Competition regulators must learn the lessons

The Competition Commission’s rand-rigging case against the banks is not over yet, even if just five of the 28 remain after the competition appeal court trashed most of the commission’s case.

It has been more than eight years since the commission began its investigations into what was essentially a New York-based US department of justice case — and pursued it obsessively, adding banks at random as it went along despite the flimsy evidence. It could be a few more years before SA sees the back of this one, especially if there are yet more appeals back and forth.

The competition appeal court’s sharp judgment, which dismissed the case against most of the banks on the law and on the evidence, offers essential lessons for SA’s competition regulators and their political bosses. They must take those lessons to heart if they are serious about creating a more competitive and vibrant economy. Chief of these is that they must not be blinded by ideology, or a thirst for headlines, into pursuing cases that may have very little merit and little economic effect either way.

There are plenty of constraints on competition in SA and only limited resources to tackle these. The commission must focus on priority areas that can make a real difference to consumer welfare and can open up markets in ways that enable the economy to grow faster. A second lesson is that if the commission is going to pursue ambitious cases it had better ensure it has its ducks in a row. In this case, the commission joined multiple local and foreign banks and bank-related entities to its case over multiple years. It set itself the demanding legal test of proving they were all embroiled in a “single overarching conspiracy”.

The competition appeal court found it had utterly failed to show it had the evidence, or the jurisdiction, or the legal grounds, to proceed with the bulk of its case. That was despite many opportunities to improve it. Chances are there never was a case against most of the banks. But if there had been, the commission proved not competent enough to make one.

Regulators should not go after SA’s banking sector lightly. They look after the nation’s savings. They are the lifeblood of the economy, the mechanism at the heart of the payments system and the lubricant that matches lenders with borrowers and investors. As Stuart Theobald has pointed out in these pages, they are also a key source of funding for a government that needs to borrow everincreasing amounts.

Nobody loves banks. But we all need our banking sector to be safe and sound and trusted. It does households and businesses no good to cast aspersions that undermine trust in the banks — especially over alleged conduct a decade before that could not have had any effect on the rand or the economy. The commission’s case opened the doors over the years to a flood of populist and often ignorant antibank sentiment, including from the government itself, that was divisive and damaging.

The commission needs to ask itself some serious questions, and learn the lessons of the banks case. If its loss at the competition appeal court helps to prompt this, it will have been a victory for SA, albeit an expensive one.