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Perhaps this is an indication of the way things are going to be after Brexit. The Governments of Germany, France and Poland have recently published a document calling for a radical review of the EU merger rules to allow a stronger emphasis on industrial policy considerations .

Remove the UK from the equation with its strong belief in competition only based assessment of mergers and more politically motived industrial policy concerns are likely to fill the vacuum. More and more they are likely to become a focus of future EU competition policy. Despite strong resistance from the EU Commission which is wedded to a competition based assessment of concentrations the combined forces of the two leading member states (and it has to be added the main EU paymasters) supported by Poland are likely to be an substantial force.

Stung by the EU Commission’s decision to block the proposed acquisition of French engineering company, Alstom, by German competitor, Siemens, on the basis that the deal could harm competition in markets for railway trains and signalling systems, the French and German Governments allied with Poland want more flexibility in EU merger analysis to allow for the creation of European Champions . The rationale for such a move is that the promotion of European champions will help these companies to effectively compete with state backed companies particularly those backed by the Chinese Government .

In their paper entitled ‘Modernising EU Competition Policy’, the three Governments call for a review of the way horizontal mergers are assessed. In particular they want EU merger rules to take into account the global competition context in which companies have to compete thereby allowing regulators greater flexibility to protect the strategic European interest. This would require, among other things, taking a more flexible approach to geographic market definition thereby permitting an analysis of wider global markets rather than a narrower EEA wide definition. In addition the paper suggests that greater emphasis should be placed upon the assessment of potential competition, including imports-related competition from outside the EEA. They argue competition policy should have a long term outlook to the development of markets. It should also pay attention to the trade and industrial policy approach of third countries. Therefore whilst competition from third countries’ state-backed or subsidised companies could initially be attractive to European consumers it could create long-term market conditions detrimental to those same consumers where European competitors are weakened or driven out of the market.

Armed with state subsidies low profitability of entering the EU market is not a significant barrier to these subsidised foreign companies which, with their deep pockets, can afford to take a long term strategic approach to contesting EU markets.

The report states that EU merger rules do not sufficiently take into account “third countries state interventions in merger control” and the subsidies that these countries grant to companies. The three Governments are therefore calling on the EU Commission to consider in its decisions the state control exerted on entities when calculating turnover and when deciding whether a merger is likely to impede effective competition in the EU. The EU Commission also comes in for criticism from the three Governments for its enforcement efforts in regulating the mergers involving big tech companies . The document calls for the Commission to speed up merger control and competition enforcement activities involving big tech mergers. In particular it says further work is needed to adequately capture potential “predatory” acquisitions aimed at snuffing out potential competition to big tech at an early stage. It also calls for the possibility of exploring such combinations ex post although it is not clear how this could easily be done if it comes with a potential ex post divestment remedy

The report concludes with a call for an early discussion of merger policy and the competitiveness of EU industrial sectors at the Competitiveness Council in the near future.

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Decree No. 2019-339 of 18 April 2019 (the “Decree”), simplifying formalities for the notification of a prospective concentration operation, including mergers and acquisitions, to the French Competition Authority (“FCA”), was published in the French Official Journal on 20 April 2019 and came into force the following day.

This Decree is in line with the FCA’s intention to modernise concentration control, as announced by the FCA at the end of 2017.

The Decree amends the annexes to the French Commercial Code setting forth the information to be provided relating to the filing of a concentration notification and brings two main novelties.

Firstly, it simplifies the notification file itself:

Whilst before the entry into force of this Decree, the notification had to be submitted in four copies, now only one is required.

Next, Annex 4-3 of the French Commercial Code has been amended to increase, in accordance with the vertical restraints guidelines, the threshold above which a market would prima facie be considered to be affected, from 25 to 30%. The exceeding of such threshold implies the requirement to provide more substantial information in the notification. Now, therefore, such additional information will be required only when the 30% threshold is exceeded, which simplifies notifications for proposed transactions falling below such threshold.

Finally, Annex 4-4 of the French Commercial Code has also been simplified so as to streamline the notification of concentration process. Whereas, prior to the entry into force of the new Decree, the table relating to the reporting of financial data of companies notifying their concentration had 93 entries, it now has only 12. These 12 entries concern mainly turnover information.

