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Published 1 March 2021
In December 2020 we explored the impact of the Supreme Court’s ruling in Merricks vs. Mastercard – an important judgment which could transform the landscape of UK class actions. We anticipate that the ruling will have a profound impact on would-be claimants who may otherwise be dissuaded by the disproportionate costs typically associated with competition claims. A move closer towards the US model, in which there are fewer obstacles to certification of class actions, now seems likely.
In this article we look at the changes to the UK’s “cartel claims” regime following the end of the Brexit transition period on 31 December 2020.
The new regime - prohibitions
Now that the transition period has ended, EU competition law no longer applies directly to the UK, and UK enforcement authorities will no longer enforce EU law. At first glance, that sounds like a very significant change in an area of the law that was, until 31 December 2020, very heavily reliant on EU legislation, interpretation and case law. However, in practice we do not expect much of a change, at least in the short term.
The new Section 60A of the Competition Act introduces modest changes which reflect the UK’s cautious transition into a fully independent jurisdiction. While English Courts, Tribunals and the Competition and Markets Authority (“CMA”) are no longer bound by EU competition law, they are still required to avoid inconsistency with those EU principles and rulings that were in force before the end of the transition period. The prohibitions set out in Sections 2 and 18 of the Competition Act (on “preventing, restricting or distorting competition”, and abusing a dominant position) broadly mirror those in Articles 101 and 102 of the Treaty of the Functioning of the European Union (“TFEU”) – so we do not expect a significant divergence at this stage.
UK Courts and authorities must also have regard to EU guidance and future EU case law. However, UK Courts won’t be able to make references to the European Court of Justice in relation to questions of the interpretation of EU law, and that may lead to a gradual divergence in interpretation. Further, when a contrary principle of English law comes into existence, the corresponding EU principle can be disregarded in its favour, where that is considered appropriate. Unless and until England develops its own competition law jurisprudence, though, again, we do not anticipate any notable changes in this area.
The new regime - investigations
In the near future, the full effect of Brexit will be felt in the areas of investigation and enforcement. Where the European Commission is currently investigating whether a cartel exists, the CMA cannot instigate a parallel investigation into the same set of facts (unless the infringement is continuing after the end of the transition period or the EU decision is annulled). The CMA must also now stop any ongoing investigations into EU infringements, and confine its activity to investigating UK infringements. The CMA will now have ultimate control over any new UK cartel investigations.
While the CMA is likely to embrace this change in respect of antitrust activity occurring solely within the UK, it cannot avoid the fact that many cartels are, by their nature, international. Where, as often happens, an alleged infringement includes unlawful activity in both the UK and the EU, there is a risk of parallel investigations by the CMA and the European Commission. Further, unless new co-operation agreements are signed in future, the CMA and the European Commission will no longer share evidence when investigating cross-border cartels, or conduct dawn raids in the other’s jurisdiction without permission (the UK has fallen out of the information-sharing European Competition Network). It is to be hoped that the authorities will develop alternative co-operation and evidence-sharing arrangements going forward.
Effect on follow-on claims
Follow-on claims for private damages may still be brought by UK litigants on the basis of European Commission decisions made before the end of the transition period. In addition, such claims may also be based on so-called “Continued Competence Claims” – where a cartel finding is made by the European Commission post-Brexit, but where the investigation was initiated before the end of the transition period. Given the length of some investigations, that is likely to mean that follow-on claims remain possible in relation to EU Commission decisions for a fairly significant period of time. Crucially, however, for investigations that begin after 1 January 2021, claimants will no longer be able to use the Commission’s findings as a springboard to bring follow-on claims in the UK. They will face the choice of bringing standalone claims following EU Commission findings or, where possible, follow-on claims in reliance on CMA decisions.
These changes are unlikely to be fatal to most cartel claims, but we expect that future claimants could face a greater evidential challenge in proving that cartel activity in Europe has an “umbrella effect” on the UK market.
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Harald Loeffler, Neil Warwick