Banks versus CompCom

ALLEGATION: WATCHDOG HAS NOT COMPLIED WITH FAIRNESS PRINCIPLES

The Competition Commission’s case on currency rigging ‘has no leg to stand on’.

The commercial banks accused of rigging currency trades have poked holes in the Competition Commission’s case against them, saying the watchdog is relying on broad accusations that lack hard evidence.

The commission’s case against bank traders began on Monday, with the Competition Tribunal hearing various objections from banks mainly on the clarity of evidence; the jurisdiction of the commission over foreign entities; and the lapse in the period of bringing charges. The censure of the commission’s conduct through a declaratory order was also heard.

The case, in which more than 30 individuals linked to 23 banks are accused of rigging trades in the rand-US dollar currency pair to allegedly boost profits, was referred to the tribunal in February.

The commission is pushing for a 10% fine on annual turnover against Standard Bank South Africa, Investec Bank, Bank of America, Merrill Lynch International, BNP Paribas, JP Morgan Chase, HSBC Bank, Macquarie Bank, Barclays Capital, Credit Suisse Group, and others.

However, Wim Trengove, who spoke on behalf of Investec Bank, told the tribunal that the commission is not complying with principles of fairness in its case.

“On all scores, banks are failed by the commission with broad allegations without granularity [in evidence],” Trengove argued.

The commission found that from at least September 2007, banks had a general agreement to collude on prices for bids, offers, and bid-offer spreads for the spot trades in relation to currency trading. The commission’s case was completed in April 2015.

Trengove said banks have no understanding of what the general agreement – the nub of the commission’s case – refers to.

“We don’t know how the agreement was made,” he said.

“We suspect that they [the commission] don’t know any of those allegations.”

In the case of Investec, Trengove said the commission accused it of engaging in three incidents of price-fixing between 2008 and 2011, but the competition authority had failed to provide further evidence to support this claim.

According to the commission, traders used platforms such as the Reuters currency trading and the Bloomberg instant messaging system (chatroom), as well as telephone conversations and meetings, to coordinate their collusive trading activities.

Currency rigging

Alfred Cockrell, speaking on behalf of HSBC Bank, Bank of America, and Credit Suisse Group said banks are confused as to whether the commission is referring to an overarching agreement or a series of agreements that have contravened section 4 of the Competition Act.

Cockrell said a reading of section 4 does not prohibit price-fixing, but it prohibits an agreement for a concerted practice that involves price-fixing. “The case is irregularly pleaded.

“There are no facts pleaded that shows that there was an agreement or a concerted practice.”

The banks argued that the charges were initiated more than three years after the alleged currency-rigging practices ceased – a legal principle known as prescription under section 67 (1) of the Competition Act.