Secondly, the Decree creates an online notification procedure for simplified filings:

Such dematerialized procedure will be available for mergers which benefited from the simplified procedure in its current form. This online notification procedure is currently being tested and should be implemented before the end of the first half of 2019.

This dematerialized procedure and the measures implemented by the Decree more generally aim at modernizing the French State’s intervention methods, thus taking into account businesses’ requests for more efficient and practical processes.

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Summary
On 4 June 2019, the Düsseldorf Higher Regional Court overturned a 2015 decision of the German national competition authority (the ‘Bundeskartellamt‘) to ban Booking.com from imposing ‘narrow’ price parity clauses in contracts with German hotels.

Price parity clauses (also known as ‘most-favoured nation’ clauses) have been a topic of debate among competition regulators across Europe. A number of national competition authorities have concluded that ‘narrow’ price parity clauses are compatible with competition law, whereas ‘wide’ price parity is likely to infringe competition law. The German Bundeskartellamt has, in contrast, found that all types of price parity may infringe competition law.

The decision of the German court, along with Booking.com’s successful appeal in Sweden last month, suggests a more unified approach to price parity clauses from European competition authorities and courts.

Background
Price parity clauses generally oblige a supplier to provide a product or service to a customer at a price no higher and/or at terms no less agreeable than offered to other customers.

In the context of the hotel bookings sector, a ‘wide’ price parity clause would require a hotel to provide rooms to an online booking portal on terms at least as favourable as those offered on all other online and offline distribution channels. On the other hand, a ‘narrow’ price parity clause would allow a hotel to offer better terms and prices to other online and offline sales channels but would prevent the hotel from advertising lower prices on their own website.

While there is a broad consensus that ‘wide’ price parity clauses are troubling from a competition point of view, the position on ‘narrow’ clauses is less clear-cut – some view them as anti-competitive (certain jurisdictions, like France, have imposed legislative bans on all forms of price parity clauses) while others consider them to be a necessary measure to prevent ‘freeriding’ behaviour.

Booking.com in Germany
In 2013, the German competition authority began investigating booking platforms Expedia and Booking.com for their use of ‘best-price’ clauses in contracts with hotels. In a judgement on 9 January 2015, the Düsseldorf Higher Regional Court confirmed that imposing ‘wide’ price parity clauses was in breach of competition law but, in December of the same year, the Bundeskartellamt also banned Booking.com from including ‘narrow’ price parity clauses in its contracts with German hotels. Booking.com appealed the Bundeskartellamt’s decision in January 2016. This appeal has been successful.

According to the Court’s announcement on 4 June, its decision to overturn the Bundeskartellamt’s ban was informed by the results of a hotel and customer survey. The Court found that, unlike ‘wide’ price parity clauses, ‘narrow’ provisions do not restrict competition and indeed are necessary to ensure a fair and balanced relationship between platform operators like Booking.com and contracting hotels. It was noted that such clauses prevent hotels from taking unfair advantage of the publicity that comes with being listed on an online booking portal while at the same time ensuring that transactions ultimately take place on their own websites, where the prices are lower – behaviour that the court described in its announcement as ‘improper redirection of customer bookings’.

There are limited grounds on which the Bundeskartellamt can appeal the decision. The competition authority has indicated on twitter that it regrets its failure to convince the court of its approach and that it will decide on next steps once the full text of the judgement becomes available.

A similar story in Sweden
On 9 May 2019, Booking.com overturned a ruling of the first instance Swedish Patent and Market Court which had required Booking.com to remove ‘narrow’ price parity clauses from its contract terms with hotels. The case stemmed from complaints made by Swedish hotels association Visita.

The second instance court ruled that Booking.com was not in breach of competition rules, finding that Visita had failed to sufficiently substantiate its case that the ‘narrow’ price parity obligations in question negatively affected the online travel agency market or the market for hotel rooms. The decision cannot be appealed further.

Implications for businesses
Hotel owners should be aware of the broader implications of the Swedish and German appeal decisions. These cases may suggest a European consensus is developing on the effects of ‘narrow’ price parity clauses, but it also serves as a reminder that the divergence of opinions in this area is not just to be found between hoteliers and booking platforms, or even between jurisdictions, but also between competition authorities and courts in the same country.

