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Harsher penalties for collusion

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Harsher penalties for collusion
Harsher penalties for collusion
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The Competition Commission is seeking fines against 17 banks for their hand in allegedly manipulating the rand-dollar currency trade over eight years. If the Commission were to succeed in its price-fixing case against some of the world’s biggest banks, it would be enough to wipe out the country’s budget deficit [1]. That’s how great the extent of the rigging is. The Commission found that implicated banks used Bloomberg chatrooms to enter into arrangements to fix prices of the rand-dollar exchange and divide the market by allocating customers since at least 2007 [2]. It also emerged that a number of the traders identified in the Commission complaint were not new to forex rigging. Let's call the Banks Collusion saga what it really is, corporate corruption.

In the recent past we have seen corrupt collusion in the bread and construction industries. The dominant narrative on corruption has conveniently implied that corruption only happens in government. Yet, we keep hearing about more revelations of corruption in Mzansi’s private sector. Even after those implicated in the bread cartel [3] and construction cartel [4] were found guilty, they only faced a fine of 10% of their annual turnover. This doesn’t do enough to recover the looted money, nor change the behaviour of companies. That’s why the Competition Act, and other laws, should be amended to clamp down on this behaviour. Companies should have to pay back at least 50% of their ill-gotten gains made every year from collusion.

While there was limited political support for ensuring the bread and construction cartels were held to account, there is clearly political support for the Competition Commission bringing banks to book. That’s why it’s critical we act now to ensure the Competition Commission has the power to truly hold companies to account. Banks like Citibank may have already agreed to pay a 10% fine [5], but we should all know they are only paying back a fraction of the money they essentially ‘stole’ from us.

With Citibank already having admitted guilt, it confirms the pervasiveness of continued greed within the banking sector. The blatant regard for others and their well being is beyond measure considering that such behaviour by the banks had the potential to collapse national and global financial systems. Furthermore, such actions have led to immeasurable pain to ordinary people as evidenced by the deep recession of 2008-09, which was triggered by banks conducting their business recklessly.

Dear Mr Jacob Zuma, President of South Africa, Mr Rob Davies, Minister of Trade and Industry, Mr Michael Masutha, Minister of Justice,

We, the undersigned, call on you to act swiftly in bringing those implicated in the banks collusion to book. You will recall that the rand has suffered considerably in the last 8 years and the revelations by the Competition Commission have given us insight into who is responsible for this. This has had dire consequences for many families where bread winners have lost their jobs due to economic volatility.

Even after the Bread and Construction Cartels were found guilty, they only faced a fine of 10%, and this does nothing to change the behaviour of companies. That is why we are calling on you to amend the Competition Act and other laws to clamp down on this behaviour. Companies should have to pay back at least 50% of their ill-gotten gains made every year from collusion.

[1] Banks bust: ‘Price-rigging’ fine would be enough to wipe out SA's budget deficit, Lisa Steyn, Lynley Donnelly for Mail&Guardian. Feb 17, 2017.
[2] MKMVA demands harsher punishment for banks over collusion, Mahlatse Gallens for News24. Feb 18, 2017.
[3] Bread cartel member Foodcorp fined R45.4mil, South African News Agency.
[4] World Cup stadium construction cartel gets its comeuppance, Lisa Steyn for Mail&Guardian. Dec 4, 2015.
[5] Citibank to pay R69.5m in rand rigging scandal, Adiel Ismail for Fin24. Feb 20, 2017.

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If the Department of Trade and Industry can amend the Competition Act, the Competition Commission can issue a harsher sentence for companies guilty of collusion, and robbing Mzansi.