Appeal on appeal: Competition Commission shows its tenacity in rand-fixing case

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If you need a real-life example to underscore what it means to “dig in your heels”, look no further than the Competition Commission and its handling of the rand-fixing case.

This week, the Commission announced it has approached the Constitutional Court (ConCourt) for leave to appeal the Competition Appeal Court (CAC) judgment handed down on 8 January.

In the judgment, the CAC upheld the appeal by the majority of the 21 respondent banks accused of colluding to manipulate the rand in the New York foreign exchange market more than a decade ago.

The CAC dismissed the case against three major South African banks – Standard Bank, FirstRand, and Nedbank – and 14 of the foreign banks listed as respondents in the case.

Only four foreign banks, whose traders admitted guilt in 2015 to charges from the US Department of Justice, remained implicated: BNP Paribas, JP Morgan Chase and Co, HSBC Bank plc, and Credit Suisse Securities (USA) LLC.

In other words, the CAC order effectively released 17 respondent banks from the Commission’s complaint referral.

Read: Ready to be heard, says Investec in rand-fixing case

However, it seems the Commission is determined to ensure that at least 13 of these respondents answer to the allegations brought against them before the Competition Tribunal.

In its current application for leave to appeal, the Commission is appealing the CAC order to the ConCourt against 13 respondent banks. Among these are three local institutions:

  • Standard Bank of South Africa Limited,
  • Nedbank Limited, and
  • FirstRand Bank Limited.

And 10 foreign banks:

  • Bank of America National Association,
  • Merrill Lynch International Designated Activity Company,
  • JP Morgan Chase,
  • Australia and New Zealand Banking Group,
  • Nomura International,
  • Commerzbank,
  • Macquarie Bank,
  • HSBC Bank USA National Association,
  • Merrill Lynch Pierce Fenner & Smith, and
  • Standard Americas.

Commissioner Doris Tshepe said the appeal would provide the Constitutional Court with an opportunity to pronounce on whether the South African competition authorities have “jurisdiction to investigate and prosecute firms that were based outside of the Republic whose anti-competitive conduct affects the South African economy”.

The Commission has said it will not appeal the CAC’s rejection of the case in respect of the case against the holding companies of Nedbank, FirstRand, Credit Suisse Group, and Standard New York Securities. For these entities, this protracted eight-year legal battle ends here.

Moonstone contacted the Commission, asking why it was decided not to include these four entities in its leave for appeal application. Feedback was still outstanding by the time of publication.

Last respondents standing

In 2017, the Commission referred a complaint to the Competition Tribunal for adjudication. Initially, the complaint was levelled against some 19 respondents for alleged collusive conduct when engaged in foreign exchange trading between 2007 and 2013. This number later grew to 28.

Twenty-one of these joined the interlocutory application to the CAC to prevent the matter from going ahead “due to a lack of evidence”.

In its decision, the CAC stated that the Commission could only present evidence supporting charges against four financial institutions: BNP Paribas, JP Morgan Chase and Co, HSBC Bank plc, and Credit Suisse Securities (USA) LLC.

The four banks were given 40 days within the order of the court to file their answering affidavits in response to the Commission’s claims of currency manipulation.

The Commission said it would not appeal the CAC order in respect of these four respondent banks.

Of the other respondents originally named, Investec Limited and Investec Bank Limited chose not to join the CAC interlocutory application, thus it remains part of the case.

Investec has said it remained “ready and willing to present its case” when the merits of the Competition Commission’s “new referral affidavit” – filed four years ago – will finally heard by the Competition Tribunal.

The Commission has already indicated that it would not pursue charges against Absa Bank Limited, Barclays Capital Inc, and Barclays Bank plc because they have applied for leniency.

Standard Chartered UK, which settled for R42 million with the Commission last year, and Citibank, which reached a R69.5m settlement in 2017, also no longer form part of the case.

On local ground

Understanding the difference between the four distinct entities that are Nedbank Group Limited, Nedbank Limited, FirstRand Bank Limited, and FirstRand Limited provides some context for the Commission’s decision to include Nedbank Limited and FirstRand Bank Limited in its leave to appeal application while letting the other two “go”.

FirstRand Limited is the listed holding company on the Johannesburg Stock Exchange (JSE) and the Namibian Stock Exchange (NSX).

FirstRand Bank Limited is a wholly owned subsidiary of FirstRand Limited. FirstRand Bank Limited represents the South African banking operations and has three major customer-facing divisions which are separately branded: First National Bank (FNB), WesBank and Rand Merchant Bank (RMB).

FirstRand Limited has several other wholly owned subsidiaries, including but not limited to FirstRand EMA Holdings (Pty) Ltd (FREMA), which holds the group’s banking subsidiaries in broader Africa (for example, FirstRand Namibia, FNB Botswana, FNB Eswatini, FNB Lesotho, FNB Mozambique, FNB Zambia, First National Bank Ghana, RMB Nigeria).

Similarly, Nedbank Limited is responsible for directly delivering banking services to customers, Nedbank Group Limited oversees the overall strategic direction, governance, and management of the entire Nedbank Group, including its subsidiaries and business units.

Moonstone reached out to FirstRand and Nedbank to find out what they thought of the Commission’s latest legal move.

FirstRand said they did not currently have a response to the Commission’s decision to appeal. Nedbank had not responded by the time of publication.

One can assume, however, that Standard Bank was not tickled pink on hearing the news. In response to the CAC’s ruling last month, the group released a statement saying it welcomed the CAC’s decision “to uphold its appeal by dismissing currency manipulation allegations against Standard Bank”.

The CAC concluded that the case against Standard Bank “does not get out of the legal starting blocks”.