Watchdog goes to top court over price-fixing ruling

The Competition Commission has approached the Constitutional Court, asking for leave to appeal the ruling that dismissed currency manipulation charges against the three big SA banks and 14 foreign banks.

The commission hopes to reinstate rand/dollar price-fixing charges against Standard Bank, FirstRand, Nedbank and 10 foreign banks but will now exclude four of the banks’ holding companies.

In January, the Competition Appeal Court (CAC) dismissed the commission’s case against 17 of the banks, leaving just four foreign banks whose traders pleaded guilty in 2015 to charges brought by the US department of justice.

Essentially, the CAC wanted the commission to limit its case to cases in which it has sufficient evidence of wrongdoing.

The trades in question took place offshore between 2007 and 2013 among traders using chat rooms to conspire to bid at the same time to drive the rand/dollar exchange rate higher or stop bidding to drive it lower. But while wrongdoing that has led to traders being jailed in the US has occurred, the CAC found that the commission had not provided evidence that all the banks it charged were involved in a single overarching conspiracy to price-fix the rand.

In fact, in the case of Standard Bank and First Rand, the CAC suggested there was no evidence provided to show they were involved at all.

This dismissal of the commission’s case was not the first time its legal case was heavily criticised. In 2020, the CAC ordered the commission to redo its case and provide the facts to show each bank, individually and knowingly, conspired to work together to manipulate the currency pair.

The commission did not provide such facts, but is now going to the top court and arguing such facts should not be required so early on in the case. However, the banks have previously argued they should know what the case against them is.

The commission says in papers to the top court the effect of the CAC judgment is “to dramatically restrict the commission’s case against four banks”.

“The commission cannot accept this outcome in a case involving the most egregious ... form of anticompetitive conduct,” it says.

In its papers, the commission uses much of the same language that was used by politicians, who blamed banks for dampening the value of the rand.

“The manipulation of the price of the rand/dollar currency pair has both an immediate and long-term impact on the exchange rate of a rand affecting all currency exchanges... This, in turn, affects SA’s international trade, international financial transactions, important exports, foreign direct investment, public and private debt, and the purchasing of goods and services and financial assets for ordinary South Africans.”

The commission has not yet proved that any of the trades in question affected the currency. Hundreds of thousands of trades take place daily to four decimal points. In 2023, the National Treasury said that what happened offshore between 2007 and 2013 among traders abroad has had no influence on either weakening or strengthening the rand today.

The commission is also appealing the fact the CAC says it has no jurisdiction over the foreign banks that have no branches in SA, and it argues that the fact they traded the rand gives them jurisdiction.

“This appeal will provide the Constitutional Court with an opportunity to pronounce on whether the SA competition authorities have jurisdiction to investigate and prosecute firms that are based outside the republic whose anticompetitive conduct affects the SA economy,” said commissioner Doris Tshepe.

The foreign banks the commission wants to charge are Bank of America, Merrill Lynch, JPMorgan Chase, Australia and New Zealand Banking Group, Nomura International, Commerzbank, Macquarie Bank, HSBC Bank and Standard Americas.

The commission will no longer pursue charges against the holding companies of Nedbank, FirstRand and the Credit Suisse Group. Absa Bank, Barclays Capital and Barclays Bank applied for leniency as they had provided evidence to the commission. Citibank and Standard Chartered Bank have settled with the commission.

Insiders say the banks that did not settle have not done so as there is no evidence of wrongdoing against them.

BNP Paribas, JPMorgan, HSBC and Credit Suisse Securities still have cases to answer as does Investec, as it did not appeal the charges.