Competition Tribunal to hear the Sekunjalo matter
THE Competition Tribunal will today hear the matter regarding a further extension to the current interim relief it granted the Sekunjalo Group of companies. The extension is being opposed by the respondents (the banks).
The interim order granted on September 16, 2022, extended in March this year, came as a result of several of South Africa’s banks closing transactional facilities for each of the companies within the Sekunjalo Group.
The interim relief ordered that the bank accounts that had been closed, be reopened with the same terms and conditions as before the closure, and prevented the banks involved from closing any of the Sekunjalo accounts for a period of six months or until the investigation being conducted by the Competition Commission was concluded or whichever came first.
Since the investigation has not yet been concluded, it stands to reason that the interim relief will be extended to protect Sekunjalo and its group of companies. However, Standard Bank, FirstRand, Access Bank, Mercantile Bank, and Nedbank have opposed the proposed extension.
Sekunjalo originally brought an interim relief application claiming that the banks’ conduct, in terminating banking relationships and/or refusing to provide banking and payment services to the Group, constituted an abuse of dominance, market power and/or collusive conduct in contravention of the Competition Act.
According to the Tribunal, the interim relief granted by the Tribunal prevented three banks, Standard Bank, Mercantile Bank, and Bidvest from closing the Applicants’ bank accounts and ordered five others, Nedbank, Absa, FirstRand, Sasfin, and Access Bank to reopen the bank accounts that had already been terminated.
In October 2022, Standard Bank, Access Bank, and Mercantile Bank, a division of Capitec Bank Ltd, noted appeals and filed reviews with the Competition Appeal Court (CAC).
On July 17, the CAC set aside the interim order insofar as it relates to Standard Bank, Access Bank, and Mercantile Bank. On August 7, Sekunjalo Group filed an application for leave to appeal to the Constitutional Court.
The Tribunal’s initial order, granted on September 16, 2022, stated that the Tribunal found that the Sekunjalo Group established prima facie that the banks have engaged in a concerted practice involving a concerted refusal to supply banking services to the Sekunjalo Group amounting to a restricted horizontal practice in terms of section 4(1)(a) of the Act.
The Tribunal noted that, “Banking plays a central role in the economic life of society and no commercial transaction of substance and scale is possible without banking services.”
The Tribunal found that “the Sekunjalo Group had established a prima facie case that the conduct of the banks has the effect of impeding or preventing the Sekunjalo Group from participating in or expanding within the markets in which the Group operates and thereby substantially lessening competition”.
According to the Tribunal, the banks justified their conduct on the
basis of the reputational risk of dealing with the Sekunjalo group. due to findings of potential malfeasance and impropriety made by Justice Mpati, following a Commission of Inquiry into the Public Investment Corporation’s (“PIC”) dealings with Ayo technology Solutions (AYO).
The Tribunal also said that: “The banking system is the bedrock of any modern economy as it enables trading within and across borders.
“Reputation is therefore critical for all the various stakeholders of the banks in order for them to have confidence in the system and in the fact that their money is safe.
“Reputation also takes time to build, and it provides a commercial advantage for firms in the market.
“Because of reputational risk, it is not surprising that firms would want to put in place (either for themselves or as a regulatory requirement) reasonable risk mitigation strategies which are proportionate to the risks identified.”
However, the Tribunal found that the banks’ justification was undermined by them not having shown consistency in their application.
“The undisputed and non-speculative fact before us is that a number of other companies have been implicated in serious allegations of misconduct such as alleged state capture and serious allegations of corruption”.
“Concrete evidence of consistency in approach by the Respondents in relation to reputational risk would have given their stated case more weight.
“The banks themselves indicated that they make no claim regarding the veracity, or otherwise, of the findings contained in the Mpati report,” the Tribunal said.