A Commentary on the Jurisdictional Challenges in the Rand-Dollar Exchange Manipulation "Cartel": Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company

Cartels are the most egregious of competition law transgressions, because they entail a concerted effort on the part of cartel members to deliberately distort the market through price fixing, bid rigging, market allocation and constraining the supply of goods and services. Despite efforts by national competition authorities in various countries to combat cartelism, cartels have proved to have long tentacles, often extending beyond borders and morphing into "cross-border cartels". This contribution discusses one of the major challenges that cross-border cartels poses to competition authorities, that of prosecutorial and penal jurisdiction. The note focusses on the "banking cartel" that has been and still is the subject of contentious litigation. In March 2023 the Competition Tribunal (the Tribunal) handed down judgment in the matter of the Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company [2023] ZACT 26 (30 March 2023). There were several questions in the matter, including the jurisdiction of the South African competition authorities to investigate and prosecute firms not incorporated or operating in South Africa (pure peregrini). The Competition Commission (the Commission) had initiated proceedings in the Tribunal against a host of banks for alleged cartel conduct, and some of the respondent banks raised objections and exceptions relating to the jurisdiction of the South African competition authorities. The note observes that while national competition authorities may have prosecutorial jurisdiction against cross-border cartels, there is still a challenge in enforcing an order where cartels are non-resident in the country. The contribution also notes potential challenges to cartel enforcement on the African continent in light of the establishment of the African Continental Free Trade Area (AfCFTA). Due to the removal of various trade barriers, there is likely to be a rise in cross-border competition issues, including cross-border mergers and cross-border cartels. The note therefore discusses a pertinent issue, that of jurisdiction, which may well be a challenge within the AfCFTA.


Introduction
Cartels have been designated as the most egregious of competition law violators because the violations involve a coordinated effort on the part of cartel members to distort the market deliberatelyand, in turn, deprive consumers of their welfare. 1A cartel, in the simplest form, occurs when producers or suppliers of goods and services collude to distort the market by fixing prices, constraining production or dividing markets between themselves. 2 In South Africa, while the term "cartel" is not expressly used in the Competition Act, 3 what constitutes cartel conduct is regulated by the Act, which prohibits certain restrictive horizontal practices. 4The Act prohibits "any agreement between, or concerted practice by firms or a decision by an association of firms to fix prices, divide markets or engage in collusive tendering." 5In terms of section 4(1)(b) of the Act, such conduct is per se prohibited, meaning there can never be justification for engaging in cartel conduct.
A cross-border cartel (CBC) is a cartel that involves multiple members from different countries. 6The existence of a CBC creates a major challenge regarding investigatory, prosecutorial and penal jurisdiction.This challenge was illustrated in the recent Tribunal decision in Competition Commission v Bank of America Merrill Lynch International Designated Activity Company, 7 wherein banks from multiple jurisdictions, spanning Europe, Africa, Australia and the United States of America (USA) were accused of conspiring to manipulate the South African Rand through information  Simbarashe Tavuyanago.LLB LLM (UP) LLD Candidate (UWC).Lecturer and Programme Director (PG Diploma in Labour Law), Department of Mercantile Law, Faculty of Law, University of the Free State.E-mail: TavuyanagoS@ufs.ac.za.ORCiD: https://orcid.org/0000-0002-6756-0884.A version of this paper was presented at the 1 st Banking, Competition and Corporate Law Colloquium in July 2023 at the North-West University.Thank you to the organisers of the colloquium, the participants and the reviewers for their valuable feedback on this topic.A cross-border cartel is one where the cartel members are located or based in different countries alternatively, the conduct takes place over multiple jurisdictions, or where the effects of the conduct are felt in more than one country.Cross-border cartels are also referred to as international cartels or transnational cartels.See Horna Fighting Cross-Border Cartels 5-7.sharing on electronic and other platforms and through various coordination strategies when trading in the USD/ZAR currency pair.
The case is of significance to competition law jurisprudence as, apart from it having all the hallmarks of a scintillating international banking syndicate spectacle, it also highlights the challenges associated with the regulation of CBCs.The alleged conduct of the banks, if proven, would constitute cartel conduct in the form of price fixing and market division, thus violating the Competition Act. 8However, before a determination by the Tribunal on whether the banks were guilty of the alleged conduct could be made, the issue of jurisdiction took centre stage in the matter.Several banks with no physical or operational presence in South Africa objected to and raised the exception that the South African competition authorities had no jurisdiction to prosecute them. 9 The Tribunal found that it had jurisdiction to prosecute all the alleged cartel members. 10The decision of the Tribunal is a welcome addition to competition law jurisprudence insofar as it seeks to create legal certainty concerning the extent of the Tribunal's jurisdiction over alleged cartel members not domiciled in South Africa. 11However, a major question remains over how effective such a finding would be where the authorities lack jurisdiction or power to enforce their findings.The case that was before the Tribunal and its finding also serve as a warning to the challenges that CBCs may precipitate considering the removal of trade barriers owing to the  -competition-commissionapproaches-concourt-to-appeal-banks-price-fixing-order-8b66a202-cb02-4f52-9787-7cb071aae896).Whereas the appeal may yet confirm the Commission's jurisdiction or the CAC's finding, the quintessence of this contribution remains the same: that of highlighting the challenge of first establishing prosecutorial jurisdiction and subsequently enforcing penal jurisdiction.The note will therefore not discuss the CAC's decision bar to mention its implications where relevant.