Given the cross-border nature of the hotel bookings sector, a joined-up approach to price parity clauses would offer hotel owners important certainty when negotiating with platform providers. However, the debate remains live as to what the actual effects of such clauses are. Any appeal by the Bundeskartellamt could provide further clarity in this area.

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Following settlement negotiations with the parties concerned the Competition and Markets Authority (CMA) published on 31st May 2019  a non-confidential version of its decision in which it found six office fit-out firms had infringed the Chapter I prohibition of the Competition Act 1998

The decision disclosed that the parties concerned engaging in cover bidding in response to invitations to tender thereby colluding on the prices they would bid for particular contracts. Over 14 contracts with a variety of customers were affected by their anti-competitive behaviour which took place in the years 2006-2017. Fines were imposed upon five companies ranging between £4.1 million – £7,7 million. One company benefited from immunity from fines under the CMA’s leniency programme . They had been the first company to raise the existence of the anticompetitive arrangement and their participation in it.

The particular significance of this decision is that several company directors of the parties concerned were disqualified as sitting as directors as a result of being involved as directors of the companies guilty of the anti-competitive conduct under Company Director Disqualification Orders (“CDO”)and Company Director Disqualification Undertakings (“CDU”) . These were introduced under the Enterprise Act 2002. CDOs allow the CMA to seek the disqualification of an individual from being a company director for a period of up to 15 years, if that individual was a director of a company which breached either Article 101 or 102 TFEU or Chapters I or II of the Competition Act 1998 and their conduct is closely associated with the breach of competition law such that it made them unfit to be involved in the management of a company.

More particularly a director will be deemed unfit to be concerned in the management of a company if director concerned:

  • contributed to the breach of competition law,
  • did not contribute directly to the infringement of competition law but had reasonable grounds to suspect the conduct of the undertaking was a breach and took no steps to prevent it, or
  • did not know, but should have known, that the company was involved in conduct that was in breach of competition law.

The CMA can seek a CDO by applying to the Courts. Alternatively it may accept a CDU from a director. This has the same effect as a CDO and can be enforced in the Courts. To date the CMA has now disqualified nine directors in total. These were all accepted by way of CDUs offered by the individuals concerned. This case saw the most recent example of the CMA’s use of CDOs/ CDUs . The CMA began proceedings against three former directors of the companies found guilty of anti-competitive conduct in May 2019 . The relevant directors agreed to give CDUs and were banned from acting as directors or being involved in the management of any UK company for periods ranging between two and five years.

With this increased use of CDO/CDUs, the CMA wants to highlight that company directors do have responsibilities to abide by competition law . The CMA argues they need to take responsibility in respect of competition law compliance by their companies. The CMA state that whilst company directors are not expected to be competition experts, they are expected to have a sufficient understanding of what constitutes the most serious types of anti-competitive behaviour which includes bid rigging which was the subject of the present case.

.The CMA also published a case study relating to this decision to emphasise how important it is for companies and their directors to avoid this type of behaviour . Agreeing with a competitor to submit a cover bid is illegal and a company should never agree to submit a cover bid, even if it does not want to win the tender or take on the work or just to keep onside with customers or project managers. This is a form of cartel type activity .The CMA goes on to stress that this type of activity can have serious consequences for the businesses and individuals involved even if it is isolated behaviour and relate to historical activity In this case some of the activity took place as far back as 2006. It also advocates companies putting in place compliance strategies under which directors to lead by example and promote a culture of compliance within their businesses.

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Summary

Digital markets mergers are a hot topic for global antitrust regulators. The UK’s Competition and Markets Authority (“CMA”) has published an expert report on whether the UK has struck the right balance between over and under regulation of such transactions. The CMA is confident that the overarching competition law framework can cope with mergers in digital markets. However, they are also seeking comments on proposals for incremental improvements in its merger assessment tools and guidance for digital markets deals. In this article, we outline what the CMA has said, and what this means for businesses active in the digital sector.

CMA’s views on merger control in digital markets

In a speech delivered on June 3, 2019, to the OECD/G7 Conference on Competition and the Digital Economy Andrea Coscelli, Chief Executive of the CMA, emphasized that while there have been a large number of acquisitions by major digital companies in the last decade, only a handful have been scrutinized by competition authorities. Accordingly, Coscelli posed the question of whether regulators have correctly “balanced the risks of under-and over-enforcement.”

