Dennis Davis — judge, law professor, author of 11 books and host of the Judge for Yourself show — isn’t known for pulling his punches. Outspoken and brusque, he has gone so far as to argue for criminally charging politicians who attack the judiciary — such as Julius Malema — with contempt of court.
So the Competition Commission knew it was never going to have it easy when most of the 28 banks it accused of conspiring to “rig the rand” between 2007 and 2013 appealed to the Competition Appeal Court — presided over by Davis, Lister Nuku and Vusi Nkosi — to have the case thrown out.
In the end, the court’s 79-page ruling — released this week — was perhaps even more devastating for the Competition Commission than the bankers dared hope.
The ruling torpedoes the case against most of the 28 banks, leaving just five — BNP Paribas, JPMorgan, HSBC, Credit Suisse Securities and Investec — on the hook. The banks against which the case has been dismissed include Standard Bank, Nedbank, FirstRand, the Credit Suisse Group, Standard Americas, Bank of America, ANZ Bank, Nomura, Commerzbank, Macquarie Bank and HSBC US.
The judges seem dismayed by the commission’s schoolboy errors. They stress that their ruling “does not in any way sanction cartel behaviour”, but the outcome was inevitable after the commission, ordered in 2020 to provide “significant further details” to support its case, failed to do so.
The commission’s case should have been “pleaded with sufficient factual particularity” to show that the banks participated in a single overarching conspiracy, but, the ruling says, it seems this was a “bridge too far for the commission”.
It’s not just that those banks won; it’s that the ruling sketches the picture of a regulator that had a winnable case, but bungled the investigation so badly that it tried to prosecute banks that weren’t even at the scene of the crime
For the regulator, it’s the sort of bloody nose that might prompt you to head to the nearest casualty ward to get a brain scan. It’s not just that those banks won; it’s that the ruling sketches the picture of a regulator that had a winnable case, but bungled the investigation so badly that it tried to prosecute banks that weren’t even at the scene of the crime.
Take its case against the two largest South African banks, Standard Bank and FirstRand.
The judges say FirstRand should never have been on the list in the first place because, as the commission itself admits, “it does not even know who the FirstRand Bank’s traders were, and has no evidence that they participated in any chats”.
It was “regrettable” that even after FirstRand pointed out the flaws in this case, the Competition Tribunal allowed the case to continue based on “hopelessly incorrect information”.
As it is, much of the commission’s case was based on circumstantial evidence that traders happened to have used the same chatrooms on the Bloomberg and Reuters platforms — the Old Gits chatroom and the ZAR chatroom — at one point.
But as the judges say, a trader’s “occasional participation in a chatroom, or unspecified conduct which is tenuously inferred”, is hardly evidence of a grand conspiracy.
The case against Standard Bank was equally flimsy, hinging on a discussion between a banker from Barclays and a Standard Bank employee who wasn’t even a trader, but rather a salesperson with no ability to swing currency trades either way.
Yet, the commission “inexplicably persisted” in claiming that Standard Bank was part of the conspiracy. The case against Standard Bank was “skeletal”, the ruling says, and “does not get out of the legal starting blocks”.
For the foreign banks, it was even more of a mess. Here, the commission had to prove “clear evidence of linkages to the South African banks as part of an overall conspiracy”, but in most cases it didn’t even get close.
In the case against Standard New York Securities, for example, the two allegedly errant traders named in the court papers hadn’t even worked for it. “This had been clear from the papers,” the ruling says.
So what does this mean for the Competition Commission, and the currency-rigging case itself?
“It’s not a good ruling for the competition authorities,” one lawyer tells the FM. “But what is particularly devastating is that this reveals how the commission ignored the information given to it, and it’s a devastating indictment of the tribunal that they allowed this to continue.”
The lawyer says that as much as there are diligent public servants at the commission, there are others “who behave with an audacity and arrogance that is breathtaking, given how frequently they end up on the wrong side of legal rulings”.
What makes it all the more galling is that there’s no dispute that traders at several banks clearly conspired to manipulate the rand/dollar exchange rate
What makes it all the more galling is that there’s no dispute that traders at several banks clearly conspired to manipulate the rand/dollar exchange rate. In the US, three traders have been found guilty, and one, former JPMorgan trader Akshay Aiyer, is serving eight months in jail.
Equally, five other banks have already been given “corporate leniency” by the commission (effectively a plea bargain) for admitting their role in the scam: Absa, Barclays Bank, Barclays Capital, Citibank and Standard Chartered.
But rather than sticking to what could be proved, the Competition Commission overreached and tried to net just about any bank operating in the country.
“This outcome will anger a lot of people, because there clearly was something to answer for among the rogue traders,” says the lawyer. “The commission could have proved its case against the traders based on the evidence, but they became too ambitious and went chasing ghosts. It’s massive hubris.”
Of course, the commission may yet appeal this ruling to the Constitutional Court — spokesperson Siya Makunga says the commission is “still studying the judgment” — but it remains to be seen whether it has learnt any lessons from this chastening episode. For an institution meant to ensure corporate accountability, these amateur errors do it no favours.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.