Background
The case dealt with exception, objection and dismissal applications from the respondents concerning several cases before the Tribunal.The applications emanated from proceedings initiated by the Commission, which alleged that between 2007 and 2013, at least 28 banks from multiple jurisdictions, including Europe, South Africa, Australia and the USA, had conspired to manipulate the South African Rand through information sharing on electronic and other platforms and through various coordination strategies when trading in the USD/ZAR currency pair. 12According to the Commission, the alleged manipulation had harmed various aspects of the economy, including imports and exports, foreign direct investment (FDI), public and private debt, prices of goods, services and financial assets. 13The discussion below traces the case's chronological development from referral to the judgment at hand and delineates the issues the note seeks to address.

Referral
In February 2017, the Commission referred a complaint against the first 19 respondents for alleged price-fixing and market division in contravention of sections 4(1)(b)(i) and (ii) of the Competition Act. 14In March 2017, most of the banks either filed exceptions or requests for further particulars, raising among other things, the Tribunal's lack of jurisdiction to hear the matter. 15he exception relating to a lack of jurisdiction was mainly predicated on the fact that several of the banks had no presence in South Africa.In June 2019 the Tribunal handed down a judgment concerning the exceptions raised by several respondents.In doing so, the Tribunal divided the respondents into four different groups:  • Second class local peregrinithree banks that had a South African Representative Office and representative officer in terms of the Banks Act; 17 and • Pure peregrinitwelve banks with no local presence or business activity in South Africa.

Legal question
The above classification of respondents raised a key legal question: whether the Tribunal had the jurisdiction to prosecute all the respondents jointly.Ancillary to the finding on the question of prosecutorial jurisdiction was the question of penal jurisdiction.If the Tribunal found that it had jurisdiction to prosecute and if it were found that the banks, including foreign banks, were guilty of cartel conduct, did the Tribunal have the power to impose sanctions on those pure peregrini banks as provided by the Competition Act?

Tribunal's finding
The Tribunal answered the above question by finding that it had subject matter jurisdiction over pure peregrini banks.Still, it lacked the personal jurisdiction to make a finding against them and could only make a declaratory order. 18The Tribunal based its finding of having subject matter jurisdiction on the fact that the Competition Act applies to all economic activity within or affecting South Africa. 19Considering that the Tribunal is a Tribunal of record with jurisdiction throughout the Republic, 20 entrusted with powers to adjudicate on any prohibited conduct 21 as well as to make any rulings or orders necessary for the performance of its functions, 22 including imposing penalties on transgressing parties, the Tribunal's assertion that it had subject matter jurisdiction cannot be disputed.
The Tribunal found that while it could not impose penalties on pure peregrini as envisaged by the Act, 23 it could issue a declaratory order confirming the peregrini's involvement in cartel conduct which could have reputational consequences.The Tribunal then dismissed the Commission's referral against the pure peregrini banks with the caveat relating to its power to make a declaratory order.