Despite Coscelli stressing there are “no neat fixes” to the challenges such transactions pose, he also declared that reinventing the entire approach to mergers would “do more harm than good.” Discussing the findings of the May 2019 final report prepared by Lear commissioned by the CMA on merger control decisions in digital markets, Coscelli considers that overall, the CMA’s merger control tools are fit-for-purpose.

In particular, Coscelli views that the CMA’s current jurisdiction allows the regulator sufficient oversight over transactions in digital markets. However, he recognizes the need to keep an eye on transactions by particularly powerful companies: “the elimination of even a very small or nascent competitor could remove an important source of competition. In such markets, it could be that any entrant with a credible strategy and route to funding is worth protecting.”

Coscelli notes that the merger assessment tools require “evolution, not revolution.” This includes:

  • Making more use of “dynamic counterfactuals” in the assessment of mergers. The post-merger market should be assessed not only against the status quo but against the likely future trajectory of the firms in the absence of the merger. The CMA have already utilized this approach in a recent case.
  • Enriching the information available in the merger review process. The Lear report suggests using dawn raids to uncover essential information, such as future plans of the target company. According to Coscelli, this finding underlines “the ever-increasing importance of the merging businesses’ internal documents to our assessments, and the importance of taking strong enforcement action where merging parties provide incomplete or misleading information in response to our requests.”
  • Additionally, Coscelli suggests that the regulator should be in a position to better understand the company valuation and investor rationales.
Comment

Coscelli’s comments reflect the need for gradual rather than dramatic change in terms of the CMA’s merger assessment tools. The CMA is calling for views and information until July 12 from interested parties regarding the aspects of the Merger Assessment Guidelines.

The suggestion of the Lear report that the CMA should consider using dawn raids as part of its standard information gathering process in order to assess fully what would happen to the target business absent the merger is striking.  It coincides with an uptick in CMA enforcement against merging parties for failure to provide information and other procedural infringements. Companies should continue to be mindful of the likelihood that internal assessments of a merger will have to be provided to the CMA as part of its merger review.

The comments from the CEO of the CMA eflect an accelerating focus on competition enforcement in digital markets.  For example, Bruno Le Maire, France’s economic minister, also delivered a speech on June 3rd in which he declared that the EU should look further into the future with competition analysis and that the rules need to become more effective in dealing with the tech sector.

Meanwhile, Daniel Haar, acting chief of competition policy and advocacy for the Department of Justice Antitrust Division spoke about the US position on digital antitrust at a conference hosted by the Canadian Competition Bureau. Haar stressed that threats posed by the digital economy “are not so unique” and the DOJ needs to keep an eye on non-price effects in mergers dealing with zero-price products. It has since been announced that the US Department of Justice and Federal Trade Commission will begin antitrust reviews of the conduct of several major digital players

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 Introduction

On 8th April 2019 the European Commission(“the Commission”) fined General Electric (“GE”) €52 million for providing incorrect information during the Commission’s investigation of GE’s planned acquisition of LM Wind which was investigated under the EU Merger Regulation . The merger itself was ultimately cleared unconditionally in Phase I on the basis that it raised no competition concerns.

This latest decision seems to be yet another example of the Commission ramping up penalties on companies for procedural irregularities in the merger control process. Earlier cases have seen the likes Facebook fined  €110 million in 2017 for providing misleading information in relation to its acquisition of WhatsApp. Last year Altice, the Dutch cable and telecommunications company, received a record fine of €125 million for gun jumping.  At the time the Commission made it clear more cases were in the pipeline. The trend of increased penalties for procedural irregularities in the merger control process is also reflected in the decisions of national competition regulators .

Increased Penalties meted out by competition regulators provide a salutary reminder that companies need to answer competition regulators questions fully and truthfully . The cases are also an indication that the need to strictly observe the procedural rules under the merger control process including a prohibition on gun jumping..

The Facts

In January 2017, GE notified its proposed acquisition of LM Wind to the Commission. The merger created a vertical link between GE’s wind turbine operations and LM Wind’s turbine blade production activities. In this notification, GE stated that it did not have any higher power output wind turbine for offshore applications in development, beyond its existing 6 megawatt turbine. However, through information collected from a third party, the Commission found that GE was simultaneously offering a 12 megawatt offshore wind turbine to potential customers. As a result on 2 February 2017, GE withdrew its original notification and subsequently re-notified the same transaction. This time it ensured that complete information on its future projects was provided to the Commission. On 20 March 2017, the Commission approved the proposed acquisition unconditionally.

