The Competition Commission v Bank of America Merrill Lynch International Limited and Others

On 1 April 2015, the Competition Commission initiated a complaint against various banks (both local and foreign) for colluding to fix prices and divide markets in respect of the rand-dollar exchange rate in contravention of section 4(1)(b) of the Competition Act 89 of 1998. The complaint was referred to the Competition Tribunal on 15 February 2017. The respondent banks filed exceptions, primarily concerning jurisdiction. The banks were categorized as: (1) "pure peregrini" - neither domiciled nor carrying on business in South Africa; (2) "local peregrini" - foreign banks with some presence in South Africa (branches or representative offices); and (3) local banks. The Competition Commission filed multiple supplementary affidavits and sought to join additional respondents. The Competition Tribunal found it had no personal jurisdiction over the pure peregrini banks, though it considered it could issue a limited declaratory order excluding civil damages and penalties. The Tribunal ordered the Commission to file a new referral affidavit regarding the local peregrini.

• Whether section 3(1) of the Competition Act applies extraterritorially to conduct occurring outside South Africa that has effects within the Republic
• Whether the common law requirement of personal jurisdiction over peregrini must be established before the Competition Tribunal can exercise jurisdiction
• Whether the common law regarding personal jurisdiction should be developed to align with the objectives and scope of the Competition Act
• Whether the Competition Tribunal has jurisdiction to make declaratory orders against pure peregrini in the absence of personal jurisdiction
• Whether adequate connecting factors between foreign respondents and South African jurisdiction can establish personal jurisdiction
• The proper test for establishing subject matter jurisdiction under section 3(1) of the Act
• Whether joinder applications could be deferred pending filing of a proper referral affidavit
• Whether a cross-appeal could properly be noted against a respondent who had not itself appealed

The appeal against paragraph 3 of the Competition Tribunal's order was upheld. The cross-appeal against paragraph 1 was upheld. The Tribunal's order was set aside and replaced with an order: (1) dismissing the applications for dismissal by pure peregrini banks, subject to the Commission filing a new referral affidavit within 40 business days; (2) requiring the new affidavit to confine the case to a single overall conspiracy with specific particulars; (3) requiring the Commission to set out facts establishing adequate connecting factors between parties and the Tribunal's jurisdiction; (4) granting leave to join Investec Bank Limited; (5) deferring other joinder applications pending compliance; (6) dismissing the sixth respondent's application to set aside the cross-appeal with costs; (7) ordering respondent banks to pay costs of the appeal and cross-appeal, including costs of two counsel.

The binding legal principles established are: (1) Section 3(1) of the Competition Act 89 of 1998 applies extraterritorially to all economic activity having an effect within South Africa, using a test of direct, foreseeable and substantial consequences within the Republic. (2) The common law requirement of personal jurisdiction must be developed to align with the objectives and scope of the Competition Act, particularly in the context of economic globalization. (3) Personal jurisdiction over peregrini in competition matters can be established through adequate connecting factors between the parties, the alleged conduct, and South African jurisdiction, without necessarily requiring physical presence in South Africa, submission to jurisdiction, or attachment of property. (4) In cases involving alleged cartels or concerted practices between peregrini and local parties that have substantial effects in South Africa, the adequate connecting factors may establish both subject matter and personal jurisdiction. (5) The Competition Tribunal cannot issue any order, including a declaratory order, against parties over whom it lacks jurisdiction. (6) A cross-appeal is legally equivalent to an appeal and can properly be noted against respondents who did not themselves appeal the original order.

Davis JP made several non-binding observations: (1) Economic globalization has challenged the ability of nation states to pursue policies based on democratic choice, with competition law being a key site of this tension. (2) Multinational corporations are often more powerful than nation states and can strategically structure their behavior to avoid national regulation. (3) The presumption against extraterritoriality for economic law defending markets is no longer appropriate in the altered global marketplace. (4) Economic considerations will dictate whether a South African judgment has prospects of successful enforcement abroad. (5) Service under Tribunal rules appears more permissive than High Court rules and can be effected by email or fax. (6) A declaratory order by the Tribunal finding cartel participation may have significant consequences for a peregrinus even without civil penalties. (7) The Court emphasized the transformative objectives in the Act's preamble regarding addressing apartheid's legacy of concentrated economic power. (8) Reference was made to international approaches to extraterritorial jurisdiction in competition law, including US, EU, and OECD jurisprudence and scholarship. (9) The Court noted the Competition Commission's unsatisfactory and vacillating approach to the litigation through multiple supplementary affidavits.

This judgment is highly significant for South African competition law enforcement in establishing: (1) The extraterritorial reach of the Competition Act to conduct occurring outside South Africa that has direct, foreseeable and substantial effects within the Republic; (2) The development of common law personal jurisdiction principles to accommodate modern economic realities of globalization and transnational anti-competitive conduct; (3) That adequate connecting factors between foreign parties and South African jurisdiction, particularly in alleged cartel cases, can establish personal jurisdiction without requiring physical presence or attachment of property; (4) The importance of aligning jurisdictional principles with the Act's transformative objectives, including addressing concentrations of economic power and protecting consumers; (5) Recognition that cartel activity is the most egregious form of anti-competitive conduct requiring effective enforcement mechanisms; (6) Guidance on the relationship between subject matter jurisdiction (section 3(1)) and personal jurisdiction in competition matters. The judgment addresses a critical gap in competition law enforcement in the digital, globalized economy where anti-competitive conduct increasingly transcends national borders.