Peregrini's demur
The pure peregrini banks lodged an appeal in the Competition Appeal Court (CAC) against the Tribunal's decision that it could issue a declaratory order against them, albeit that the order would be limited in effect.They argued that for the reason that the Tribunal had determined that it had no jurisdiction over them, it therefore did not possess the power to issue the declaratory order if the Commission were successful in its section 4(1)(b) case. 25On the other hand, the Commission was not satisfied with the Tribunal's finding that it had only subject matter jurisdiction and not personal jurisdiction.As such, the Commission cross-appealed the Tribunal's finding, and amongst other things, the test used to determine jurisdiction over a peregrinus. 26The CAC upheld the pure peregrini respondents' appeal against the Tribunal's order regarding the declaratory order, read in conjunction with the Tribunal's order dismissing the Commission's referral against them. 27e CAC also upheld the Commission's appeal and found that the common law on personal jurisdiction applied to section 3(1) of the Act and that the Tribunal could enjoy both personal and subject matter jurisdiction over the pure peregrini, provided that there were adequate connecting factors between the conduct of the foreign peregrini and the suit brought by the Commission to justify the assumption of such jurisdiction. 28The CAC then 25 CC v BOA para 22.

28
CC v BOA para 27.It is worth noting here that central to the establishment of personal jurisdiction was the concept of a single overarching conspiracy (SOC).In the CC v BOA 2024 appeal, CAC was tasked with determining whether the Commission had proved that there was a SOC among the banks, thereby linking them to the alleged cartel conduct and granting the Commission jurisdiction to prosecute them.It was noted that a SOC comprised three elements, to wit "a common anti-competitive objective, being the existence of an overall plan pursing a common economic objective; participation, being each firm's 'intentional' contribution by its own conduct to the common objectives pursued by all the participants; and knowledge, being that the firm was either aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or it could reasonably have foreseen it and that it was prepared to take the risk" (CC v BOA 2024 para 28).The Commission was therefore required to show a common anticompetitive objective, that is an overall plan in which all of the respondent banks participated to pursue a common economic objective.It was required to show that each firm had made an intentional contribution by its own conduct to the common objectives pursued by all of the participants to the SOC.It further was required to show that each respondent bank was aware of the actual conduct planned or put into effect by the other undertakings in pursuit of these objectives; that is to perpetuate a SOC or that each respondent bank could reasonably have foreseen that it participated in the SOC and that it was prepared to take the risk (CC v BOA 2024 para 176).The CAC found that the Commission's reference to occasional participation in a chatroom without any additional evidence and where there was no link to any South African bank was inadequate to show a SOC (CC v BOA 2024 para 185).

S TAVUYANAGO
PER / PELJ 2024( 27) 7 allowed the Commission to establish adequate connecting factors between the respondent parties and the jurisdiction of the Tribunal to establish personal jurisdiction in addition to proving the requirements of subject matter jurisdiction on facts which may be set out in the fresh referral affidavit. 29The Commission filed its revised referral in June 2020, to which the respondents filed exceptions, objections, applications for dismissal and strikings-out of the referral and the Commission's application to join further respondents. 30One of the grounds on which the respondents raised an exception was the same objection they had had to the 2017 referral, that of the Tribunal's lack of jurisdiction. 31After extensive pondering, the Tribunal found that it had subject matter and personal jurisdiction as envisaged by section 3(1) of the Act and confirmed by the CAC.It dismissed the respondents' objection to its jurisdiction. 32 3 Discussion of the case