As a result of the inaccurate information provided, the Commission sought on 6 July 2019 to make an example out of GE by issuing a Statement of Objections alleging that it had breached its procedural obligations under the Merger Regulation. The Commission’s investigation confirmed that GE had indeed offered a higher power output offshore wind turbine to potential customers. This was in contradiction to its previous representations to the Commission.  As a result, GE’s statement in the notification form was incorrect.

Commission Reaction

Competition Commissioner Margrethe Vestager on announcing the imposition of the fine commented:

“Our merger assessment and decision-making can only be as good as the information that we obtain to support it. Accurate information is essential for the Commission to take competition decisions in full knowledge of the facts. The fine imposed today on General Electric is proof that the Commission takes breaches of the obligation for companies to provide us with correct information very seriously.”

Penalties

Under the Merger Regulation the Commission has the power to impose fines of up to 1% of the aggregated turnover of companies, which intentionally or negligently provide incorrect or misleading information to the Commission. So in setting the right quantum of the fine ,the Commission takes into account the nature, the gravity and duration of the infringement, as well as any mitigating and aggravating circumstances.

The Commission concluded that  GE committed an infringement by negligently providing incorrect information in the merger notification form.  Moreover, the Commission considered that given the many contacts GE had with the Commission during the merger review process, particularly when discussing  GE’s pipeline products in this market it should have been obvious to GE that the information requested by the Commission on this topic was important for the Commission’s assessment for the Commission’s assessment

This was therefore a serious infringement which prevented the Commission from having all relevant information for an accurate assessment of the transaction. On that basis the Commission concluded that an overall fine of €52 million is both deterrent and proportionate.

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Summary
On 21 February 2019, the Financial Conduct Authority (“FCA”) issued its first competition law infringement decision since it was given competition law powers on 1 April 2015. Three asset management firms were found to have shared strategic information during an initial public offering (“IPO”) and a placing in 2015. One firm was granted immunity from fines under the competition law leniency programme. The other two firms were fined £306,300 and £108,600 respectively. The FCA’s decision follows the announcement on 5 February 2019 that it had fined a senior employee of the leniency applicant £32,200 for breach of personal regulatory conduct rules related to some of the same facts.In this article, we consider the FCA’s recent decisions, highlighting what firms can learn from them and what the future may hold for competition law enforcement by the FCA. The infringing conduct Full details of the FCA’s findings regarding the competition law infringements are awaited, in the form of a non-confidential version of the FCA’s decision. However, the FCA’s press release explains that it found that the three asset management firms breached competition law by:
  • disclosing to each other their confidential bidding intentions in relation to a placing of Market Tech shares in July 2015 and/or the On The Beach Group IPO in September 2015; and/or
  • accepting such information from each other.

The information exchanged included the price they were willing to pay for the shares and, in some instances, the volume they wished to acquire. The exchanges took place on a bilateral basis, shortly before the share prices were set. There is no suggestion that the firms agreed the price at which they would each bid for the shares, or the volumes for which they would bid. In fact, in relation to the IPO, none of the recipients of their competitor’s bidding intentions subsequently changed their own bids to that firm’s suggested price limit.

The law on information exchange

Under EU and UK competition law, information exchanges between competitors of their intended future prices or quantities are considered a restriction of competition “by object”. Where conduct amounts to a restriction of competition by object, a negative effect on competition does not need to be proven.

Even a one-off or one-way exchange of strategic information between competitors can constitute an infringement. A firm will be presumed to have accepted the information received and adapted its market conduct accordingly unless it responds with a clear statement that it does not wish to receive such data.

The UK competition authorities (including the CMA and the FCA) can impose fines on firms which engage in information exchange in breach of UK and/or EU competition law of up to 10% of their worldwide group turnover. In this respect, the fines imposed by the FCA appear to be relatively low.

Interaction with the FCA’s regulatory powers

As mentioned above, the FCA had also fined an individual portfolio fund manager at the leniency applicant £32,200 for:

  • failure to observe proper standards of market conduct, contrary to FCA Statement of Principle 3 for Approved Persons; and
  • acting with a lack of due skill, care and diligence, contrary to FCA Statement of Principle 2 for Approved Persons.

