‘Colluding’ banks likened to cartels in rand-fixing saga

The alleged collusion by some of the country’s top banks and their international counterparts to manipulate the Rand resembles a classic example of a transnational cartel, says Advocate Tembeka Ngcukaitobi SC.

“They targeted our sovereignty - our rand - driven by profit. We are the only ones who have an interest in prosecuting them,” said  Ngcukaitobi SC, acting on behalf of the Competition Commission.

The commission is appealing the majority of the findings of the Competition Appeal Court (CAC), especially the fact that the CAC found that the commission did not have jurisdiction over the majority of the international banks.

The Constitutional Court on Tuesday heard arguments from the commission and the hearing is expected to last until Friday.

An important issue which served before the court is the extent of the commission’s jurisdiction over the foreign banks alleged to have participated in a single overarching conspiracy (SOC).

It is alleged that these banks, together with local banks which include Standard Bank, Nedbank and First Rand Bank, have conspired to manipulate the exchange rate in respect of the US dollar and the rand.

The commission argues that its terms permit enforcement action even against banks with no presence or business in South Africa (a peregrinus). Ngcukaitobi argued that the effects of the alleged rand fixing were felt within the Republic. Ngcukaitobi said there was enough evidence to establish a prima facie case that they were involved in the manipulation of the rand.

In arguing jurisdiction, he said the court must consider the presumption against extraterritoriality, which cautions against reading legislation as applying beyond the borders of South Africa unless clearly stated.

The court must also consider the common law requirement that both personal and subject matter jurisdiction must be established where a respondent is a peregrinus. Ngcukaitobi argued that the Competition Act enables the commission to exercise its jurisdiction regarding economic activity across the borders.

He pointed out that South African consumers are affected by the alleged manipulation of the rand when they for instance purchase products which are being imported.

“Price manipulation has a permanent effect. It introduces a permanent structural price. A distortion affects the value of imported products,” he said.

Asked by one of the judges whether any order from a South African court or tribunal issued against a foreign bank could be enforced on them, Ngcukaitobi said most of the institutions the commission is claiming are, on the face of it, involved in the conspiracy to price fixing, have a presence in South Africa. According to him there are also remedies to enforce compliance.

In asking the court to overturn the finding by the CAC that the majority of the banks do not have a case to answer to, Ngcukaitobi argued that they were all aware, or should have reasonably been aware, that their agents colluded in chatrooms to manipulate the rand/dollar exchange.

He argued at length how the conversations in the chatrooms were conducted in an open manner and those who did not directly take part, knew about the activities.

While local banks Nedbank and First Rand Bank said they never had any agents in the chatrooms, Ngcukaitobi argued that it does not matter, as, according to the commission, they knew about the colluding and they also benefitted from it.

“They did not have participants in the chatrooms, but if your trading pattern fits the fact patterns in the chatrooms, you are in the SOC,” he said.

Ngcukaitobi further argued that the alleged collusion regarding the price fixing affected South Africa directly, thus those implicated, should face justice here as South Africa is the only country taking the matter further.

He said it is often straight forward to prosecute firms accused of cartel conduct, as the conduct is usually clear. But cartels have evolved over the years, they are now bigger and transnational.

He told the court that the CAC made several errors in law in its judgment and if the ConCourt ruled in favour of the commission, the matter regarding the merits can then go to the trial stage.

Cape Times