The closure of the Sekunjalo Group’s banking accounts by Nedbank and several other major banks is unjustified and irrational, the Competition Tribunal was told on Tuesday by the group in its urgent bid for these banks to reopen these accounts.
This comes in the wake of the recent finding by the Competition Commission that these banks were guilty of colluding to push the Sekunjalo group out of the banking market.
Sekunjalo and 27 of its companies are asking for an urgent interim order forcing these banks to reopen its bank accounts and to again do business with it until the conclusion of the referral by the Commission of its findings to the Tribunal, following the complaint filed by Sekunjalo which alleged prohibited practices by the banks.
The Competition Commission in its findings last month said, “The investigation found that the banks took a decision to terminate and/or refuse to open bank accounts for the Sekunjalo Group of companies. Sekunjalo will be forced to exit markets where they are active as a direct result of the banks’ decision to terminate and/or refuse to open bank accounts for them.”
The investigation also found that the decision by the banks to terminate and/or refuse to open bank accounts for Sekunjalo constitutes a prohibited concerted practice by firms in a horizontal relationship, which has the effect of lessening competition in markets where Sekunjalo is active.
The investigation further found that the exit of Sekunjalo Group in the market will have substantially negative effects on public interest.
The Commission has meanwhile requested the banks to provide written submissions that could justify their decision to terminate and/or refuse to open bank accounts for Sekunjalo.
The banks have not yet made submissions, and the tribunal was on Tuesday told that the banks disagree with the prima facie findings of the Commission.
The Commission is meanwhile consulting senior advocates to draw up an application to take its findings to the tribunal for final investigation and its verdict.
In light of the Commission’s determination and the effect of the prohibited practice on the Applicants (the Sekunjalo Group), the Applicants have now approached the Tribunal so that it can, in the interim, again do business with these banks.
Advocate Vuyani Ngalwana SC told the panel of three - Andreas Wessels, Imraan Valodia and Mondo Mazwai - that there is undisputed evidence that the concerted conduct by the banks has the effect of substantially preventing or lessening competition in the markets in which the Applicants are active. The concerted conduct also has a material effect on public interest, it was said.
“There is no objective justification for the termination and/or refusal by the banks to provide banking services to the Applicants. There is an urgent need to prevent serious and irreparable harm to the Applicants, and the balance of convenience favours the granting of an interim interdict,” he said.
The panel was told that there is no harm that faces Nedbank and the other banks if the termination of the accounts is reversed. Ngalwana said Nedbank has confirmed in writing that it does not accuse the Applicants (or any of the entities within the Sekunjalo Group) of money laundering or corruption.
Nedbank’s argument that the Applicant must establish their own prima facie case of prohibited practice separately and independently of the Commission’s finding, after an investigation of more than a year, that a prohibited practice has been established, was dismissed by Ngalwana.
He said the Applicants have a right to equal protection and benefit of the law, and not to be unfairly discriminated against.
“The Applicants are significant players in the media and publishing market. They have a right to freedom of expression, which includes freedom of the press and other media, and freedom to receive or impart information or ideas.”
He also told the tribunal that as South African companies and their South African employees, the Applicants have the right to choose their trade, occupation or profession freely.
He said the Tribunal should question whether the participation of historically disadvantaged persons in the national economy as a result of lack of bank accounts will be diminished by the closure of the Applicants’ bank accounts.
Another question was what the substantial public interest considerations are in relation to the effect of the conduct on employment, social and economic welfare of the Applicants’ employees in a country in which unemployment is approximately 32%.
“The Tribunal must do what the Constitution demands of it by containing the trend of banks that collectively hold almost 90% of the total banking sector assets from foreclosing the Applicants.”
Ngalwana said this would most likely or inevitably give rise to exit from the markets and retrenchments in circumstances in which participation by black companies in the national economy and employment is desperately needed, and where the pace of transformation has been very slow and unemployment is high.
He pointed out that the Commission has now determined that prohibited conduct has been established and that the closure of the bank accounts of the Applicants was done in a coordinated manner.
“The Applicants have been denied access to banking services by approximately 100% of the banking services market and/or by 90% of the banking services market which comprises the big five banks. Eighteen of the Applicants do not have alternative bank accounts. Without bank accounts, the Applicants cannot compete effectively in their markets,” Ngalwana argued.
Approximately 4,512 employees will likely lose their jobs, he said.
Nedbank in its termination letters relied on allegations in media reports and adverse inferences made in the Mpati Report.
But Ngalwana said this cannot be an objective and rational justification for the closure of the Applicants’ bank accounts. Nedbank itself, through its CEO Mike Brown and Nedbank’s Group Chief Legal Counsel, confirmed that they are not accusing the Applicants of corruption or money laundering.
“There is no explanation from Nedbank why non-infringing alternatives have not been explored in circumstances where Nedbank has been banking the Applicants for many years,” he told the Tribunal.
Advocate Greta Engelbrecht, arguing on behalf of Nedbank, said the Tribunal should not entertain the application, as there is at present no referral of the Commission’s findings to the Tribunal. She also maintained that the Commission gave no reasons for its findings and it may be that its findings are not correct.
She strongly denied that Nedbank coordinated its decision to close the Applicants’ banking accounts with the other banks. She remained steadfast that it was a decision made by Nedbank alone.
According to Engelbrecht’s argument, all 28 companies under Sekunjalo should prove the harm they had suffered by the closing of their accounts.
She maintained that apart from three companies, the rest have made alternative banking arrangements through third-party payments. Thus, she said, they are not being pushed out of the banking sector.
“Yes, it is harder to do business, but there is no reason to come to court.”
She added that there are also some accounts among those which were closed, which were mainly dormant. She was asked by Wessels why the bank then refused to open those. Engelbrecht responded that Nedbank relied on reputational damage.
Wessels, who, among others, peppered Engelbrecht with questions, also asked her about the Applicants which now have to pay more by using third-party payments, to which she said it is so, but at least they have access to the facilities.
The tribunal, meanwhile, indicated that it would give its verdict “in due course”.