The  FCA’s Final Notice makes clear that the FCA did not consider that it was required to undertake an analysis of competition law when assessing the case against the individual fund manager. It held that any behaviour whereby one market participant seeks to influence other market participants to cap their orders at the same price limit as his own, in an attempt to get them to use their collective power, undermines the proper price formation process and is behaviour that is below proper standards of market conduct. Further, the FCA found that the individual failed to demonstrate the required level of due skill, care and diligence, by failing to adequately consider the risks associated with his communications with individuals at competitor firms or seeking appropriate internal guidance.

Compliance lessons

Given the low threshold for a finding that an exchange of information with a competitor amounts to a competition law breach, it can be an area of considerable competition law risk for firms. This can be exacerbated in the financial services sector where the line between “strategic information” and “market colour” is not always clear and firms who compete in one context often have legitimate reasons for exchanging information in others. The law on information exchange and how it may apply in specific circumstances in which staff will find themselves should therefore be a key focus of any financial services firm’s competition law compliance programme.

This case also highlights the potential benefit to firms of “blowing the whistle” on anti-competitive behaviour under a competition authority’s leniency programme. As in this case, a firm can obtain absolute immunity from competition law fines in the UK if it is the first to come forward with sufficient information to allow the FCA to take forward a “credible investigation”. Immunity in the UK also protects a firm’s staff and officers from prosecution under the cartel offence and from director disqualification.

In the financial services context, the decision whether to apply for leniency may be complicated by the firm’s potential notification obligations to the FCA and/or PRA. A breach of competition law may trigger various notification obligations such as:

  • Principle 11, which requires firms to disclose anything relating to the firm of which the FCA would reasonably expect notice;
  • SUP 15.3.32, which requires a firm to notify the FCA if it has or may have committed a significant infringement of any applicable competition law; and
  • SUP 15.3.1(2), which requires a firm to disclose to the FCA any matter which could have a significant adverse impact on the firm’s reputation.

These proactive notification obligations will of course preclude a strategy of containment through hoping that an infringement goes undetected (which may well be the approach of some corporates outside the financial services sector).

A financial services firm may also have to take into account the fact that competition law immunity will not protect either the firm or its staff and officers from enforcement action for breach of their parallel regulatory duties. It is not clear in this case whether the FCA decided not to take parallel regulatory action against the three firms because one of them was a successful immunity applicant or, if that was the case, whether this is a policy it will adopt going forward. What is clear is that, in order to be in a position to decide whether to apply for leniency, a firm needs to have strong procedures in place to identify promptly when it may have been involved in a potential competition law breach.

What next for competition law enforcement by the FCA?

Now that it has its first competition law decision under its belt, our expectations are that the FCA will now seek to increase its use of its competition law powers.

As already mentioned, the nature of the financial services sector means that unlawful information exchange is a particular risk for firms. The notification obligations described above provide a major source of information to the FCA regarding potential competition law breaches. Financial services firms facing potential fines of up to 10% of their worldwide group turnover are also likely to continue to self-report infringements under the competition law leniency regime.

Brexit may also encourage a trend towards greater competition law enforcement by the FCA. Whilst at present the UK competition authorities are prohibited from applying competition law to cases over which the European Commission has chosen to exercise its jurisdiction, this will change once the UK ceases to be an EU Member State. From that point onwards, the CMA and the FCA will be free to investigate any perceived anti-competitive practice affecting the UK, irrespective of whether the Commission is also conducting its own investigation in respect of conduct affecting trade in the EU. Where conduct affects both the UK and EU, firms may therefore be subject to parallel EU and UK investigations, and could be fined up to 10% of worldwide group turnover by the authorities in both jurisdictions.

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Summary

 In light of recent political developments in the UK it is becoming an increasing possibility that the UK will leave the EU on 29 March 2019 without a deal. Businesses involved in merger activity will face significant implications in the event of a “no-deal” Brexit as the EU’s merger control regime will no longer cover the UK. Mergers may face investigations by both the CMA and the European Commission even where they have already been notified in Brussels.

