; the EU retains the rights to review, vary and substitute the decisions. If the UK has a weak enforcement system, does that mean that the EU could make up for that when it comes to review or substitution? However, if it is about preservation of jobs or research which have already gone due to weak enforcement, nothing will bring those back.

The big question is not what is happening in this piece of legislation, but when domestic competition policy and domestic enforcement against large companies will become more substantial.