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.

Finweek English Edition - - OPINION - Ed­i­to­rial@fin­week.co.za Dr Michael Cardo MP is the DA’s shadow min­is­ter of eco­nomic de­vel­op­ment.

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

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