Competition Law in an Independent Scotland

by Emma Flood Curated Media on August 14, 2014

eu competition law scottish independenceThis post considers such implication and in particular whether Scotland would benefit in being independent from UK competition regulation, or whether the CMA should be relied upon to investigate all cross border competition cases under EU law.

The Scottish Government has stated their intentions to create a single authority responsible for both competition enforcement and sector regulation in the event of Scottish independence. In the Government report, Economic and Competition Regulation in an Independent Scotland the Scottish Government has promised to ensure regulation centered around on Scottish interests, however the enforcement of competition law is not mentioned.

The Regulatory Framework

A new competition authority within an independent Scotland with EU membership would constitute an official national competition authority for the purposes of Regulation 1/2003.

The new Scottish competition authority would be obliged  to apply Article 101 TFEU in conjunction with national competition law where agreements and practices ‘may affect trade between Member States’

As Scotland would now be considered a separate member state from The Rest of the UK, practices that affect both Scotland and UK may engage EU competition law.

Under Regulation 1/2003, it is made clear that cases should be ‘dealt with by the most appropriate authorities’ within the European Competition Network.

An authority may close a case in its member state where the case is also being dealt with by another member state ‘the objective being that each case should be handled by a single authority’ . However, Regulation 1/2003 does not  set out any criteria for case allocation.

There may be guidance in the form of the Commission’s Notice on Cooperation within the Network of Competition Authorities (2004/C101/03).

The notice outlines that the authority receiving the complaint or launching an investigation first, as the member state that is most likely to be at the forefront of the investigation of the case. However, the notice sets out three factors cumulative factors which best determine the authority to deal with a case. These are:

(1)     Substantial, actual or foreseeable effects on competition within the authority’s territory. The greater the effects on the state, the better placed they are to deal with the infringement.

(2)     Which authority is most able to effectively bring entire infringement to an end.

(3)     Which authority is most able to gather evidence to prove the infringement.

The notice goes on to clarify that parallel action by multiple NCAs may be appropriate where the actions of one authority alone would not be sufficient to bring the infringement to an end, or to adequately sanction the infringing party/parties.

Who will deal with cross border infringements?

Applying this reasoning to a potentially independent Scotland, it is most likely that the CMA will take charge of most investigations.

It is likely that for many companies established in both Scotland and the rest of the UK, it is most likely that the largest percentage of sales will be in the UK, given that the population is significantly larger.

This will mean that the CMA will be best placed to deal with the infringement, or if the Scottish authority insists on handling the case, they will have to work in close co-operation wit the CMA in order to gain sufficient evidence to investigate a cross border infringement.

Secondly, a newly established Scottish competition authority will not have the experience of case management that the CMA have, this may mean they are less likely to ‘effectively bring the infringement to an end’.

Would Scotland benefit?

There will also be significant costs involved in having both authorities investigate any infringements that span the whole of the UK, which may be impractical and not very cost effective  if it can be handled by a single authority.

It also may mean that in fact, Scotland has less influence over competition matters affecting Scottish consumers as while most of the work is being carried out by the CMA- Scotland is no longer being represented in this institution.

Undertakings operating cross border may also have to get used to operating within the rules of both authorities. For example, it would become good practice to submit two leniency applications to ensure an infringement not investigated by one authority is not picked up by the other. This could be seen as unnecessary cost and unnecessary red tape.

On the other hand, the dominance of the CMA in this area could be seen as a great advantage to the newly established Scottish authority and to Scottish consumers. Cross border infringements can be handled by the CMA which would leave more time and resources for the Scottish authority.

This would allow the Scottish competition authority to focus on strictly Scottish issues and realise the governments plan to ‘simplify the regulatory landscape to one that is more appropriate for a country of Scotland’s size,’ and establish and refine the competition rules and enforcement in Scotland, before they begin to tackle any cross border infringements.

Furthermore, with a limited case load the Scottish authority will have more time and be better able to deliver quality judgements and make fuller investigations.

What do you think? Comments here or on Twitter welcome.


Image credit: Flickr (Anders Sandberg)

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