Background

Currently, where a merger has a European Community dimension and is notifiable under the EU Merger Regulation (the “EUMR”), the European Commission has exclusive competence to investigate the merger (subject to some exceptions). The merger will not be investigated by the national merger control authority of any other Member State, such as the Competition and Markets Authority (the “CMA”) in the UK. This is known as the “one-stop-shop” regime.

If the UK leaves the EU on 29 March 2019 under the terms set out in the Withdrawal Agreement then the “one-stop-shop” regime will stay in place until at least the end of December 2020. Although the UK will no longer be a Member State, EU legislation including EUMR, will remain applicable to the UK. Mergers with a European Community dimension will be dealt with by the European Commission and UK turnover will be calculated in the normal way for EUMR, as if the UK were still a member of the EU.

No-Deal Brexit

If however, the UK leaves the EU on 29 March without a deal then the EU and UK merger control regimes will run in parallel and mergers may be subject to parallel investigations from both the European Commission and the CMA. The CMA has estimated that this will lead to an increase in the number of UK merger investigations by up to 40%.

Mergers where there is a decision before exit day

If the European Commission has investigated a merger and issues a decision before exit day, then the CMA has no jurisdiction over that merger unless the decision is annulled, in full or in part, following an appeal.

Mergers notified but with no decision before exit day

Where a merger has been notified to the European Commission under the EUMR but there has not been a decision before exit day, then the CMA will no longer be excluded by the EUMR from taking jurisdiction over the UK aspects of the merger under the UK merger regime (provided the transaction meets the UK’s jurisdictional thresholds). EU aspects of the merger will remain with the European Commission, assuming the transaction still meets the EUMR turnover thresholds, given the fact that UK turnover will no longer be taken into account.

Mergers occurring after exit day

For new transactions which are notified after Brexit day, they may face parallel investigations under both the EUMR and the UK merger control regime if they satisfy the jurisdictional thresholds of both regimes.

Consequences for businesses

If merger parties anticipate a scenario where their merger has been notified to the European Commission, but no decision has been issued by exit day, the parties should follow the CMA’s recent guidance in making sure that they contact the CMA at an early stage in the transaction. This will be particularly important where the transaction may raise potential competition concerns in the UK. Parties should also be aware that the CMA may suggest to the merging parties that they should start pre-notification discussions with the CMA.

Given this guidance from the CMA and the fact that new transactions notified after Brexit may face parallel investigations under both the EUMR and the UK merger regime, businesses involved in merger activity should look to factor this into their deal timetables and consider reflecting these changes in the conditions precedent.

Fore further details please contact Robert Bell or William Haig

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Non-exit is looking increasingly likely !
An impending sense of doom stalks the corridors of Westminster this morning after last night’s historic Government defeat over the EU Withdrawal Agreement .
The May compromise deal delivered too little to too many but not enough to anyone, except perhaps the EU27. It was bound to fail !
And fail it did in historic proportions (by 230 votes). No Government has been so convincingly defeated in UK Parliamentary history.
Today the Government faces a vote of non confidence tabled by the Official Opposition, the Labour  Party. However this likely to be a side show. Government rebels and the Ulster Unionists are likely to back the Government and the motion is likely to be easily defeated.Whilst it is clear that the Government can’t command the confidence of the House on Brexit the prospect of a general election seems even less appealing to most of those on the Conservative benches.
So the current Government is likely to listlessly carry on pursuing some sort of Brexit Plan B. But it is becoming  increasingly obvious that neither the Government nor any other faction in Parliament has any idea about how to break the deadlock.  So what is likely to happen now?
Nevertheless there is likely to be a majority ruling out “no deal”.
So there appears to be only three possible options:
• Parliament mandates the Government to secure an extension of Article 50 and renegotiate;
• The Government rescinds Article 50 notice and Parliament repeals the Withdrawal Act;
• Parliament passes legislation to hold a second referendum on the May deal or remaining in the EU (with the need of an extension of Article 50 to facilitate it).
The EU may be ready to extend Article 50, but it will be less amenable to negotiate further with the current discredited Government. No tinkering with the recently defeated deal is going to reverse a majority of 230 .Secondly no House of Commons will openly admit it has failed and unilaterally repeal the Withdrawal Act unless in an act of political desperation (we are not quite there yet !).
 So the odds are on a second referendum to neatly pass the “buck” to the People which curiously enough is probably not a bad place to end up
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Introduction

The Advocate General of the European Court of Justice on 4th  December 2018 held, in an advisory opinion, that the UK could unilaterally revoke its decision to leave the European Union and stay a full member of the trading bloc without the need to obtain consent of the other EU 27 member states. If followed by the full European Court the UK Parliament will have a further option to consider if it rejects the draft Withdrawal Agreement agreed with Brussels by UK Prime Minister Theresa May. If  that option is exercised the UK may well find itself remaining a full member of the European Union after all !

