Johannesburg - The “pretrial skirmishes” that are stalling the Competition Commission’s case of forex rigging against banks are starting to irk the watchdog.
“We are eagerly waiting for the banks to file their answers,” said Competition Commissioner Tembinkosi Bonakele this week.
“Not a single one of them has provided an answer on the merits of the case.”
Bonakele suggested that the banks might be trying to wear the commission down with exception applications preceding the actual case.
“Assume that we [the commission and its case] are crazy. We are only asking for banks to say we are crazy, but they have not filed an answer. I do not know if lawyers are telling them it will go away.”
He repeated an earlier claim that some of the banks had “discreetly” approached the commission to possibly settle.
“We are not interested. We want an answer; that is it.”
A hearing was held at the Competition Tribunal this week to sort out technicalities regarding the order in which the various issues would be dealt with.
A procedural conflict has emerged whereby the commission wants to have each bank’s exception ruled on separately – but the banks want the tribunal to combine all their objections and make the commission produce a new referral.
Competition Commissioner Tembinkosi Bonakele wants to open a new front in the war on collusion - criminal charges of fraud against cartel members.
“We are starting with this ... I have asked my legal team to compile a list which we will refer to the National Prosecuting Authority (NPA),” he told City Press on the sidelines of an annual competition conference, held in Johannesburg this week.
This is separate from last year’s amendment to the Competition Act, which criminalised cartel conduct.
Bonakele has criticised that amendment, citing the NPA’s probable lack of expertise in working with economic evidence.
By instigating fraud charges, the Competition Commission hopes to resolve some “legacy cases” and work around those strategies that evade Competition Law sanctions.
“There are people who are testing the limits of the system, the limits of the state’s arsenal,” said Bonakele.
“It is not a move to replace what we do. It is an additional tool which we must use wisely. We do not want to chill the corporate leniency policy, for instance.”
Asked for examples, Bonakele mentions companies that come forth with information but pin the blame on the wrong entity – sometimes a shell entity that cannot be penalised as it has no assets.
Theoretically, almost all competition offences could be conceived of as fraud because customers have an expectation that companies will be competing, Bonakele admits.
“Bid-rigging is fraud. Some types of price-fixing are fraud. You are misled into thinking the price is the outcome of competition.”
But he said the list going to the NPA would be “very selective”.
“It is not a long list. Some are legacy cases ... that have been open for years.”
“It is impermissible that parties alleged to have colluded should be permitted to form a united opposition to the further conduct of litigation against any one of them,” the commission argued in papers at the tribunal.
There have been 12 exception applications, covering 14 of the 18 respondent banks.
In its papers submitted to the tribunal, the commission calls some of these “so-called” exceptions.
Standard Bank is the only one formally applying for the full record of the commission’s investigation. This application will be heard first, on September 18.
The worst-case scenario for the commission would be a repeat of the ill-fated milk cartel prosecution.
Major dairy companies were referred to the tribunal for collusion in 2006, but the case soon got bogged down in procedural complaints and applications.
More than four years later, the case died in the Supreme Court of Appeal on a legal point, without the merits ever actually being tried.
Many of the arguments raised by the banks are almost identical and fall into a number of categories.
The foreign banks in the case all argue that the commission does not have jurisdiction because the trading in the rand that the case revolves around happened in London or New York.
Tied to this is the notion that the commission might have to demonstrate the actual effect of the collusion in South Africa in order to justify its jurisdiction.
“In my view, obviously we do have jurisdiction. It is the South African rand,” said Bonakele.
“American banks think it is okay for the US to investigate their conduct, but it is not okay if South Africa does. It will be interesting to see what our courts say about this.”
Another repeated exception is the “wrong guy” argument, where the commission’s referral allegedly targets the wrong subsidiaries of the banking groups.
In a few instances, the individual traders identified in the referral are also alleged to have not worked at the relevant banks at the times the commission says.
The commission has previously said it might join new banks to the case, but this seems mostly to relate to fixing these “wrong guy” allegations – not actually to joining new members of the alleged cartel.
Bonakele, in any case, is suspicious of why the banks would turn these objections into exception applications.
“If you say the person was not employed by you, that sounds like a good defence.
“Commit yourself to a version and put it in an affidavit,” he said this week.