The Competition Commission has been ordered to redraft its case against a number of local and international banks it has accused of being part of a cartel to manipulate the rand.
The Competition Tribunal instructed the commission to remedy its “defective pleadings” in an order handed down on Wednesday. It said the commission must confine its case to that of a single overall conspiracy on the part of the banks and establish a list of allegations the banks must answer to enable them to understand the case being brought against them.
The matter has dragged on for years — dogged by accusations that the manner in which the commission has managed the case is vexatious, and counterclaims that the banks have applied extensive legal resources to avoid dealing with the merits of the complaint.
Although the tribunal did not agree to dismiss the case outright —as many of the banks had requested — the instruction to rewrite its complaint narrows the scope of the commission’s arguments, which the tribunal said had lacked focus and consistency.
This raises the question of just how much more difficult it could become for the commision to prove its case.
The judgment also highlighted some of the “extraordinary” actions by the commission. Its original referral was supplemented three times, to correct errors in naming the parties as well as to expand on its arguments, leading to criticism of how the commission has handled the case. One bank, Investec, went so far as to ask the tribunal for an order declaring the commission “vexatious and unreasonable” in a bid to discipline the commission for its conduct. The tribunal dismissed this plea as too broad, and noted it would be premature to rule on it at this stage of proceedings.
The order was made in response to a range of exception applications brought by the banks, asking the tribunal to dismiss the matter.
These applications were broadly based on the arguments that the commission did not have sufficient facts to make its case — labelled “vague and embarrassing” — and that the tribunal did not have jurisdiction over a number of the foreign banks. Certain of the banks had also objected to being joined to the case later in the investigation.
When it came to the strength of the complaint, the tribunal noted that the commission had been unwilling to commit itself unequivocally to a particular formulation of the case, which “caused a lack of focus and consistency” throughout its referral and the subsequent supplementary additions to its arguments.
The tribunal found that this had ramifications for its ability to, among other things, decide whether the complaints against several of the banks had prescribed. It also found that the relationship between the traders responsible for the allegedly collusive conduct and the banks themselves was unclear. It has given the commission a tight window of 40 business days to submit its new referral — which will replace all the complaint referral affidavits — and the banks will be required to respond only to the new one.
The matter has stretched on for four years, with the investigation initiated in 2015, and the referral made to the tribunal in early 2017.
The order handed down this week deals only with the pre-trial exception applications — the actual case has yet to be heard on its merits. To complicate things, the commission and Standard Bank have been locked in a separate legal action over the right to access the commission’s record of the investigation, which has progressed all the way to the Constitutional Court and is awaiting a judgment.
The commission has maintained that the banks have dragged their feet on the matter to avoid addressing the merits. The banks in turn have held that the delays are a result of the commission’s own mismanagement.
The commission brought the case after a number of similar actions by regulators internationally, in which banks have admitted to collusion to manipulate currencies and important benchmark interest rates and paid billions of dollars in fines.
Four of the banks cited in the South African case have either settled or plead leniency. Local bank Absa, its erstwhile parent Barclays Bank and Barclays Capital have applied for leniency, while Citibank has settled and agreed to pay a fine of R70-million.
Some of the banks cited such as JP Morgan Chase and Company, the third respondent in this case, have admitted guilt elsewhere. It signed plea agreements with authorities in the United States and admitted guilt in a similar foreign-exchange-rigging plot. The tribunal, however, ruled that this could not be used as evidence in the local complaint.
The matter has also been dogged by speculation that it was politically motivated, because the case began to gather momentum at the height of the furore about the closure of the Gupta family’s bank accounts by the country’s big four banks.
The commission has previously dismissed these allegations, stating that it “is an independent body by law” and that “no political pressure has been exerted on it”.
In response to this week’s development, the commission released a short statement saying it is studying the “lengthy judgment” and would respond when “we have applied our mind to the contents”.
It welcomed the long-awaited decision on the technical problems with the case and said it was an “important step” towards getting the banks to “respond and attend to the merits of the case”.
Standard Bank said in a statement that noted the tribunal had upheld its exception case.
Standard Bank was one of the banks that argued that the case was vague.
It said in its exception application that the complaint “contained no factual evidence of its participation in the collusion alleged and otherwise was so contradictory and/or devoid of particularity that Standard Bank South Africa could not determine from it the case it was required to meet”. It said it “remains unaware of any evidence implicating it in the alleged collusion”.