In a UK parliamentary vote on March 14, MPs voted to ask the EU for a delay to Brexit and rejected the idea of leaving the EU without a deal under any circumstances. However, the EU is not obliged to say yes and the default position in law at the moment remains that – deal or no deal – 29 March is when Brexit will happen.
What would a no-deal Brexit mean for Belgian companies in terms of merger control?
According to CMS experts, a no-deal Brexit would mean that certain mergers will immediately be regulated by authorities in both Brussels and London with the danger of delays, increased costs and paperwork, and possibly even contradictory outcomes.
End of EU ‘one-stop shop’ principle in the UK
Under EU law, merger control operates on the basis of a ‘one-stop shop’ principle. Mergers that satisfy EU filing thresholds must be exclusively reported to the European Commission and, in principle, do not require clearance by member-state national
national competition authorities. As a result of this principle, the Commission has an exclusive review function over mergers affecting the UK market which meet EU merger notification thresholds.
As of the date of departure of the UK from the EU (whether or not it is as a result of a ‘no-deal’ Brexit), this ‘one-stop shop’ principle will immediately cease to apply in the UK. For businesses, this means that in some cases mergers currently meeting the relevant EU thresholds will be reviewed by both the European Commission, as well as the UK Competition and Markets Authority (CMA) as regards their UK impact. This raises the prospect of parallel review of major international transactions by both the Commission and the CMA and, where relevant, other national authorities outside the EU.
The duplication of work, and the possibility that authorities in London and Brussels will work according to different timetables and arrive at different decisions adds costs and legal uncertainty to merger transactions.
Risk of parallel reviews
Although merger notifications to the CMA are different from most other jurisdictions in that they are voluntary and non-suspensory, it remains that in certain circumstances, parties will be well advised to notify both the European Commission and the CMA of a transaction and await their approval before closing.
Under the current UK regime, parties can choose whether or not to notify the CMA about a draft acquisition or merger, and can complete a transaction without prior approval. However, if the jurisdictional thresholds are met and the transaction is likely to produce anti-competitive effects, the parties face serious risks if they complete the transaction without notifying the CMA beforehand. They could indeed be investigated by the CMA (on its own initiative) and then ordered to dispose of the acquired or merged business, if the CMA rules that the transaction be prohibited.
Moreover, CMA Chairman Andrew Tyrie recently stated that the authority wants to revamp its merger control function due to Brexit and the challenges raised by the digital economy (available here). Tyrie said that existing rules making merger notifications voluntary may need to be amended so that the CMA can have an appropriate influence over large multi-jurisdictional mergers affecting the UK.
Proposals have been made to require mandatory notifications of mergers above certain (yet to be defined) thresholds so that large mergers can be caught. This would be accompanied by a ‘standstill obligation’ designed to prevent parties from implementing the transaction prior to CMA approval.
For smaller mergers below the thresholds, the system would remain voluntary, with parties notifying the CMA only when they see a risk to competition and the CMA retaining the ability to review cases at its discretion.
Post-Brexit cooperation desired between London and Brussels
The CMA already has a close working relationship with the European Commission and it has expressed willingness to maintain effective cooperation with the European Commission in respect of merger control.
Whilst it is unlikely that the CMA will change its procedures to align with those of the European Commission, there is likely to be significant behind-the-scenes coordination between London and Brussels on significant mergers. Further detail on how this relationship will be conducted will no doubt provide companies with comfort about the impact of having to make dual notifications in London and Brussels.
Annabelle Lepièce, Partner, annabelle.lepiece@cms-db.com
Joëlle Froidmont, Senior Associate, joelle.froidmont@cms-db.com
