Significant Changes To UK Competition And Merger Control Rules Set To Put The UK On A Separate Path From The EU

Allen & Overy


Allen & Overy
This month there have been some major developments in initiatives to amend UK competition and merger control rules.
European Union Antitrust/Competition Law
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This month there have been some major developments in initiatives to amend UK competition and merger control rules. First, the UK Government has announced which reforms to the UK competition and consumer laws it plans to take forward. Second, there has been significant progress with the adoption of UK rules on vertical agreements and horizontal cooperation agreements. We discuss each in turn.

It is also worth mentioning that the new UK subsidy control regime received Royal Assent at the end of April. It sets out the post-Brexit framework for the grant of subsidies by UK public authorities. The Government expects it to come into force in Autumn 2022. We will provide further updates on the new regime in due course.

Government confirms reforms to UK competition and consumer laws

In July 2021, the UK Government published wide-ranging proposals for reform of the competition and consumer rules. Now, it has announced which proposals it intends to implement. Our alert comments on the key changes. These include:

  • Merger control: significant amendments to the jurisdictional thresholds, including a new threshold designed to enable the CMA to review killer acquisitions more easily.
  • Market inquiries: greater flexibility, particularly in relation to the CMA's ability to accept binding commitments and to review and amend existing remedies.
  • Anti-competitive conduct: facilitating stronger and faster enforcement, eg by bringing anti-competitive agreements implemented outside the UK (but with an effect in the UK) into the scope of the Chapter I prohibition and giving the CMA greater evidence-gathering powers.
  • Tougher sanctions for non-compliance: including for failing to comply with investigations and remedies.

Our commentary on the reforms to consumer law will be available shortly.

New UK rules on vertical agreements and horizontal cooperation agreements

EU regulations exempting certain categories of agreement from the prohibition on anti-competitive agreements were retained in UK law post-Brexit. However, with some of these block exemptions due to expire this year, the European Commission (EC) and the UK Competition and Markets Authority (CMA) have been undertaking separate in-depth evaluations. Both have been consulting on whether to extend the block exemptions and, if so, how they and associated guidance should be updated.

For businesses operating across the UK and the EU, diverging antitrust regimes means increased compliance costs. The CMA's approach to its review has therefore been to balance the advantages of divergence from the EU to address peculiarities of UK markets and better protect UK consumers with the benefits of consistency between the EU and the UK block exemptions. The end result is likely to be a great deal of similarity in the rules interspersed with some key differences in approach.

Most imminently, the Vertical Block Exemption Regulation will expire on 31 May 2022. The UK and the EU propose to renew the block exemption in amended form. Both jurisdictions also plan to issue guidance which will cover how businesses should apply the block exemptions as well as how they should assess vertical arrangements that do not fall within the scope of the block exemptions.

Our alert on the CMA's draft verticals guidance sets out the main changes in approach from the current rules. In particular it looks at parity obligations, dual distribution, the distinction between active and passive selling, online sales and advertising bans, dual pricing, agency agreements, RPM and non-competes. Crucially, where relevant, it compares the UK position with the EC's planned approach. You can also read about how the EU rules on vertical agreements have been enforced in Central and Eastern Europe (and what to expect going forward) in our separate commentary.

The two Horizontal Block Exemption Regulations relating to R&D and specialisation will expire on 31 December 2022. Again in line with the EC, the CMA is proposing to recommend that these are replaced with similar but improved block exemptions, and accompanied by guidance that also addresses other categories of horizontal agreement and issues not covered by the block exemptions themselves. Our alert on the EC's proposed guidance focuses on sustainability agreements and data sharing. At this stage, without draft UK guidance, we await the CMA's thinking on these points.

The good news is that businesses are likely to be granted 12-month transition periods. This should give them sufficient time to consider the subtle divergences in approach and, where necessary, adapt ongoing agreements to ensure compliance beyond the end of the transition period.

Originally published 4 May, 2022

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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