Skadden Discusses Merger Reviews And Antitrust Inquiries In Case Of 'No-Deal' Brexit

 
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As the U.K.'s March 29, 2019, exit date from the European Union approaches, companies involved in merger reviews or antitrust investigations should preemptively address the risk of a "no-deal" Brexit.

Both the U.K. and EU have antitrust laws that can apply simultaneously to the same merger or allegedly anti-competitive conduct. Currently, procedural rules determine how jurisdiction is divided between the European Commission (Commission), at the EU level, and the Competition and Markets Authority (CMA), at the U.K. level. But there are no transitional provisions dictating how jurisdiction for pending matters is to be handled in the event of a "no-deal" Brexit.

Merger Control. Companies in merger reviews filed with the Commission (whose pre-Brexit jurisdiction supersedes the U.K.'s review) should factor in the risk of a parallel review by the CMA post-Brexit. As the CMA has the power to investigate cases up to four months after closing, this could leave deals in significant legal uncertainty. A second risk is that EU jurisdiction falls away if, without the target's U.K. turnover, the deal no longer meets the EU merger control revenue thresholds. This would expose the deal to notification at a member state — rather than EU — level. These risks should be considered when drafting conditions precedent and, in appropriate cases, through consultation with the CMA and any relevant national authorities.

Antitrust Investigations. Companies subject to EU antitrust investigations (which, once formally initiated, would preclude the U.K. also investigating where EU competition law is engaged) may be subject to separate CMA proceedings post-Brexit. Again, this engenders substantial legal uncertainty. The U.K. has no statute of limitations in antitrust inquiries, and there is no obligation on the EU or CMA post-Brexit to respect each other's jurisdiction or to set off penalties imposed by the other authority for the same conduct. Particularly for ongoing cartel cases where the company has sought immunity, it will be important to have immunity markers in place with both authorities. Otherwise, the company risks other defendants jumping the queue for leniency.

Background

U.K. and EU antitrust laws currently apply simultaneously: While the U.K. remains part of the EU, procedural rules identify when matters fall under the jurisdiction of the Commission or CMA, and there are referral arrangements and soft law guidance in place to identify the authority best positioned to oversee each matter.

The draft withdrawal agreement1 for the U.K.'s exit from the EU creates a transitional period of 18 months, ending on December 31, 2020, during which EU competition law will continue to apply to the U.K. Thereafter, ongoing matters before the EU will continue until completed. However, the EU and U.K. have both warned there is a risk...

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