Determination of jurisdiction
In analysing the submissions regarding jurisdiction or the lack thereof, the Tribunal reiterated the incontrovertible fact that it had jurisdiction over any contravention of the Act concerning prohibited practices, including conduct under section 4(1)(b). 33The above refers to subject matter jurisdiction, which was not in dispute; however, regarding extra-territorial conduct, jurisdiction must be established in terms of section 3(1) of the Act.Section 3(1) provides that the Act applies to all economic activity within or affecting the Republic.On a plain reading one would be inclined to conclude that because the alleged conduct of the banks (including the peregrini) affected various parts of the South African economy, the Act would automatically apply, and the Tribunal would have de facto jurisdiction over the peregrini.
The Tribunal was swift to point out the CAC's decision in ANSAC, 34 wherein it was found that section 3(1) did not automatically confer subject matter jurisdiction over extra-territorial firm conduct on the competition authorities. 35Rather, section 3(1) of the Act provided for the "qualified effects test", which envisioned that for the Act to apply to extra-territorial conduct, the conduct must have had "direct and foreseeable substantial" consequences in the regulating country. in restricting the bounds of the effects test, determining that "section 3 envisaged that the Act applied to all economic activity outside South Africa where the conduct complained of had 'direct and foreseeable' substantial consequences in South Africa." 36 While the respondents argued that the Commission's referral fell short of meeting the qualified effects test, the Tribunal found that for the purposes of establishing jurisdiction, the enquiry did not involve a consideration of the positive or negative effects on competition in the regulating country but merely whether there were sufficient jurisdictional links between the conduct and the consequences. 37The Tribunal was not with merits at this stage.All the Commission needed to do was to satisfy the prima facie requirements of the testwhether the Commission's referral shows the alleged conduct to satisfy contravention of section 4(1)(b) and whether the referral prima facie showed that the likely effects of the conduct were direct, substantial and foreseeable. 38rther, and relating to the respondents' submissions that the Commission's referral lacked "connecting factors" to establish extra-territorial jurisdiction, the Tribunal referenced the CAC's development of the common law of personal jurisdiction to section 3(1) to ensure that extra-territorial egregious conduct which might have anti-competitive effects on the South African economy does not escape the reach of the Act. 39To that end the Tribunal found that it had to consider all connecting factors and not only those contained in the Commission's pleadings. 40This wide interpretation and development of the common law by the Tribunal and the CAC is consistent with the promotion of the spirit, purport and objects of the Bill of Rights as envisaged by the Constitution 41 insofar as the attainment of justice is generally concerned, and the protection of consumers' socio-economic rights is specifically concerned.business' which involved acts within the relevant territory that amounted to or were ancillary to, transactions that make up or support the business". 44timately, determining whether the Commission had proved a prima facie link between conduct and effects to found extra-territorial jurisdiction in section 3(1) of the Act was up to the Tribunal's discretion.This discretion had to be exercised through a balancing of several factors that did not constitute a closed list. 45The Tribunal exercised this discretion and found it had subject matter and personal jurisdiction over the peregrini. 46e decision to dismiss the respondents' exceptions and objections to the Tribunal's jurisdiction is laudable for two reasons.First, it creates certainty regarding extra-territorial jurisdiction in section 3(1) of the Act.Further, it asserts the competition authorities' attitude to fighting CBCs and the authorities' commitment and refusal to be bullied by "big business" from more developed jurisdictions. 47However, it raises the question of whether half jurisdiction is better than none.This is because the decision in its order dismissing the exceptions remained silent on the recourse available to the competition authorities where the alleged conduct was to be proven.Is it then to be imputed from the reading of the order dismissing the peregrini's objection that the Tribunal can both find against a peregrinus and penalise it as well?If so, how are the practical implications of enforcing a sanction on a non-resident perpetrator to be dealt with?
Perhaps the Tribunal had pre-empted its lack of power in the 2017 finding where it found that it had jurisdiction but only insofar as issuing a declaratory order was concerned. 48If this is to be accepted to be the case, it then raises the serious risk of relegating the current judgment to being only of academic relevance.What is the point of all the contentious litigation and the lengths the Tribunal went to establish that it had jurisdiction if that jurisdiction is limited to prosecutorial and not penal jurisdiction?It is also worth noting that the determination of whether the alleged conduct was in contravention of section 4(1)(b) of the Competition Act, which was the primary purpose of the 2017 referral, is still in abeyance as the authorities have been dealing with exceptions, objections, dismissal applications, appeals and cross-appeals relating to the citation and joinder of respondents.The Tribunal still needs to make a ruling to that effect and may yet be taken on appeal to the CAC and beyond.The delay in dealing with the merits and deciding on the alleged conduct, as well as the potential for future appeals and delays, perhaps proves another arrow in the cartelise quiverthe fact that they can litigate a matter almost in perpetuity.The perverse consequence of this delay and delays of this nature in similar cases is that while all this is ongoing, innocent consumers are the ones that feel the effects of the alleged cartel members' conduct.

