Competition Commission hauls banks to Constitutional Court over alleged rand manipulation

The Competition Commission has approached the Constitutional Court of South Africa for leave to appeal a ruling dismissing its case against several local and international banks for allegedly conspiring to manipulate the rand.

This is after the Competition Appeal Court (CAC) threw out the Commission’s case against 23 of 28 banks on 8 January 2024, saying that the anti-monopoly watchdog did not provide sufficient evidence to prove a “single overall conspiracy”.

The Commission has accused the banks of colluding to fix the rand-dollar foreign exchange rate.

“In its current application for leave to appeal, the Commission is appealing the Competition Appeal Court order to the ConCourt against 13 respondent banks,” it stated.

These include local institutions Standard Bank, Nedbank, and FirstRand Bank.

It also includes ten international banks:

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

“The Commission will not appeal the CAC order in respect of the Nedbank Group Limited, FirstRand Limited, Credit Suisse Group, and Standard New York Securities Inc.,” it stated.

There are noteworthy technicalities here — it is appealing the Nedbank Limited ruling, not Nedbank Group; and FirstRand Bank Limited, not FirstRand Limited.

“The Commission will also not appeal the CAC order that dismissed the appeals of these four respondent banks: BNP Paribas, JP Morgan Chase and Co, HSBC Bank plc, and Credit Suisse Securities (USA) LLC.”

The Commission noted that Absa Bank Limited, Barclays Capital Inc., and Barclays Bank plc applied for leniency, while Citibank N.A. and Standard Chartered Bank have settled out of court.

“Investec Limited and Investec Bank Limited remain respondent banks required to file answering affidavits,” it stated.

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

Manipulative myths

The Commission’s allegations against several major South African and international banks have led to misunderstandings, myths, and downright misinformation.

This has been fuelled by politicians like Minister in the Presidency, Khumbudzo Ntshavheni, who said the banks were part of a private sector plot to collapse the South African government.

Her comments were so outrageous that National Treasury had to step in to debunk them.

Treasury said the rand’s collapse had nothing to do with the Competition Commission’s case or the misconduct involved.

It explained the currency manipulation being investigated ended in 2013, and that rules and regulations were implemented long ago to mitigate and avoid this behaviour.

“Whilst the wrongdoing described by the Competition Tribunal [and Commission] harmed individual clients, it would not have influenced the depreciating trend of the currency since 2013,” Treasury stated.

It explained that the rand’s strength and weakness were driven by broader changes in the global and domestic economy.

“The value of the currency today, which has depreciated against the dollar, and the resulting impact on prices, should not be attributed to these instances of misconduct between 2007 and 2013,” it said.

The Competition Commission itself has also explained that the manipulation went both ways — slightly strengthening or weakening the rand by fixing bid-offer spreads for their own gain.

Stated differently, the banks’ alleged manipulation did not impact the value of the rand in a way that would affect the broader economy.

The Competition Commission’s head of cartels, Makgale Mohlala said a bank’s manipulation depended on whether they were buying or selling currencies.

The banks would, on specific deals, manipulate the bids to increase their profit.

This could mean weakening or strengthening the rand, depending on whether they were buying or selling.

He added that while the value changed during these specific deals, it did not impact the rand’s strength against the U.S. dollar long term.