Test of independence for Competition Tribunal
Politicians are turning up the heat on the banks accused of collusion, but the competition regulator must do all it can to ensure that political pressure does not influence its decisions.
economic development minister Ebrahim Patel gifted President Jacob Zuma with plum bragging rights ahead of his reply to the debate on the State of the Nation Address (Sona) on 16 February. During Sona, Zuma told the country that “collusion and cartels” were squeezing smaller players out of the economy. “High levels of economic concentration” (a dog-whistle descriptor for so-called white monopoly capital) had to be broken up, he said. To this end, legislation was in the pipeline to amend the Competition Act and realise the ANC’s “vision of radical economic transformation”.
A few days later, replying to a Parliamentary debate that plumbed new depths of insult and low-mindedness, Zuma was able to trumpet some rapid progress in the government’s war on collusion.
The Competition Commission had, the previous day, referred for prosecution to the Competition Tribunal a case against 18 banks. They stand accused of colluding on prices for bids, offers and bid-offer spreads for spot trades involving the US dollar/rand currency pair.
Although the Competition Commission’s investigation had been two years in the making, the timing of its referral and the announcement thereof bore a whiff of political motivation.
They seemed to tap into a populist well of discontent with “extortionate” banks (at least if social media was anything to go by) and offer a well-timed salvo in the ANC’s battle for radical economic transformation. The latter is a Hugo Chávez-style gambit aimed at stealing the EFF’s policy thunder while shoring up Zuma’s ailing political fortunes.
For a fleeting moment, the commanderin-chief (Zuma, not Julius Malema) managed to sound authoritative. Perhaps Patel, his lieutenant in the economic development ministry, might yet keep his Cabinet posting in the night of the long knives that is bound to follow Brian Molefe’s sudden deployment to the ANC’s benches in Parliament.
Amidst the gathering storm clouds, the Competition Tribunal will have to withstand tremendous political pressure. There are many interest groups who would like it to stage a show trial and mete out kangaroo-court justice to the banks. The ANC, for its part, is clearly gearing up for a showdown.
However, neither the Competition Commission’s case against the banks, nor its proposed administrative penalty (equal to 10% of the banks’ annual turnover), is cut and dried. For one thing, the financial institutions have not yet had the benefit of the audi alteram partem rule (the opportunity to respond) at the Tribunal’s hearings.
Of course, if the banks are shown to have contravened the Competition Act – and, indeed, if they inflicted losses on the public by manipulating the exchange rate in such a way as to undervalue the rand – then they must face serious consequences. (Also see page 14.)
Justice must be seen to be done. That doesn’t always happen in collusion cases. Each year, the Competition Tribunal slaps hundreds of millions of rands’ worth of administrative penalties on companies for uncompetitive behaviour. In 2013, a record penalty of R1.46bn was imposed collectively on 15 firms in a construction cartel. In 2014/15, administrative penalties amounted to R725m. These payments make their way into the National Revenue Fund. However, consumers who are hurt by cartels and collusion seldom get to reap the benefits of compensation directly.
Section 65(6) of the Competition Act allows individuals who have suffered harm as a result of anticompetitive conduct to claim damages in a civil court. Yet, apart from the class action suit that was brought against Premier Foods in the bread cartel case, this recourse has rarely been used.
The City of Cape Town is still fighting for the R430m it feels ratepayers were shortchanged of by companies that engaged in collusive tendering for the construction of stadiums for the 2010 World Cup. Seven listed construction companies reached a settlement with the government that, in exchange for the dropping of legal action, will see them pay R1.5bn over 12 years into a fund aimed at promoting “development” in the sector. Patel lauded the fund as a “momentous milestone” of “radical economic transformation”. Often, as with the public interest conditions attached to large mergers, these settlements are the product of backroom deals brokered by politicians. The deals may well serve the rhetoric of an ill-defined political agenda like radical economic transformation, but they don’t necessarily make the economy more competitive – or even more just. Moreover, when politicians intervene, they tend to undermine the regulators’ integrity and effectiveness.
With the political heat turned up on the banks, the Competition Tribunal now faces a tough test of its independence and impartiality.
Ebrahim Patel Minister of economic development