The Competition Commission v Bank of America Merrill Lynch International Limited

• Jurisdiction: South Africa
• Judge: Davis JP
• Judgment Date: 28 February 2020
• Docket Number: 175/CAC/Jul 19
• Court: Competition Appeal Court
• Hearing Date: 28 February 2020
• Citation: 2020 JDR 0277 (CAC)

Davis JP:

[1]

'Since institutional diversity inhibits the global integration of markets by raising transaction costs across jurisdictional boundaries a world that is sufficiently responsive to democratic preferences will also be one that falls short of globalisation'. (Dani Roderik)

[2]

The rapid globalisation of markets has challenged the ability of the nation state to pursue policies borne of indigenous democratic choice. Competition law is one such site of this problem in that anti-competitive conduct can detrimentally effect the national economy in circumstances where the conduct takes place on foreign soil or on the internet. In turn this raises a problem for the competition authorities of a nation state to enforce the relevant national law.

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[3]

This appeal concerns the vital question as to the scope of the jurisdiction of the respondent ('the Competition Commission') in enforcing the vision of the Competition Act 89 of 1998 ('the Act') as formulated and passed by the democratically elected parliament of this country. A significant part of that vision is to be found in the preamble to the Act:

'The people of South Africa recognise:

That apartheid and other discriminatory laws and practices of the past resulted in excessive concentrations of ownership and control within the national economy, inadequate restraints against anti-competitive trade practices, and unjust restrictions on full and free participation in the economy by all South Africans.'

In similar fashion s 2, the purpose clause, provides:

'(a)

to promote the efficiency, adaptability and development of the economy;

(b)

to provide consumers with competitive prices and product choices;

(c)

to promote employment and advance the social and economic welfare of South Africans;

(d)

to expand opportunities for South African participation in world markets and recognise the role of foreign competition in the Republic;

(e)

to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the economy; and

(f)

to promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons.'

[4]

The Act was intended to have a broad reach in that s3 (1) provides 'this Act applies to all economic activity within or having an effect within the Republic except ...'. I shall deal presently with the relevant jurisprudence relating to this section.

[5]

Central to the differences between the parties in the present dispute are two considerations, being the presumption against ex-territoriality and the

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common law requirement that, before a South African court can adjudicate upon a dispute in which a party happens to be a peregrinus, both personal and subject matter jurisdiction must be present.

[6]

As I have observed, these differences take place within the context of the global economy of the twenty first century. Thus, a pressing problem confronting competition authorities globally concerns the effect of new technologies which have resulted in transnational, and even global consequences. Multinational corporations are often more powerful than nation states and can strategically comport their economic behaviour to avoid national regulation. As Professor Eleanor Fox, a distinguished USA anti-trust scholar has noted, 'in this altered world market place the presumption against extra territoriality for economic law in defense, of markets is no longer appropriate. We need to deal with the reason behind the presumption to prevent clashes caused by one sovereign's unreasonable intrusion on another sovereign's legitimate interest, and to tailor the law of restraint to the reason for it. Since general retreat and withdraw from antitrust enforcement against non-nationals and foreign based acts would deeply undermine the global and national competition systems, it is fitting to stress modes for accommodation more than rules for retreat.' [1]

[7]

In summary, the question as to whether the Act in general and s 3 (1) in particular rises to the challenge of the global economy lies at the heart of the present case and thus holds major consequences for competition law enforcement in this country.

The factual matrix:

[8]

On 1 April 2015 the Competition Commission initiated a complaint against various banks [2] for colluding to fix prices and divide markets in respect of the rand - dollar exchange rate, which acts it alleged, were in contravention of s 4 (1) (b) (i) and (ii) of the Act. On 15 February 2017 the Competition

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Commission referred its complaint to the Competition Tribunal (Tribunal) in terms of s 50 of the Act. By 3 March 2015, most of the respondent banks had either filed an exception to the referral or sought further particulars from the Competition Commission. On 10 March 2017 the Tribunal at a pre-hearing set out a timetable which made provision for the Competition Commission to file a supplementary affidavit by no later than 31 March 2017. Thereafter the respondent banks were provided with the opportunity to re-examine their exception applications. On 31 March 2017 the Competition Commission filed its first supplementary affidavit addressing the issue of jurisdiction but did little to address a range of exceptions which had been raised by the respondent banks. On 7 April 2017 the Competition Commission filed a second supplementary affidavit which sought to rectify an omission contained in the March affidavit.

