Banks face renewed scrutiny as Competition Commission appeals rand manipulation ruling

Local and international banks, previously cleared by the Competition Appeal Court (CAC) of allegations regarding their collusion to manipulate the rand against the US dollar, now face renewed scrutiny as the Competition Commission prepares to take the matter to trial.

This is according to Advocate Tembeka Ngcukaitobi, acting on behalf of the Competition Commission.

He said there is enough evidence to establish a prima facie case that they were involved in the manipulation of the rand.

The commission is appealing the majority of the findings of the CAC, especially the fact that the CAC found that the commission did not have jurisdiction over the majority of the international banks.

The Constitutional Court on Tuesday heard arguments from the commission and the hearing is expected to last until Friday.

An important issue which served before the court is the extent of the commission’s jurisdiction over the foreign banks alleged to have participated in a single overarching conspiracy (SOC).

It is alleged that these banks, together with local banks which include Standard Bank, Nedbank and First Rand Bank, have conspired to manipulate the exchange rate in respect of the US dollar and the rand.

The commission argues that its terms permit enforcement action even against banks with no presence or business in South Africa (a peregrinus). Ngcukaitobi argued that the effects of the alleged rand fixing were felt within the Republic. 

In arguing jurisdiction, he said the court must consider the presumption against extraterritoriality, which cautions against reading legislation as applying beyond the borders of South Africa unless clearly stated. 

The court must also consider the common law requirement that both personal and subject matter jurisdiction must be established where a respondent is a peregrinus. Ngcukaitobi argued that the Competition Act enables the commission to exercise its jurisdiction regarding economic activity across the borders.  

He pointed out that South African consumers are affected by the alleged manipulation of the rand when they for instance purchase products which are being imported.

“Price manipulation has a permanent effect. It introduces a permanent structural price. A distortion affects the value of imported products,” he said.

Asked by one of the judges whether any order a South African court or tribunal issues against a foreign bank could be enforced on them, Ngcukaitobi said most of the institutions the commission is claiming are, on the face of it, involved in the conspiracy to price fixing, have a presence in South Africa. According to him there are also remedies to enforce compliance.

In asking the court to overturn the finding by the CAC that the majority of the banks do not have a case to answer to, Ngcukaitobi argued that they were all aware, or should have reasonably been aware, that their agents colluded in chatrooms to manipulate the rand/dollar exchange.

He argued at length how the conversations in the chatrooms were conducted in an open manner and those who did not directly take part, knew about the activities. 

While local banks Nedbank and First Rand Bank said they never had any agents in the chatrooms, Ngcukaitobi argued that it does not matter, as, according to the commission, they knew about the colluding and they also benefitted from it. 

Ngcukaitobi further argued that the alleged collusion regarding the price fixing affected South Africa directly, thus those implicated, should face justice here as South Africa is the only country taking the matter further.

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