Twenty-eight SA and foreign banks have lost another round in the case over allegations that they had colluded to manipulate the rand/dollar exchange rate in currency trades — with the Competition Tribunal ruling it can hear the case eight years after charges were first laid.
The Thursday ruling found the tribunal has jurisdiction to hear the case even if most of the alleged trades were conducted abroad, often by employees at foreign banks. Usually, authorities are limited to pressing criminal or civil charges against companies or individuals who break the law within their country.
The commission, which acts like a prosecutor in competition matters, argues that traders, working at 28 banks in Europe, SA, Australia and the US between 2007 and 2013, conspired to manipulate the rand/dollar rate through information sharing. It wants a fine to be imposed of 10% of the banks’ annual turnover.
It is alleged traders worked together to delay trading to drop prices and created fictitious bids to raise prices. Absa bank is believed to have been the whistleblower and has never charged.
The commission first charged 18 banks in March 2015, including JPMorgan Chase, Standard New York Securities and Nomura International. It won the right to add nine more banks to the case on Thursday: HSBC Bank USA, National Association, Merrill Lynch Peirce Fenner and Smith, Bank of America, Credit Suisse Securities (USA), Nedbank, FirstRand and Standard Americas.
Over the past eight years, the banks have fought back arguing the commission does not have jurisdiction to bring the case as much of the alleged trading took place offshore. In terms of the law the commission must show the trades had an “effect in SA”, which is not as straightforward as it sounds, since currency trading involves hundreds of thousands of trades a day with figures going to four decimal points.
The commission argued that the bankers’ actions had an impact on the SA economy, by affecting imports and exports, foreign direct investment, public and private debt and company balance sheets.
The banks argued the commission’s initial 2015 case was “vague and embarrassing”, which are legal speak for improperly formed arguments lacking sufficient facts.
In 2019, the tribunal ruled the commission could not ask for a fine against foreign banks as it had no jurisdiction over them. However, in 2020 the Competition Appeal Court said the commission could charge foreign firms for anticompetitive cartel behaviour in this and other cases.
The Competition Appeal Court ordered the commission to redo its case, file a “legally coherent complaint” and show that the foreign had banks acted together, in what in law is described as a single overarching conspiracy.
The commission redid its charges but the banks appealed against the new charges at the tribunal. Their argument included that the period prescribed to lay a charge had expired, that charges remained vague and again that the commission did not have jurisdiction.
On Thursday, the tribunal ruled the competition commission’s new legal papers met the requirements as set out by the appeal court in 2020 and that the commission had shown the alleged actions had affected SA — giving it jurisdiction.
The tribunal said in its order: “The respondents are accused of engaging in conduct considered the most egregious in competition law. Furthermore, the alleged conduct relates to fixing and manipulating the rand/dollar exchange rate, which has a central and crucial role in the SA economy.”
The case has not yet reached the phase where the merits of the case ca be argued. The tribunal ordered the banks to respond to the merits of the commission’s case within 40 working days. It is expected that at least one bank will appeal against the tribunal’s decision, delaying the case once again.
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