Brexit: Competition and State Aid (EUC Report)

Lord Aberdare Excerpts

Thursday 24th May 2018 Lords Chamber

[Lord Aberdare (CB)]

My Lords, it is a pleasure to serve on the EU Internal Market sub-committee. This report, pace the noble Baroness, Lady Noakes, seems to be a good example of the committee inquiry process working as it should. The committee has a membership of all the talents, with an outstanding chair in the person of the noble Lord, Lord Whitty, and first-rate staff support. It has been supported by a splendid special adviser, Professor Erika Szyszczak, who gets no mention at all in the report, perhaps because the spellchecker could not cope with a name that includes three Zs. The topic is relevant and important. We had input from a range of knowledgeable witnesses and produced what I believe is a constructive and helpful contribution on the issue. We even received a timely and generally positive response from the Government, followed—again within a reasonable timescale—by this debate.

There was broad consensus that the current EU competition system for anti-trust and mergers, with responsibilities divided between the Commission at EU level and national competition authorities in each member state, works pretty well. The UK regime is seen as robust and effective and the CMA is well respected. The transition deal reached by the Government since the report’s publication addresses some of the concerns expressed in the report—for example, over the need to give businesses greater clarity and certainty, and to ensure that they would have to make only one set of adaptations to their systems and procedures. Other issues remain unresolved, such as how competition cases that are live at the point of exit will be dealt with.

I will comment, I hope briefly, on three areas: first, what potential opportunities or improvements might arise from the UK taking back control of its competition policy; secondly, issues relating to state aid; and, thirdly, broad questions relating to the future framework for competition policy across the UK.

Criticisms of the current system for anti-trust and mergers relate largely to delays and bureaucracy, as well as concern about insufficient attention being paid to the concerns of consumers who are, after all, meant to be the ultimate beneficiaries. Several suggestions were made about how to improve the processes of investigation and enforcement after we leave the EU: for example, greater use of interim enforcement measures; setting time limits for parts of the process; focusing more on the actual effects of corporate behaviour than its specific form, as the Commission tends to do; expanding the public interest criteria for assessing mergers; or revising thresholds for triggering action on them. Some of these ideas were also proposed in the sub-committee’s earlier report on online platforms, and could be particularly useful to address fast-moving digital markets and issues posed by dominant online platforms, which have been so prominent recently.

Of course, any such changes may need to be balanced against the constraints of seeking to negotiate a comprehensive competition agreement with the EU, which might well include binding commitments limiting the scope for change, so any divergence from EU rules may be relatively small, at least initially, and take place only gradually. There may also be some drawbacks of our leaving, such as businesses having to make dual notifications of mergers, or some reduction of private damages actions based on breaches of competition law, for which, as we have heard, the UK has established itself as Europe’s foremost jurisdiction.

What opportunities does the Minister envisage to enhance the effectiveness of our competition regime after Brexit, what may they mean for the arrangements we make for continued co-operation with the EU regulatory regime and the European competition network, and how far and how fast may we begin to divert from the EU regime?

State aid presents a different challenge. It is currently regulated entirely at EU level, with no existing UK regulatory structure. Provisions on state aid are likely to be a required element of any deal with the EU. As the Prime Minister herself said, it would be a serious mistake to try to beat other countries’ industries by unfairly subsidising one’s own. At the same time, any new structure for managing state aid in the UK must take account of the needs of the UK’s own single internal market, extending across the devolved nations, regions and local authority areas and addressing their particular needs and priorities, while avoiding the risk of subsidy races between different parts of the UK, all of which have up to now had to follow common EU rules.

The Government stated view is that,

“the UK should be prepared to establish a full, UK-wide subsidy control framework, with a single UK body for enforcement and supervision, at the point this is required”.

They have also concluded that the CMA would be best placed to take on this role. This raises a number of questions, including how the CMA’s independence will be assured and whether there is any risk of conflict between its new state aid role and its existing competition function. Above all, how will the interests of the devolved nations and other regional and local bodies be taken into account in defining the new rules and by the CMA in enforcing them? In its evidence, the Welsh Government stated that,

“a UK internal State aid framework needs to be drawn up cooperatively and consensually between the UK Government and the Devolved Administrations as equal partner”,

and that:

“The Welsh Government would expect to be involved in the appointment of the board or panel members of any future UK-wide State aid authority, as well as agreeing the terms of reference, ongoing remit and priorities”.


Some of those aspirations were taken up in the committee’s recommendations. How does the Minister believe that the Government and the CMA should respond to those aspirations?

That leads me to my third topic. It seems unlikely that Brexit will bring major changes, at least in the short term, to the way that competition policy operates in the UK. Looking to the longer term, what form of regime would best meet the needs of the UK’s internal market, and what institutional arrangements most effectively deliver it?

The sub-committee recommended that a first step towards addressing these questions should be for the Government to undertake a wide-ranging consultation exercise, gathering views and ideas from the devolved Administrations, regions and local authorities, as well as from businesses and consumers in general. Indeed, as the noble Baroness, Lady Donaghy, mentioned, the LGA in its evidence set out some ideas on how a future UK state aid regime could provide greater simplicity and flexibility for councils to deliver public benefits.

I conclude by asking the Minister what plans there are, if not for a consultation, at least to pursue other ways of identifying opportunities to maximise the potential benefits of a competition regime free of the constraints of the current EU system.