CBCs and the AfCFTA
As indicated in the introductory section, this note does not seek to provide an in-depth discussion of the AfCFTA's competition regime.However, this note is alive to the fact that the challenges faced by the South African competition authorities regarding CBCs may also be faced by the AfCFTA competition authority.It is therefore necessary to highlight how the challenge of jurisdiction may manifest in the AfCFTA.Despite the aspirations of the AfCFTA Agreement, 49 namely the free movement of people, goods and services, its implementation will not be without challenges. 50In the competition law domain the concern of CBCs is real.To understand the reality of the challenge of CBCs, one has only to look at recent examples of CBCs that have been the centre of attention for national competition authorities across Africa, which include the following: • The Automotive Components Cartel (2020) affecting South Africa and COMESA. 51 Considering the above, as well as the opening of Africa for trade, it is not a matter of "if" but of "when" CBCs will entrench and increase, and in that eventuality the question becomes whether the AfCFTA is equipped to deal with this scourge.To provide for effective competition regulation, including the regulation of cartels, the AfCFTA Agreement provided for Phase II Negotiations, which included establishing a competition policy. 52The envisaged competition policy culminated in enacting the Protocol to the Agreements, establishing the African Continental Free Trade Area on Competition Policy (the Competition Protocol). 53The objectives of the Competition Protocol include ensuring that gains from AfCFTA trade liberalisation are not negated or undermined by anti-competitive practice. 54ne of the anti-competitive practices that the Competition Protocol seeks to regulate is that of cartel conduct.The Protocol prohibits horizontal business practices such as: • the fixing of prices or trading conditions; • restraints on production or sale, including by quota or output restriction; • collusive tendering or bid-rigging; • market or customer allocation; • concerted refusal to purchase or supply; and • the collective denial of access to an arrangement, or association, which is crucial to competition. 55e Article proceeds to provide that any agreement, decision by associations of undertakings or concerted practice is prohibited if it has the effect of distorting, preventing or restricting competition in the market unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect. 56In terms of the institutional framework, the Protocol establishes the Competition Authority, 57 the Competition Board 58 and the

1
Kelly et al Principles of Competition Law 85-86; Neuhoff et al Practical Guide to the South African Competition Act 75; Whish and Bailey Competition Law 520-521. 2 Kelly et al Principles of Competition Law 85-93, Whish and Bailey Competition Law 530-547; Motta Competition Policy 138-142.3 Competition Act 89 of 1998 (hereinafter "the Act" or the Competition Act).(b)(i-iii) of the Act. 6

2 Competition Commission of South Africa v Bank of America Merrill Lynch International Designated Activity Company [2023] ZACT 26 (30 March 2023)
16

•
Incola bankseight local banks in respect of which jurisdiction of the Tribunal was not disputed; • First class local peregrinifive banks which had a South African Branch and were registered in terms of the Banks Act 94 of 1990; 12CC v BOA para 2. 13 CC v BOA para 3. 14 CC v BOA para 11. 15 CC v BOA para 13. 16 CC v BOA para 16.
42It is also consistent with international best practice if one considers the Australian Competition and Consumer Commission's (ACCC) successful prosecution of the Valve Corporation and the court's finding that it had jurisdiction in terms of the Competition and Consumer Act, 43 in whatever "territory where there was 'carrying on of 37CC v BOA para 84; see ANSAC para 18.
The African Continental Free Trade Area, established by the Agreement Establishing the African Continental Free Trade Area.See African Union date unknown https://au.int/en/treaties/agreement-establishing-african-continental-free-trade-area(hereinafter "the Agreement").
50See Art 3 of the Agreement establishing the AfCFTA for a comprehensive list of objectives.