Case against banks collapses
Harsh words from court after Competition Commission failed to give evidence of a conspiracy to fix the rand
The Competition Appeal Court (CAC) has thrown out the case against all but five of the 28 banks that were accused of colluding to fix the rand in the New York foreign exchange market more than a decade ago.
The CAC on Monday dismissed the Competition Commission’s eight-year case against three of the big SA banks and most of the foreign banks, leaving just the four foreign banks whose traders pleaded guilty in 2015 to charges brought by the US department of justice.
TORTUOUS
Investec also remains in the case because, unlike other SA banks, it opted not to join the application to the CAC to prevent the case going ahead for lack of evidence.
The CAC’s ruling lets Standard Bank, Nedbank and FirstRand off the hook, along with most of the foreign banks.
It leaves the commission able to go to trial only against JPMorgan Chase, BNP Paribas, HSBC and Credit Suisse, as well as Investec. A further five banks that were implicated in the original US case have settled with the commission or pleaded leniency.
The CAC ruling comes after years of tortuous litigation since the Competition Commission launched its initial case in 2015, based on evidence from the US.
The commission alleged that the banks’ traders participated in a “single overarching conspiracy” to fix the rand exchange rate in online New York chat rooms between 2007 and 2013.
But the banks repeatedly challenged the validity of the case itself, arguing that the commission had provided no evidence of a conspiracy and had included foreign banks over which it had no jurisdiction as well as holding companies which did no trading.
The CAC found in 2020 that the commission’s first effort was “lamentably inadequate to prosecute a cartel case” and directed it to reconfigure its case “to pass legal muster”.
The Competition Tribunal then decided in 2023 to go ahead with hearing the case anyway, but the banks went to the appeal court to prevent this, arguing the commission had not addressed any of the questions raised by the CAC and had still provided no evidence of a “single overarching conspiracy”.
The ruling will raise questions over the quality of the commission’s investigations in high-profile cartel cases. Monday’s CAC ruling had unflattering things to say about the commission— its case against Standard Bank “did not get out of the legal starting blocks”. In addition, the commission’s “reference to occasional participation in a chat room without any additional evidence and where there was no link to any SA bank is inadequate to meet the test as set out in the 2020 order”.
INABILITY
It also said the commission’s submission suffered from an inability to distinguish between information in the public domain, such as that available to all banks on a Reuters screen, and information that was the product of “some form of nefarious cartel activity”.
And the ruling raises the question of whether the conduct in the chat rooms could have influenced the rand exchange rate at all, noting that the largest single transaction cited by the commission was R25m, in a rand-dollar market in which spot trade averaged $26bn over the period.
Standard Bank on Monday welcomed the decision. The CAC has accepted Standard’s “incontrovertible evidence over a period of seven years that it had not been party to an international conspiracy to manipulate trading in the dollar rand currency pair”.
MONDAY S APPEAL COURT RULING HAD UNFLATTERING THINGS TO SAY ABOUT THE COMMISSION
Standard said it remains committed to supporting the work of regulators, including the Competition Commission, and reiterated its belief in and respect for SA’s institutions generally and its well-functioning and sound judicial system.
The CAC ruling, by former CAC judge president Dennis Davis and judges Nuku and Nkosi, made no order on costs.