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Brexit is (or may be) Coming!
More than three years after the EU referendum in the UK (in which 37
percent of the electorate at the time voted “Leave”), it is still unclear
whether the UK will leave the EU on 31 October 2019 (the current “Brexit
That remains the default legal position, but the UK Parliament has also
passed a law designed to stop a “no-deal” Brexit on 31 October. Under that
law, if an exit deal (as opposed to a long-term trading arrangement) is not
agreed to between the UK and EU by 19 October, and Parliament does not vote
in favour of leaving with no deal, then the UK Prime Minister will be
legally obliged to ask the EU for a further delay to Brexit. It would then
be up to the other 27 EU countries to decide whether to grant that further
extension and on what terms.
If a no-deal Brexit takes place on 31 October, there will be implications
for competition law enforcement and practice in the UK, but there are much
bigger issues for companies trading in or into the UK. These include the
impact on supply chains, personnel, data transfer and contracts, just to
name a few.
If not in place already, contingency plans should urgently be considered.
For many companies, establishing a new presence in one of the remaining EU
countries, for example
Belgium, is a sensible option.
Exchange of Competitively Sensitive Information May Infringe
On 20 September 2019, the UK Competition and Markets Authority (CMA)
that pharmaceutical suppliers King Pharmaceuticals and Alissa Healthcare
Research had admitted breaking competition law by exchanging information in
order to keep prices up.
There appears to be no allegation that the companies actually agreed on
prices. Instead, they simply exchanged commercially sensitive information,
including information about prices, volumes and entry plans for the drug
Nortriptyline between 2015 and 2017.
The exchange of strategic and competitively sensitive information, such as
this, between competitors is extremely dangerous and has often been seen
(and fined) as a cartel under EU and UK competition law. In addition to a
likely fine, the companies will now almost certainly receive follow-on
civil claims for damages from customers in the UK (in particular, the UK
National Health Service).
Compliance programmes and training for EU and UK competition law should
cover and emphasise the dangers of exchange of competitively sensitive
information between competitors, even if that exchange has no impact on the
Companies Admit to Illegal Customer Sharing Arrangement Carried Out Via
The UK communications regulator (Ofcom)
on 19 September 2019 that Royal Mail and The SaleGroup had both admitted to
participation in a customer sharing arrangement.
The SaleGroup, trading as Despatch Bay, is an online reseller of parcel
delivery services, including for Royal Mail. It arranges deliveries for
small and medium-sized business customers by sourcing multiple parcel
operators, rather than carrying out deliveries itself. The company also
offers its customers a single point of contact for administrative services
such as billing and invoicing.
The two companies implemented, monitored and enforced an agreement to share
at least 90 customers between 2013 and 2018. Enforcement took place through
regular email correspondence, with one company usually asking the other to
withdraw a quote provided to certain customers. Some of these offers had
undercut the price a customer was paying at the time. Therefore, when the
quotes were withdrawn, the customers were prevented from paying lower
prices for the same parcel delivery services.
The SaleGroup also shared its customer list with Royal Mail, with the aim
of making sure each company could avoid offering services to the other’s
Royal Mail blew the whistle on the arrangement (and therefore escaped a
fine). It’s not known how the behaviour was uncovered, but an internal
audit could well have done so, particularly given the (somewhat surprising)
use of email to enforce the arrangement. Even if this was the case, the
bald nature of the arrangement is notable and both companies will no doubt
be reconsidering the effectiveness of their competition law compliance
The SaleGroup accepted a fine of £40,000, which was described by Ofcom as
“significant” given the small size of the company. This shows that
regulators can and do take fining decisions against even very small
companies, not least as a deterrent and to create precedents.
Procedural Rules Matter: Another Fine for Infringing Hold Separate
Competition regulators worldwide react very badly to infringements of rules
governing their investigations and the scope of their jurisdiction.
Companies should take great care to ensure strict compliance to these rules
and that jurisdictional claims are respected, not least in the merger
The UK operates a voluntary merger control regime under which transactions
may be completed without clearance having been obtained. However, where the
CMA has put in place hold separate obligations on a company, the position
becomes very similar to standard compulsory filing and suspension regimes,
under which “gun-jumping” (closing or partially closing before clearance)
often gives rise to fines.
An example of this came on 24 September 2019, when PayPal was
£250,000 for a single violation of hold separate obligations imposed by the
CMA in relation to the company’s completed acquisition of iZettle.
PayPal had sought and obtained a derogation allowing it to engage in
international integration activities that included conducting cross-selling
pilot campaigns involving its non-UK businesses. The derogation was subject
to the requirement that any international activities did not affect the UK
and were confined to non-UK jurisdictions.
The CMA found that PayPal had not adequately complied with this limitation.
It conducted cross-selling pilot campaigns (intended to target customers in
France and Germany) that led to it contacting potential UK customers. This
was a concern even though the numbers were limited. The CMA found that 76
potential UK customers, 16 of which had an online and offline presence in
the UK, were contacted as part of the campaigns (albeit there was a risk
that significantly more potential UK customers were contacted given the
total number of customers contacted).
Although the mere fact of the procedural breach was a concern, the CMA
explained that these activities could have impacted the ongoing
competitiveness of the businesses should the transaction not have proceeded
(as a result of a negative finding by the CMA following its merger
European Commission Wins and Loses But Will Continue to Review Tax
Planning Measures Under EU State Aid Law
EU state aid law governs the ability of EU member states to provide grants
and other monetary advantages to companies within their jurisdiction. In
principle, although subject to many exceptions, any aid which a private
investor would not have provided is illegal.
The scope of this law often surprises companies, particularly so when it
comes to tax. In a number of recent cases, the European Commission has
found that tax arrangements agreed to between EU member states and
multinational companies were illegal under EU sstate aid law, meaning that
the companies were required to pay back underpaid tax plus interest.
On 24 September 2019, the EU General Court (the EU’s second highest court)
ruled on two of the most high profile of these cases (see the various
T-636/16). The court upheld the Commission's 2015 decision finding that Luxembourg
granted illegal selective tax advantages to Fiat. However, the court
annulled the Commission's 2015 decision finding that the tax rulings
granted by the Netherlands to Starbucks were not in line with EU state aid
rules. These cases concerned particular issues about selectivity of tax
measures (a requirement of EU state aid law to apply) and whether
transactions between group companies give rise to an advantage under EU
state aid rules based on the so-called “arm's length principle.”
In response, the Commission
that it will continue to look at aggressive tax planning measures under EU
state aid rules to assess if they result in illegal state aid. Companies
need to be aware of the potential application of EU state aid rules to
their tax arrangements, as well as to other advantages granted by EU member
states in whatever form.
The onus is on the recipient to make sure that the rules have been complied
with, so that it does not face the risk of repayment plus interest.
Additional European competition law news coverage can be found in our news section.
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