Legal eagle Adv Tembeka Ngcukaitobi SC, who is representing the Competition Commission, said the manipulation of the rand by local and foreign banks is a transnational cartel driven by profit maximisation.
Nhcukaitobi said the rand manipulation and price-fixing by these banks is an “overarching conspiracy, cartel and collusive behaviour”.
He said this on Tuesday during the allegations of rand manipulation and price-fixing case between the Competition Commission and several local and foreign banks at the Constitutional Court in Braamfontein, Johannesburg.
Competition Appeal Court judgment
Ngcukaitobi said the commission, as the applicant in the case, approached the highest court in the land. It wanted leave to appeal the Competition Appeal Court (CAC) judgment handed down in January last year. It upheld the appeal by the majority of the respondent banks accused of rand manipulation and price-fixing.
In January last year, the CAC dismissed the cases against some of the 28 banks that were accused of rand manipulation. The commission alleged that the banks colluded to manipulate the dollar and/or rand foreign exchange rate, thereby contravening the Competition Act of 1998.
In its current leave to appeal, the commission is appealing the CAC order to the Constitutional Court against 28 local and foreign banks. The 28 respondents in the case are Standard Bank of South Africa, Absa Bank, Nedbank, FirstRand Bank and the bulk of which are foreign banks. Absa Bank is not an active participant in the proceedings.
The matter was heard before 10 Constitutional Court judges who are newly appointed Deputy Chief Justice Dunstan Mlambo and Justices Rammaka Mathopo, Owen Rogers, Jody Kollapen, Zukisa Tshiqi, Steven Majiedt, Leona Theron, Nonkosi Mhlantla and acting ConCourt Justices Cagney Musi and Katharine Savage.
Currency manipulation
During court proceedings on Tuesday, Ngcukaitobi said local and foreign banks colluded to execute currency manipulation.
“Each bank contributed to misconduct. The misconduct is cartel and collusive behaviour… Cartels have evolved and are now bigger, complex and transnational. This case is a classical example of transnational cartels. Not only did these cartels not respect territorial borders or nationalities, they do not respect any product in pursuit of profit,” said Ngcukaitobi.
“Here what we have is something unique. They [the banks] targeted our sign of sovereignty, which is the rand, in a pervasive scheme driven by profit motives. The judicial institutions of South Africa are the only ones across the world who have a legal interest in the prosecution of these cartels, at the heart of which is the rand.”
From Tuesday to Friday, the Constitutional Court will hear three consolidated applications for leave to appeal against the judgement and order of the CAC delivered on January 8 2024.
The case will continue hearing arguments on Wednesday.
Contravention of the Competition Act
This case dates back to 2015, when the Competition Commission alleged that the banks colluded to manipulate the dollar and/or rand foreign exchange rate. This was in contravention of the Competition Act of 1998.
The lengthy and challenging legal process commenced in April 2015. This was when the commission investigated a case of price-fixing and market allocation in the trading of foreign currency pairs involving the rand.
The commission accused 19 banks of alleged misconduct involving price-fixing and market division. This violated sections of the Competition Act.
In February 2017, the commission referred to the tribunal for prosecution a collusion case against Bank of America Merrill Lynch International Limited, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank N.A., Investec, Standard New York Securities, HSBC Bank, Standard Chartered, Credit Suisse Group, and Standard Bank.
Other banks included Commerzbank, Australia and New Zealand Banking Group Limited. Also Nomura International, Macquarie Bank, Absa, Barclays Capital, and Barclays Bank.
In June 2020, the commission submitted a comprehensive referral affidavit. The affidavit was to address previous deficiencies noted by the tribunal and the court.
Unified conspiracy
This affidavit asserted that between September 2007 and September 2013, the respondent banks were involved in a unified conspiracy. The conspiracy was aimed at manipulating rand/dollar currency trading through price-fixing and market segmentation.
The commission’s claims were based on extensive communication picked up among traders from different banks who competed with each other.
The communication is said to have occurred through Bloomberg chatrooms.
The commission argued that the frequent and consistent communication made it easier for banks to manipulate the rand/dollar currency pair. This resulted in artificially inflated prices for buyers and reduced prices for sellers of the rand.
The tribunal dealt with the commission’s assertion that there existed a single overarching conspiracy (SOC) involving both foreign and local banks rather than multiple separate conspiracies, as some respondent banks suggested.
Ultimately, it concluded that the commission’s referral provided enough alleged facts to establish a prima facie case of a SOC.
This in turn established sufficient connecting factors for personal jurisdiction over all the banks involved.
Schedule of bank charges
Then in January last year, the CAC ruled in favour of several South African banks. These included Standard Bank Group, Nedbank Group, and FirstRand Ltd. As well as most of the foreign banks that were implicated in the allegations.
It dismissed the cases against these banks due to procedural issues. Also due to insufficient evidence to demonstrate a SOC (schedule of bank charges) as alleged by the commission.
In the judgment, the court found that there was not enough evidence. And that the commission overstepped its authority in some cases.
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