Competition Commission tells how it reached R42m fine deal with bank

‘Penalty is based on annual turnover of the company in the Republic’

23 November 2023 - 07:00
By Jeanette Chabalala
Head of cartels of the competition commission Makgale Mohlala.
Image: SUPPLIED Head of cartels of the competition commission Makgale Mohlala.

The Competition Commission has revealed that it rejected three offers from Standard Chartered Bank which admitted to manipulating the rand before reaching a settlement agreement of a R42m fine.

Head of cartels of the commission, Makgale Mohlala, said there were strategic reasons taken into account when negotiating, including reaching a settlement agreement with the bank which was to incentivise Standard Chartered Bank (SCB) by not demanding a higher amount and the bank would then help the commission in prosecuting others.

Mohlala said in negotiating the fine, the commission took into account what is provided for in law, considering the size of the bank in SA, which is relatively small compared to some of its co-accused.

The Competition Act states that 10% of the company’s annual turnover in the Republic is the maximum fine that can be settled on or imposed.  

“This bank made four proposals, three of them were rejected and the fourth one was accepted because it was a better offer than the previous one,” Mohlala told Sowetan on Wednesday.  

“At some point, during the settlement, they offered R38m and we said, ‘No we don’t want it, improve the offer’, so the R42m was reasonable, that is why we accepted it. 

“That penalty is based on the annual turnover of a firm in the Republic not globally. But also, the penalty we imposed is not a small penalty relative to the size of the bank that we have settled with.

“...It is not a big firm in the country and that is where people should understand first that the bank we settled with…It may be big in the UK which is where its coming from but its not big here. When we settle here, we look at what they make here and not in the UK.”

The bank is one of the 28 banks that are prosecuted by the commission for manipulating the rand.

The settlement brought to an end an eight-year long litigation between the commission and the bank over the currency manipulation allegations.

According to Mohlala, the bank would now assist the commission in prosecuting other banks that were allegedly involved in manipulating the rand.  

“There are so many strategic reasons we take into account in agreeing to a settlement with a firm, for example, there are 28 banks that [we] are prosecuting so [we] need to win over some of the banks so they can help [us] prosecute others, to give [us] information and witnesses.

“In order to do that, [we] have to incentivise them to settle by not demanding a maximum penalty because if you demand a maximum penalty nobody would settle and would say they would rather defend themselves,” Mohlala said.

“For strategic reasons when you’re faced with so many banks that are fighting, defending themselves, left, right and centre, you must in the process get some banks that can come and help you. But because you can’t let them off scot-free you still have to make them pay for what they did even if you’re not making them pay the maximum.

He said penalty guidelines only kick-in when the tribunal imposes a penalty to a guilty firm.

The commission said the bank participated in the manipulation of the USD/ZAR currency pair by fixing bids, offers, bid-offer spreads, the spot exchange rate and the exchange rate. 

“Further, SCB participated in dividing markets by allocating customers in terms of which one trader withholds or pulls his/her existing bid or offer from the market to allow the other trader to execute and complete his/her trade,” the commission said in a statement last week.  

Mohlala said three banks that first approached the commission admitting to what they have done managed to get “leniency”.

A competition law expert who asked not to be named said while the commission and the tribunal have to “punish” breaches of the Competition Act, they should not punish in such a way that could potentially put the business out of business.

He said if the Competition Commission simply went and slapped the offending companies with a maximum fee, some of the businesses might not be able to survive, resulting in unemployment.

“... but at the same time, the Competition Commission can’t just allow people to get away with such egregious violations of the Act that they don’t feel a pinch because if that is the case then everyone is going to breach the Act.”

chabalalaj@sowetan.co.za