The Scotland Act 2016 devolved to the Scottish Government the power – jointly with UK ministers – to make a market investigation reference.
Although other aspects of competition policy remain reserved to the UK Parliament, the power to make a market investigation reference could be a powerful tool. It requires the Competition and Markets Authority – the UK’s competition regulator – to examine whether competition is operating effectively in a market. If it concludes that it is not, the CMA has wide powers to impose remedies.
Brexit may have a significant impact on the way competition powers are exercised at a UK level. It is to be expected that these changes will also affect how Scottish ministers exercise their competition competence.
Dr Arianna Andreangeli has been working, as part of SPICe’s Academic Fellowship Scheme, to examine the implications of Brexit for devolved competition powers in detail. Two recently published SPICe briefings cover her work in this area:
- Competition policy – the UK framework and the impact of Brexit looks at the framework for enforcing competition rules in the UK
- Competition policy – Brexit and the exercise of devolved powers looks at the impact of Brexit on devolved competition powers.
The main issues to emerge from this work are:
The CMA is likely to see its workload increase significantly
This is because competition enforcement and merger cases which were previously dealt with by the European Commission will now fall within the CMA’s remit as well. It is likely that businesses will face parallel investigations – from the CMA and the Commission – in many cases.
The CMA has been allocated more money to deal with its increased workload. However, there may still be resource constraints, which could impact on the effectiveness of its scrutiny, as well as its capacity to focus on purely Scottish cases.
The current mechanisms for managing relationships between the Scottish and UK governments may not be suitable for exercising joint powers
Current arrangements are enshrined in the Memorandum of Understanding between the UK Government and the devolved administrations. It has been argued that these are piecemeal and focus on conflict-resolution rather than ongoing dialogue.
This calls into question how suitable they will be for dealing with the levels of negotiation and technical expertise which will be necessary to agree a joint market investigation reference. Dr Andreangeli suggests that a new arrangement, dealing specifically with competition issues, should be agreed.
The UK framework for enforcing competition rules provides more scope for public interest interventions than the EU one
UK ministers can make public interest interventions in relation to competition and merger investigations. These require the CMA to consider factors other than competition principles (for example, the stability of the banking sector) when reaching a decision.
The Scottish Government could be put at a disadvantage if UK ministers choose to make these powers broader, or exercise them more regularly. This is because Scottish Ministers have no constitutional mechanisms to have any input into these decisions, even if they have significant implications for Scottish markets.
The EU regime for state aid will come to an end
The EU has a framework for the regulation of state aid – the provision of support to businesses by public bodies. It has been argued that this regime has protected UK businesses from the effects anti-competitive state support provided to their competitors in other member states.
When the UK leaves the EU, state aid rules will no longer apply, although it is likely that some regulation will be necessary as part of any trade agreement. The CMA has been given the role of state aid regulator – but the system has yet to be developed.
There could be implications for the Scottish Government if the UK Government pursues a more interventionalist industrial strategy. Subsides may affect Scottish markets in different ways to UK markets.
Of course, the Scottish Government could also provide support to Scottish businesses in ways that may breach state aid rule. It will therefore be important that all stakeholders trust that the CMA is impartial and independent of government interference.
Dr Angelini has also blogged about her experiences of the SPICe Academic Fellowship scheme.
Abigail Bremner, SPICe researcher, civil justice