Arrangements involving current and potential future events, such as taking security and agreeing options, require careful scrutiny under investment screening regimes. It is not safe to assume that a trigger will operate in the same way as under another more developed regulatory regime, such as merger control. Moreover, taking a security or agreeing an option needs to be considered upfront and not just when the security is about to be enforced or the option exercised.
In this piece we consider the position under the UK’s forthcoming National Security & Investment Act (NSI Act) regime and briefly compare this to the position under the recently reformed German regime. We assume that the other requirements for triggering are satisfied and focus on whether a security or an option could in itself take the transaction over the jurisdictional threshold.
When a security is actually enforced, then this may well trigger an investment screening regime, as enforcement will typically involve the lender gaining control over the relevant target or its assets which are the subject of the security. The more difficult question, which will likely arise many years earlier at the initial transaction stage, is whether merely taking the security is sufficient.
To download and read the full paper, click here.
by Becket McGrath
On 17 June, the UK Competition and Markets Authority (‘CMA’) published a keenly awaited consultation document setting out its proposed recommendations to Government for the UK’s new competition law regime for vertical agreements. Essentially, the CMA is proposing to adopt an approach that remains closely aligned with the EU verticals regime, which is itself about to undergo a refresh to take account of market and legal developments since its last update in 2010. This is a welcome development, as it should reduce the potential for material divergence between the two regimes, which would reduce legal certainty and increase costs for businesses trading in both the EU and UK.
The need for this consultation has arisen now, as the post-Brexit transitional arrangements for vertical agreements (such as selective and exclusive distribution agreements) are about to expire. To summarise the legal position, while the UK was an EU Member State the analysis of vertical agreements in UK competition law was largely determined by the EU Vertical Agreements Block Exemption Regulation (‘VBER’). This sets out the circumstances in which a vertical agreement is protected from challenge under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’). Importantly, the VBER also defines certain ‘hardcore’ restrictions that render an agreement presumptively unlawful. Together with the accompanying European Commission Guidelines, the VBER effectively serves as a complete code for the treatment of vertical agreements in EU competition law.
Since the direct application of EU competition law in the UK ceased at the end of the Brexit transition period on 31 December 2020, new arrangements were needed urgently to determine the status of vertical agreements in UK competition law from that point. The immediate solution adopted by the UK Government was essentially to continue the pre-Brexit approach, by incorporating the current EU VBER in UK domestic law, as a ‘retained block exemption’, at least until the VBER’s expiry on 31 May 2022. Since that date is now approaching, the Government needs to decide what to do. At the same time, the Commission is part way through its own review of the VBER and Guidelines, as it needs to decide the extent to which the EU regime should be updated after 1 June 2022.
While it may be tempting to continue with the UK’s current approach of aligning completely with EU law in this area (which broadly works), unlike the last time the VBER was reviewed in 2010 UK Government and CMA officials no longer have any input on the text of the EU VBER and Guidelines. As a result, a decision simply to follow the (revised) EU regime from June 2022, whatever its form, would hardly be a ringing endorsement of the UK’s new found freedom to diverge from EU rules. On the other hand, the Government and the CMA need to bear in mind that diverging from EU law in this area for its own sake would introduce complexity for the large number of businesses that trade in the UK and EU. To introduce further complexity, many of the core principles of EU law competition law as applied to vertical agreements rest on EU-specific policy priorities arising from the need to create a single European market. It was unclear how far these priorities should continue to determine the shape of UK competition law, post-Brexit, especially since the UK is no longer part of the Single Market. Given this uncertainty, the UK CMA consultation document is an important step forward.
To read about key recommendations and next steps, download the full briefing here.
By Marialuisa Taddia
Debates concerning the role and procedures of the Competition Appeal Tribunal mirror the UK’s dilemma post-Brexit
So how do practitioners rate the tribunal? ‘In my view, the CAT is one of the real success stories of the “new” UK competition regime that was put in place by the Competition Act 1998,’ says Becket McGrath, a partner at Euclid Law. ‘It has proved to be an effective and independent tribunal that is prepared to overturn decisions that are insufficiently well reasoned and to pick up material procedural defects, while showing sufficient deference to authorities’ discretion.’
There are also plenty of examples where CAT has upheld the regulator’s decisions, […] dismissed all of the applicant’s arguments and upheld the CMA merger decision in full’, McGrath notes.
McGrath says the Penrose report contains ‘a mix of good and bad ideas but the details were largely brushed aside’. […]
To read the full article, click here.
Justification for a New Competition Tool
Based on our experience of the operation of the UK market investigations regime, we agree that a new tool that goes beyond the options currently available to the Commission under Articles 101 and 102 TFEU, and that enables the Commission to identify and tackle structural market issues, is likely to be a useful addition to the EU competition regime. As far as jurisdictional scope is concerned, however, while digital markets may be particularly prone to structural issues, and the need for rapid action may be greater, there is nothing inherently novel or ‘digital’ in the desirability of a ‘backstop’ regime that empowers an authority to take specific action if harms arise for which traditional antitrust tools are insufficient.
UK experience has demonstrated that, as well as being helpful for tackling issues in potentially oligopolistic markets (such as groceries or audit), such a tool can be valuable where markets are not functioning well due to wider factors, including the interplay with regulatory regimes (for example, rolling stock leasing, energy or private health care) or past government decisions (for example, airports). Each case will turn on its facts, however, justifying the need to individual assessments, within a clearly defined legal framework.
Our response to the European Commission Consultation
As lawyers qualified in the UK and Member States with significant expertise in advising clients on EU and UK competition law, our views also draw on personal experience of enforcing the UK competition regime gained by members of the firm while working for the UK Competition and Markets Authority and its predecessor, the Office of Fair Trading. Our hope is that this experience can provide useful pointers that may assist the Commission in the design of a new competition tool. To read our full response, click here.