ROB ROSE: Watchdog mute after its banks case splinters

With questions swirling over the legitimacy of the country’s antitrust authorities, the Competition Commission appears to be doing its best to pretend it hears precisely no evil.

A week ago, the Constitutional Court eviscerated the commission’s decade-long case against 23 banks, which accused them of conspiring to rig the rand.

In a 133-page judgement, the court booted out the case against Nedbank, FirstRand, Standard Bank and a slew of others. This ruling leaves just five of the initial 23 banks to face the charge of being part of a “single overarching conspiracy”.

Far more disturbing than the result, however, was the court’s blunt assessment of how badly the commission had inserted both its feet into its well-exercised mouth.

Of the case against Standard Bank, for instance, the justices said: “It was inexplicable that the commission persisted in claiming plausible evidence to link Standard Bank to the single overarching conspiracy.”

That the commission would nonetheless persist in this case for a decade, soaking up the costs of 33 advocates (many of whom were paid for by the taxpayer), does demand some sort of accountability from the government agency.

Instead, crickets. Last week, its spokesperson, Siya Makunga, said the institution is “studying the judgement” and will release a statement soon. Efforts by the FM to speak to competition commissioner Doris Tshepe this week came to naught.

Instead of accounting for what went wrong in its flagship case, Tshepe has been tilting at other windmills. The commission has, for instance, found time to brag about prosecuting a complaint against the little-known auto software company Audatex for “price discrimination” against small companies.

Tshepe’s agency has also, in recent days, said it will launch an inquiry into the franchise sector, examining power imbalances and the “skewed, racialised patterns of ownership”, which limit the franchise industry’s contribution to economic inclusion.

So, rather than getting its headline cases right, it is going to war about whether KFC has the right black empowerment ownership. Talk about priorities. Anyway, given what the Constitutional Court found, why would KFC, Chicken Licken or Spar have any faith that they’ll get a much fairer outcome this time?

The court highlighted fundamental problems in both the lack of facts underpinning its claims and its legal strategy

—  Ahmore Burger-Smidt

The banking matter was a massive bungle for a number of reasons, not least of which is that there was actually a case for some banks, and some traders, to answer — just not all the ones the commission tried to nail.

This is, in part, because this case originated in the US. Back in 2017, Jason Katz, a currency trader who had worked at a whole lot of banks, pleaded guilty in a Manhattan court to trying to “manipulate” currency trades, including the rand/dollar.

The evidence had emerged from Bloomberg and Reuters chatrooms, with such revealing names as “Zar Domination”, where some traders had discussed co-ordinating bids to boost their performance and earn bonuses. Besides Katz, at least two other traders ended up with convictions or in jail.

Now, had the commission stopped there, acting against this narrow group of foreign banks, it would have all been fine. Instead, it got greedy and overreached.

In 2016, the commission jammed a slew of other banks into its complaint, including Standard Bank, FirstRand and Nedbank, alleging that they were part of a “single overarching conspiracy” to rig the rand.

Sadly, its ambition fell short of its evidentiary prowess.

Take the case against Standard Bank, where the commission claimed that one of the bank’s traders participated in a chatroom which “discussed the bid-offer spread” for the dollar/rand currency pair.

First, the Standard Bank person was not a trader but a salesperson. As such, he could play “no role in determining Standard Bank’s bid/offer spreads and could not bind [the bank] to foreign currency transactions”. The court said had the commission bothered to ask Standard Bank before lodging the case, it would have learnt the truth.

Besides “badly tarnishing” the bank’s reputation, the commission also ripped apart this salesman’s life based on pretty much no evidence. He had been “publicly named without having been given any opportunity to defend [himself]”.

Its case against Nedbank — where none of its traders were identified as participants in the chatrooms where prices were fixed — and FirstRand was just as poor.

More worrying was its sloppy construction of the case. Rather than getting actual evidence, the commission said the conspiracy “could be inferred” from the fact that traders communicated frequently in these chatrooms.

Heather Irvine, a partner at law firm Bowmans, says little about this ruling is surprising.

“What we’ve seen is that the commission will refer a vague complaint which doesn’t precisely identify exactly what anticompetitive conduct is alleged, hoping that in the lead-up to the Competition Tribunal hearing, the companies it is accusing will produce more evidence to shore up its case, so that when it reaches trial, it has enough evidence,” she says.

It can do this, and even appeal it all the way to the Constitutional Court, in part because taxpayers ultimately foot the bill.

Ahmore Burger-Smidt, head of regulatory practice at Werksmans, says it is clear the commission needs extra resources to do its work properly. “But an authority must understand the facts in its own jurisdiction. Here, the court highlighted fundamental problems in both the lack of facts underpinning its claims and its legal strategy,” she says.

It is inefficient, she says, for companies to have to perpetually appeal the commission’s findings to the Constitutional Court or the Competition Appeal Court.

This, alongside other recent cases eviscerating rulings by the Competition Tribunal, suggests that Parks Tau, the minister of trade, industry & competition, needs to intervene to ensure the integrity of a pivotal economic institution.

The alternative, Burger-Smidt says, is that you have what you had in this banks case: “Years of fighting and huge amounts spent — and for what?”