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 for alleged collusion to fix prices and divide markets in respect of the rand-dollar exchange rate, in contravention of section 4(1)(b)(i) and (ii) of the Competition Act 89 of 1998. The complaint was referred to the Competition Tribunal on 15 February 2017. The respondent banks raised exceptions challenging the Tribunal's jurisdiction. The banks were classified as either "pure peregrini" (firms neither domiciled nor carrying on business in South Africa) or "local peregrini" (banks with some presence in South Africa). The Competition Tribunal found it had no personal jurisdiction over pure peregrini but allowed a limited declaratory order. The Tribunal required the Commission to file a new referral affidavit regarding local peregrini to establish subject matter jurisdiction. Both parties appealed various aspects of this order.

• Whether the Competition Tribunal has personal jurisdiction over foreign firms (peregrini) not domiciled or carrying on business in South Africa
• Whether section 3(1) of the Competition Act permits extraterritorial application
• Whether the common law requirement of personal jurisdiction must be satisfied in addition to subject matter jurisdiction
• Whether the common law relating to personal jurisdiction should be developed to align with the purposes of the Competition Act
• Whether the presumption against extraterritoriality applies to limit the scope of section 3(1)
• The proper test for establishing subject matter jurisdiction under section 3(1) (qualified effects test)
• Whether adequate connecting factors can establish personal jurisdiction over peregrini
• The validity of joinder applications and cross-appeals in the circumstances

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 requiring the Competition Commission to file a new referral affidavit within 40 business days, establishing: (1) facts showing foreseeable direct, immediate and substantial effects in South Africa; (2) facts showing adequate connecting factors establishing personal jurisdiction over all named respondents; and (3) detailed particulars of the alleged single overarching conspiracy. The application by the sixth respondent to set aside the cross-appeal was dismissed with costs. Joinder of certain parties was deferred pending compliance with the order. Costs were awarded to the Competition Commission, including costs of two counsel.

1. Section 3(1) of the Competition Act applies extraterritorially to economic activity having an effect within South Africa, based on a 'direct, substantial and foreseeable effects' test. The presumption against extraterritoriality does not override this clear statutory provision. 2. The common law requirement of personal jurisdiction must be developed to align with the purposes and scope of the Competition Act. Where there are adequate connecting factors between the parties and the jurisdiction, and the conduct has direct, substantial and foreseeable effects in South Africa, personal jurisdiction can be established over peregrini without the traditional requirements of domicile, carrying on business, submission or attachment. 3. In cases involving alleged participation in cartels or overarching conspiracies affecting the South African economy, adequate connecting factors may be established by showing the relationship between all parties (including peregrini and incolae) and the anti-competitive conduct. 4. Once jurisdiction is established, the Tribunal has power under section 58 to make appropriate orders, including declaratory orders. However, where a tribunal finds it lacks jurisdiction, it has no power to make any order.

The Court emphasized that cartel activity is "the most egregious form of anti-competitive conduct" and a "scourge on consumers." The judgment extensively discussed the challenges posed by globalization to national competition law enforcement, noting that "multinational corporations are often more powerful than nation states and can strategically comport their economic behaviour to avoid national regulation." The Court observed that failure to develop the law would mean that "egregiously uncompetitive conduct which had direct and foreseeable consequences upon the economy of South Africa and the welfare of consumers would fall outside of the scope of the Act." The Court noted concerns about enforcement of South African judgments abroad, but emphasized that economic considerations and the significance of declaratory orders finding cartel participation may provide practical effectiveness. The judgment made clear that it expressed no view on the merits of the Commission's case and that all substantive issues remained to be determined. The Court also commented on the Commission's unsatisfactory and vacillating approach to the litigation, describing its conduct as resembling "a movable jurisprudential feast."

This is a landmark case in South African competition law establishing the extraterritorial reach of the Competition Act and developing the common law of personal jurisdiction to meet the challenges of the global economy. The judgment affirms that section 3(1) permits extraterritorial application based on effects within South Africa and that adequate connecting factors can establish personal jurisdiction over foreign peregrini without the traditional requirements of domicile, carrying on business, submission, or attachment. This development is crucial for effective enforcement against international cartels and anti-competitive conduct occurring abroad but affecting South African markets and consumers. The judgment aligns South African law with international competition law principles and recognizes that failure to develop the law would render key provisions of the Act nugatory in the globalized economy. It represents a significant shift in jurisdictional principles to address transnational anti-competitive conduct.