It's now old news that the Competition Commission has referred for hearing by the Competition Tribunal its price-fixing investigation against a host of international banks. The interesting thing about the investigation is the context in which it took place.  That context is a salutary warning about information exchange between regulatory agencies. In this day and age it is clear that international cooperation triggers investigations of similar illegalities across the globe irrespective of the differences in law and jurisdiction. The international and now South African bank cartel investigation illustrates the extent to which international authorities cooperate and exchange information with each other.

During 2013 investigative journalists and whistleblowers exposed LIBOR manipulation by international banks which prompted a series of investigations and fines. During 2014, the African Reserve Bank ("SARB") carried out a review of foreign currency trading practices by South African banks prompted by concerns that the Rand may be more vulnerable to manipulation in the context of these international investigations. During October 2015 the South African Reserve Bank published the report of its Foreign Exchange Review Committee which essentially found that "No evidence of widespread misconduct came to light, but there was some evidence of inappropriate sharing of confidential client information".

As we all know, information sharing between competitors will immediately spark interest and suspicion on the part of the Competition Commission. During May 2015, the Competition Commission announced that it was investigating price-fixing by a host of international banks. The Commission's investigation involved Citigroup, Nomura, Standard Bank, Investec, JP Morgan, BNP Paribas, Credit Suisse Group, Commerzbank AG, Standard New York Securities Inc., Macquarie Bank, Bank of America Merrill Lynch (BAML), ANZ Banking Group Ltd, Standard Chartered Plc and Barclays Africa (Absa), part of the Barclays Plc.   On 15 February 2017, the Commission announced that it had referred a case of price fixing and market allocation in the trading of foreign currency pairs involving the rand for prosecution. The Commission is not seeking an administrative penalty from ABSA because of its cooperation with the Commission in relation to the investigation. The Commission has also settled with the Citibank on the basis that Citibank will pay an administrative penalty of approximately R69 million.

SARB's report indicated that its investigation was prompted as a proactive step and not because of suspicions arising from the international investigations.  SARB's report distinguished between its investigation and that of the Competition Commission saying that "The review by the FXRC focused on the operations of authorised dealers in the domestic foreign exchange market, while the investigation by the CC is mainly concerned with possible violations in offshore markets allowed by its area of jurisdiction". But we mustn't forget, of course, SARB's telling remark about information exchange about foreign exchange currency traders exchanging client confidential information with each other.

The South African Competition Act prohibits direct or indirect price-fixing between competitors. It also prohibits information exchange between competitors which gives rise to anticompetitive conduct. While price-fixing is an automatic red card offence that cannot result in the individuals who participate in it (or turn a blind eye to a firm's price-fixing activities) going to jail as well as an immediate administrative penalty, anticompetitive information exchange that doesn't give rise to price fixing, market division or tender collusion only triggers an administrative penalty liability for a repeat offence.

The Commission alleges that, from at least 2007, the banks agreed to collude with each other on prices for bids, offers and bid-offer spreads for spot trades in relation to currency trading involving the dollar and rand currency pairing.

ABSA is exempt from liability for administrative penalties because it was first the post in applying for leniency in terms of the Commission's corporate leniency policy. Early settlement fine discounts are still available to any cartel members who don't qualify for leniency but agree to consent orders.  Of course that means that the respondent banks will have to admit that they participated in the cartel. And that of course is the rub.

The Commission has, for now, only recommended fines of the maximum 10 percent of the respondent banks' South African revenues. From 1 May 2016, as mentioned, price fixing (both buying and selling prices), market division and tender collusion between competitors became criminal offences in terms of section 73A(1) to (4) of the Competition Act (amended by section 12 of the Competition Amendment Act, 1 of 2009).

The banks have until 3 May 2017 to file applications to raise objections on grounds that the complaint is vague or does not disclose a cause of action. The Competition Tribunal's hearing of the complaint relating to the Commission's investigation will take place in July.