Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company and Others (CR212Feb17) [2023] ZACT 26 (30 March 2023)

Saflii

Automated Summary

Key Facts

The Competition Commission of South Africa alleges that 28 foreign and local banks, including Bank of America Merrill Lynch International, BNP Paribas, and others, colluded between 2007 and 2013 to manipulate the USD/ZAR exchange rate through electronic chatrooms (e.g., Old Gits, ZAR) and coordinated trading strategies. The Tribunal and Competition Appeal Court (CAC) previously ruled on jurisdictional issues, with the CAC ordering a new referral to address deficiencies in the Commission's case. The current proceedings involve second-round exception, objection, and joinder applications by respondents challenging the Commission's jurisdiction, pleading sufficiency, and validity of the referral. The Commission maintains that the conspiracy had substantial effects on South Africa's economy, including impacts on imports, exports, and financial markets.

Issues

  • The court considered if the Commission's referral was time-barred under section 67(1), given the conduct allegedly lasted from 2007 to 2013, and whether the Commission could seek condonation for late initiation if required.
  • The court determined whether the Commission's referral provided sufficient material facts and legal points under Tribunal Rule 15(2) to support its case against the respondents, including the SOC and alleged conduct.
  • The court examined if the Commission's referral met the Competition Appeal Court's order to consolidate and supplement pleadings, particularly regarding the single overarching conspiracy (SOC) and connecting factors for jurisdiction.
  • The court assessed whether the Competition Tribunal of South Africa could exercise personal and subject-matter jurisdiction over foreign banks (peregrini) alleged to have colluded in manipulating the USD/ZAR exchange rate, considering connecting factors and the qualified effects test under the Competition Act.
  • The court evaluated if the Competition Commission's referral was validly initiated against respondents not initially mentioned, referencing cases like Pickfords and Yara to determine the flexibility of initiation requirements.

Holdings

  • The Referral was confirmed to comply with Tribunal Rule 15(2), as it included concise statements of grounds and material facts relevant to the complaint.
  • The court upheld its discretion to grant remedies, rejecting the argument that CAC orders fettered its authority to address the Commission's case or join respondents, even if further information emerged.
  • The court found that the Commission's Referral prima facie alleges a single overarching conspiracy (SOC) between foreign and local banks to manipulate the USD/ZAR exchange rate, establishing sufficient connecting factors for jurisdiction over all peregrini respondents.
  • The Tribunal dismissed objections based on lack of personal and subject-matter jurisdiction, time bar, no valid initiation, and non-compliance with the CAC order, ruling these grounds lacked merit at the pleading stage.
  • The court rejected claims that the Commission's amendment applications in June 2020 and August 2020 were irregular, condoning any procedural deficiencies.
  • The Commission's joinder applications for HBUS, MLPFS, BANA, CSS, Nedbank Group, Nedbank Ltd, FirstRand Ltd, FirstRand Bank, and Standard Americas were granted, requiring them to file answering affidavits.
  • The Tribunal emphasized that exceptions at this stage could not dismiss the case without factual evidence, as the alleged conduct required further proceedings to determine its validity.

Remedies

  • The Commission's applications to join HBUS (19R), MLPFS (20R), BANA (21R), CSS (23R), Nedbank Group (24R), Nedbank Ltd (25R), FirstRand Ltd (26R), FirstRand Bank (27R), and Standard Americas (28R) were granted. These respondents were directed to file answering affidavits within 40 days, and the Commission may file replying affidavits within 20 days of their answers. Irregularities in the Commission's applications were condoned.
  • The Tribunal dismissed all objection applications (e.g., BAMLI DAC's exception under CR212Feb17/EXC092Aug20, BNP's exception under CR212Feb17/EXC055Jun20, and similar applications from other respondents). Respondents were directed to file answering affidavits within 40 days, and the Commission may file replying affidavits within 20 days. Non-compliance with Tribunal rules in the form of applications was condoned.

Legal Principles

The court applied the qualified effects test under section 3(1) of the Competition Act to establish subject matter jurisdiction over extra-territorial conduct. It also determined that the common law on personal jurisdiction could be applied to the Act, requiring adequate connecting factors between the foreign respondents and the South African jurisdiction to justify jurisdiction. The Tribunal emphasized its discretion in interpreting court orders and condoning procedural irregularities in the context of alleged cartel conduct.

Precedent Name

  • S.O.S Support Public Broadcasting Coalition v South African Broadcasting Corporation
  • Competition Commission v Loungefoam (Pty) Ltd
  • Competition Commission v Bank of America Merrill Lynch International Limited and Others (2019 Tribunal decision)
  • Competition Commission v Pioneer Hi-Bred International Inc. and Others
  • Intel v Commission
  • InnoLux Corp. v European Commission (LCD case)
  • Pickfords at paras 28 and 29
  • Competition Commission v Power Construction (West Cape) (Pty) Ltd
  • American Soda Ash Corporation CHC Global v Competition Commission
  • Competition Commission v Yara (South Africa) (Pty) Ltd and Others
  • Woodlands Dairy (Pty) Ltd and Another v Competition Commission

Cited Statute

  • Competition Act No 89 of 1998
  • Banks Act No. 94 of 1990
  • Constitution of South Africa

Judge Name

  • Mr AW Wessels
  • Ms Y Carrim
  • Ms M Mazwai

Passage Text

  • [220] In conclusion, we have found that the Referral prima facie alleges an SOC between the peregrini and incola (local) respondents.
  • [161] In our view the Commission has made out a prima facie case of an SOC, between peregrini banks and local banks, in contravention of section 4(1)(b) in its Referral, in respect of which the Tribunal enjoys exclusive jurisdiction.
  • [170] Thus, whether the Referral is time barred in terms of section 67(1) (as it was then) cannot be determined without recourse to a factual enquiry.