/ 31 July 2018

Forex hearings: Competition Commission accused of being ‘vexatious and unreasonable’

The commission has accused the banks of price-fixing and market allocation in the trading of foreign currency pairs involving the Rand.
The commission has accused the banks of price-fixing and market allocation in the trading of foreign currency pairs involving the Rand. (Reuters)

The first leg of the Competition Tribunal’s hearings into allegations of foreign exchange collusion by 23 local and international banks began on Monday in a packed courtroom in Pretoria.

After numerous pre-hearings, the matter is finally being heard, well over a year after the Competition Commission referred the case to the tribunal.

The commission’s handling of the case has frustrated the banks so much that at least one — Investec — has applied for a declaratory order from the tribunal to declare the commission’s conduct “vexatious and unreasonable”.

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The first tranche of proceedings has been devoted to addressing issues raised in the raft of exception applications brought by most of the banks shortly after the commission referred them to the Tribunal in February last year.

The commission has accused the banks of price-fixing and market allocation in the trading of foreign currency pairs involving the Rand. A settlement of R69.5-million has already been reached with Citibank, while ABSA, and its former parent Barclays, as well as Barclays Capital, have applied for leniency in the case.

READ MORE: Banks seek settlement — and also challenge collusion claims

In the exception applications, a number of the banks have asked the tribunal to dismiss the referral for a range of reasons, including that the commission’s case was vague and embarrassing, and that the tribunal has no jurisdiction over certain of the foreign banking entities.

The banks’ lawyers came out sabres at the ready, arguing among other things, that the commission’s case has not been made with enough facts to show an agreement between the banks, or a concerted practice, to collude.

Since many of the banks’ exception applications canvassed similar issues, the Tribunal divided this round of hearings into themes, for which one of the various advocates representing the banks was elected as lead counsel.

Advocate Wim Trengove argued under the theme of general pleading and exceptions, that allegations such as those relating to ongoing price fixing were made “with a complete lack of granularity” without which the banks cannot know what case they must answer.

“Vexatious and unreasonable”

After the initial referral, the commission has made a number of subsequent supplementing affidavits to rectify the parties listed in the matter, as well as provide further information and expand on its arguments. In January this year, the commission applied to join a further four additional banks to the complaint bringing the number of banks listed to 23.

The commission’s handling of the case was also called into question on Monday, with Investec asking the Tribunal to grant a declaratory order stating that the commission’s prosecution of the referral has been “vexatious and unreasonable”.

In court papers Investec’s Advocate Kate Hofmeyr accused the commission of adopting “unreasonable positions on various issues, only to backtrack on them later,” adding that it had caused the banks’ “significant prejudice during the course of its erratic behaviour”.

“The respondents have been forced to incur substantial unnecessary costs in preparing for hearings that they cannot proceed because of some further inexplicable step from the Commission.”

Hofmeyr told the tribunal on Monday that, “The conduct over the last year and a half, of the commission, displays a callous disregard for the banks.”

Investec is seeking the order because it is likely to have a “disciplining effect”, in the same way, that a costs order in other South African courts does.

Although in the Tribunal no costs order can be made against the Commission, Hofmeyr argued that the declaratory would serve a similar purpose.

The Competition Commission has not responded to the application for the declaratory order — but is expected to respond to this and the banks’ other arguments in the coming days.

The hearings continue to the end of Friday.