‘Brexit’ would increase merger, antitrust burdens for business, Fingleton says

Author: Lewis Crofts
29 Feb 16 | 11:47 GMT

IN BRIEF
Businesses active in Britain would face greater costs, more risk and potentially higher fines if the country left the EU, John Fingleton, former head of the UK’s competition authority said. Companies would have to comply with a separate UK regime for mergers and antitrust, while in substance the laws would remain the same, he speculated.

Businesses active in Britain would face greater costs, more risk and potentially higher fines if the country left the EU, John Fingleton, former head of the UK’s competition authority said.

Companies would have to comply with a separate UK regime for mergers and antitrust, while in substance the laws would remain the same, he speculated.

On June 23, British citizens will vote whether to remain in the EU. If they opt to leave, this would oblige the UK to negotiate a new trade deal with its European neighbors. It would also give Britain a chance to draft its own laws to replace EU regulations now applicable to mergers, cartels and monopolies.

This would mean that a large merger or a cartel affecting UK customers would end up subject to two reviews: one in Brussels and another in London. The upshot could be greater risks for transactions and potentially more fines for price fixers, Fingleton told MLex in an interview.

A free-trade agreement between the UK and the rest of Europe — which would be needed following a decision to leave the union — would likely contain the same legal standards applicable today, he said.

Fingleton headed the Office of Fair Trading, the UK’s competition watchdog, from 2005 to 2012, after running the Irish authority. In the UK post, he also led an international network of competition agencies. He now runs Fingleton Associates, a consultancy on regulatory and competition issues.  

— Mergers —

“If Britain leaves, at a certain stage, every big merger that currently goes to the European Commission will also come to Britain,” Fingleton said. “That is going to be quite messy for business.”

Companies will have to spend more on lawyers and advisers, he said, and there will be “additional risk” over the timing of any merger reviews. This could potentially be even greater “in terms of the true cost to merging parties.”

The UK approach of having two assessment phases for any transaction may have to be synchronized with the EU review process to ease the burden.

“It is wholly negative,” Fingleton said of the impact on mergers. “I can see very little benefit from an independent British review of mergers, and quite a lot of downside.”

If Britain leaves the EU, the Westminster Parliament will have to spend years rewriting legislation, deciding which rules to keep, which ones to adapt, and which to discard.

The UK has long been an influential voice in competition policy and the EU approach is close to that espoused by British enforcers and politicians. Therefore, competition law might not be top of the pile when it comes to reworking the rulebook.

That rulebook already takes a great deal of inspiration from the UK, and the EU’s tough stance on mergers and state subsidies can be traced back at least as far as the tenure of UK commissioner Sir Leon Brittan in the early 1990s.

Fingleton said he didn’t expect Britain to move away from the European standard, given that it has become the global norm in countries such as India and China — countries with which the UK wants to trade more.

“I predict that they would leave the substantive law exactly as it is,” he said.

— Cartels —

The “major change” would be the need for “parallel” investigations: While Europe would run one probe, the UK would run another for the same conduct. This is already done by major jurisdictions prosecuting global cartels.

“From the point of view of British businesses doing business in the EU, and foreign businesses doing business here, you are going to have much larger burdens on business from competition investigations and potentially increased fines.”

Both UK and EU authorities would “presumably” calculate fines based on worldwide sales and impose independent fines, Fingleton said.

Leaving the EU would mean Britain adopting its own rules on areas such as competition, government subsidies and public procurement.

But these areas would likely be covered by any trade deal between the UK and the EU, he predicted.

In other trade agreements, Brussels has consistently demanded other countries or trading blocs abide by similar standards.

“My expectation is that the standard that the EU would hold Britain to on state aid, public procurement and competition rules would be at least as high as the standard it currently holds them under as members,” Fingleton said.