Why is Article 50 Important?

Under Article 50 of the Treaty on European Union (TEU) a Member State may withdraw from the EU.  This involves notifying the European Council of that country’s intention to do so. There is then a two year period in which the parties seek to agree withdrawal terms and the basis for a future trading relationship. If there is no agreement after the two years, provided there is no extension, then the EU treaties cease to apply to the withdrawing state.

The UK Prime Minister has now come back from Brussels with an agreed Withdrawal Agreement covering terms upon which the UK will leave the European Union. This must now be voted on by  both UK Houses of Parliament. The UK Parliament is currently debating the exit terms agreed as part of that deal. The likelihood is that the UK Parliament will reject the draft Withdrawal Agreement when it votes next week. Therefore given this situation it is particularly important for MPs to know what options they have as they assess whether there is a Plan B, whether the UK Government crashes out of the European Union with no deal or whether it is possible to reverse Brexit

Part of the consideration of the last option is knowing whether it is possible for an Article 50 notice to be unilaterally withdrawn by the UK Government prior to the end of the two year period thereby reversing Brexit. Thanks to a group of predominantly Scottish politicians who obtained a referral for a preliminary legal ruling on this issue to the European Court of Justice from the Inner House of the Court of Session the answer will be finally known . Only the European Court can opine definitively on this issue

Advocate General’s Opinion

On  4 December 2018, the Advocate General of the European Court of Justice (“AG”) handed down his Advisory Opinion to the Court. The AG, Campos Sánchez-Bordona opined that the U.K. could unilaterally revoke its Article 50 withdrawal notification, provided that such revocation is:-

– in line with the relevant national constitutional requirements (i.e., the U.K. Parliament must authorize the revocation);

– formally notified to the European Council; and

– effected before the expiry of the two-year period that begins when the intention to withdraw is notified (or if given within any agreed extensions of this period);

– done in accordance with the principles of good faith and sincere cooperation. There must be no abuse of the system which could happen if a Member State keeps triggering and then revoking an Article 50 notice multiple times

The Court is expected to confirm this view in a formal judgment before the U.K. House of Commons is due to vote on the Withdrawal Agreement next Tuesday 11 December.

What This Means For The UK

If the Court follows the AG then MPs could have the option of voting to revoke the UK’s Article 50 notice and the UK  remaining a full member of the European Union. This would allow MPs a further alternative to the rather stark choice being presented to them at the moment of either accepting the May deal, negotiating a new deal, or crashing out of the trading bloc with no deal on 29th March 2019

The UK Government points out that it is not Parliament that has to withdraw the Article 50 Notice but the Government. However if there is a clear majority of MPs in favour of such a motion to revoke the Article 50 notice it is highly unlikely that the Government will stand in their way  . This is especially so since for the first time in UK constitutional history the Government was just found in contempt of Parliament on 4th December for flagrantly disobeying an earlier parliamentary vote demanding the Government release a copy of their legal advice on the Withdrawal Agreement .

Even if an affirmative vote was carried it is likely that a second referendum on that issue would have to be held first before any steps were taken to withdraw the Article 50 Notice.

The question is whether there is enough time to hold such a Referendum prior to the 29 March deadline. Following a procedural vote on 4th December Parliament has now reserved to itself  greater powers to direct the Government where we go from here if the Government fails to win the vote on 11th December. If MPs were to mandate a Referendum immediately there could still be time to hold such a vote.

If, as is seen more likely, the Prime Minister is instructed to go back to Brussels to renegotiate the deal then there is likely to be a second vote in late January. If the Government were to lose again then it would be difficult to hold a Referendum in time before the March deadline. In that scenario there could need to be an agreement on an extension of Article 50 period which would require the consent of the EU27.  We live in interesting times.

It could be a very busy Christmas for both UK and EU diplomats !

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