Constitutional Court widens reach of SA competition watchdog in cross-border cartel case

A recent Constitutional Court judgment has clarified how far South Africa's competition authorities can reach when pursuing cartel conduct involving foreign companies with no physical presence in the country.

According to legal experts at law firm Pinsent Masons (*), the case arose from allegations that a group of local and international banks – several without any office, branch or other footprint in South Africa – colluded to manipulate the dollar-rand exchange rate, in breach of the Competition Act.

After investigating, the Competition Commission of South Africa (CCSA) referred the matter to the Competition Tribunal (Ct) for a ruling. A number of the banks challenged the tribunal's jurisdiction, arguing in particular that the foreign banks fell outside its reach.

The court considered jurisdiction on two fronts: whether the conduct had sufficient effect in South Africa to fall within its subject-matter jurisdiction, and whether there were enough connecting factors to bind the parties to a South African ruling.

The CCSA had pushed for a broad reading of the Act, arguing that because the local and international conduct formed part of a single overarching conspiracy (SOC), liability could attach to both local and foreign banks alike.

The court retained the existing “qualified effects” test for establishing subject-matter jurisdiction – asking whether it was foreseeable that the conduct would have a direct, immediate and substantial effect in South Africa – and declined to widen it as the CCSA had proposed.

It did, however, accept that jurisdiction could be established where local and foreign banks participated in a single overarching conspiracy, provided there were adequate connecting factors linking them to South Africa.

Mark Thomas, a competition law expert at Pinsent Masons, said the courts appeared to require knowing participation in the broader conspiracy for the SOC doctrine to apply, inferred from a pattern of conduct sufficiently directed at South Africa or its market participants – rather than mere presence within a wider global conspiracy.

Andrew Attieh, from the same law firm, said that although the court rejected the CCSA's bid to expand the qualified effects test itself, the ruling still marked further progress in how South African competition law approaches international cartel enforcement, strengthening the CCSA's ability to investigate and pursue firms with no physical presence in the country.

Thomas added that the door had been left open for the argument to resurface in future cases, meaning businesses operating outside South Africa should not treat the jurisdictional question as settled. In practice, he said, most global hardcore cartels affecting South Africa would already meet the qualified effects test, making the vindication of the Soc doctrine significant for the Ccsa as antitrust regulator.

Christian Peeters, an EU competition law expert at the firm, said recognition of the SOC doctrine would substantially expand the CCSA's enforcement powers – not only in terms of jurisdictional reach, but in helping the regulator capture the economic reality of complex cartels, attribute liability across broad schemes, and avoid limitation-period complications where older elements of a cartel might otherwise be treated as separate infringements.

He noted the court drew heavily on EU precedent in linking a single continuous infringement to a common anticompetitive objective, a firm's intentional contribution to that objective, and its awareness – or reasonable foreseeability – of the wider scheme. Following the ruling, the CCSA is able to proceed with its case before the tribunal against six banks.

Thomas said the implications extended well beyond banking, given the increasing interconnection of global markets, and advised businesses engaged in cross-border commercial activity to keep a close eye on how domestic enforcement powers continue to evolve in relation to conduct originating beyond South Africa's borders.

• Read the original article here: “South Africa competition decision provides guidance on jurisdiction in prosecution of international cartel cases”.