[9]

On 23 June 2017 the Tribunal at a second pre-hearing ordered that the Commission, could provide further particulars with regard to issues raised in respect of the misjoinder and, would provide to certain respondent banks and, in particular, Investec Limited and Standard Chartered Bank, further particulars which they had requested.

[10]

Thereafter, the Competition Commission changed its approach. It did not provide further information to Investec and Standard Chartered Bank nor did it provide further supplementary pleadings with regard to the misjoinder point. Instead, it requested that the Tribunal set down the exceptions raised by Investec and Standard Bank to be heard on a separate and expedited basis. Prior thereto, the Competition Commission also filed applications for default judgment against six of the respondent banks [3] as none of these parties had filed an answer to the referral nor had they filed formal exception applications.

[11]

However, on 24 August 2017, the Competition Commission abandoned its application for default judgment but persisted with a separate application which was dismissed on 5 September 2017, in which the Tribunal also ordered

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that all the exceptions were to be heard in a combined hearing in January 2018.

[12]

Two weeks before the respondent banks were due to file their heads of argument, the Competition Commission filed a further supplementary affidavit. The covering email read: 'Kindly take notice that the Competition Commission's further supplementary affidavit is served and filed of record evenly herewith. Due to its size the attachment will be sent in nine batches, this is batch 1 and 2.'

[13]

In keeping with this unsatisfactory approach to the litigation, the next morning the Competition Commission's representative sent an email to all the parties stating 'the Commission withdraws the correspondence below and all attachments forwarded.' This was sadly not the end of its vacillation. On 10 December 2017 the Competition Commission submitted a letter in which it indicated that it had decided to file a supplementary affidavit and 'provide additional particularity to the initial referral and dispose of a number of the vague and embarrassing exceptions raised by the respondents. It does so without any concession that such further particularity is required or necessary'.

[14]

On 20 December 2017 the Competition Commission submitted a further supplementary affidavit which not only added to the claims contained in the February referral but also sought to join five new parties being HSBC Bank USA (19), Merrill Lynch Pierce Fenner and Smith Inc. (20), Bank of America (21), Investec Bank Limited (22) and Credit Suisse Securities (USA) LLC (23). Pursuant thereto, the Tribunal issued a direction postponing the hearing which was finally heard from 30 July 2018 to 03 August 2018. Judgment was delivered on 12 June 2019.

The decision of the Tribunal:

[15]

For the purposes of this appeal, the major issue decided upon by the Tribunal concerned its jurisdiction to hear the Competition Commission's complaint in that a number of the respondent banks alleged that they were peregrini; that is, firms that were neither domiciled nor carried on business in

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South Africa. A distinction was made between "pure" peregrini; that is those respondent banks which were neither domiciled nor carried on business in the Republic and "local" peregrini being banks with some presence in the country. It is helpful to examine the Tribunal's decision by way of a separate analysis of its treatment of local and pure peregrini.

The local peregrini:

[16]

Certain of the banks, which appeared before the Tribunal, termed local peregrini because of a presence in South Africa. Four banks had a local branch in South Africa and were registered as authorised dealers in terms of the Banks Act 94 of 1990. These were: BNP Paribas (2nd respondent), JP Morgan Chase Bank (4th respondent), Standard Chartered Bank (10th respondent) and HSBC Bank PLC (14th respondent). In the case of Credit Suisse Group (11th respondent) Commerzbank, (12th respondent) and the Bank of America, (the 21st respondent) the Competition Commission contended that they had representative offices in South Africa.

[17]

The dispute before the Tribunal...