The Competition Commission’s ageing foreign exchange case is back in court yet again, with the banks charging that the commission must show that all 28 of them were part of the alleged “single overarching conspiracy” to manipulate the rand before the case can go ahead.
The case, which the commission launched in 2017, goes back to alleged collusion by SA and foreign banks in the New York foreign exchange market from 2007 to 2013. The 28 banks the commission is going after include several foreign banks with no presence in SA, as well as foreign banks with local branches and all of SA’s big domestic banking groups.
This week’s hearing at the Competition Appeal Court, which is sitting in Sandton, is the second round in a lengthy battle about whether SA’s competition authorities have the jurisdiction to prosecute or the “material facts” to go ahead with it.
Former judge president of the Competition Appeal Court Dennis Davis has been recalled to hear the complex case, in which the commission alleges that banks’ foreign exchange traders colluded in online chatrooms to fix the rand/dollar exchange rate.
The commission originally charged 19 domestic and foreign banks, based on a 2015 complaint, but later upped this to 28 banks across the world.
It is now on the sixth version of the affidavit it has filed to support its case. Four banks have already settled or done leniency applications.
The banks have taken this week’s case-about-the-case to court to stop the Competition Tribunal going ahead with hearing the case itself. Though the Competition Appeal Court earlier ruled that the commission had to provide evidence on a series of issues before the case could begin, the Competition Tribunal said in March that it would hear the case.
The commission told the court on Monday that traders employed by or representing the banks logged on to Bloomberg terminals and entered chatrooms where they communicated with their competitors, shared sensitive information and agreed on rand/dollar spreads.
“The commission alleges that the traders’ conduct ... leads to the inevitable inference of the existence of a single overarching conspiracy with the clear objective of manipulating the normal competitive trading conditions of the rand/dollar currency pair,” it said in court papers.
Jurisdiction
Banks originally challenged the commission’s case on the grounds that it had no jurisdiction over foreign banks with no presence in SA or over New York-based trading. The court ruled that in the digital age SA’s competition authorities did have jurisdiction as long as the alleged collusive behaviour had an impact in SA.
They also challenged the commission to show material evidence that they had participated in the chatrooms or in the alleged collusion.
The commission has chosen to pursue the case on the grounds that there was a single overall conspiracy between all the banks, rather than multiple smaller ones.
Banks have charged that it has no basis for its “one size fits all” approach and have challenged it to provide evidence that they participated at all in the alleged cartel. To prove a single overall conspiracy, the commission would have to show that each of them interacted with all the others, they argue.
Even if a group of traders colluded in chatrooms to try to fix rand/dollar rates on the New York market, bankers wonder whether this could have had any impact on the value of the rand, given the huge volumes traded globally every day.
Bank for International Settlements survey figures show daily over-the-counter turnover in the SA foreign exchange market averaged $15.6bn in April 2022, though this was down from $20.4bn in April 2019.
SA decreased the most among emerging markets over the period, reflecting global economic, geopolitical and socioeconomic concerns as well as domestic factors such as electricity outages and floods, the Reserve Bank said in its June quarterly bulletin.
Global foreign exchange market turnover hit a record of $7.5-trillion in April 2022.
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