The Competition Tribunal has granted interim relief to the Sekunjalo Group, preventing three banks from closing the group’s accounts and ordering five others to reopen accounts that have already been closed.
The interim relief will be in place for six months from the date of the tribunal’s order (16 September) or when the Competition Commission concludes its investigation into a complaint filed by Sekunjalo alleging the banks engaged in restrictive practices, whichever occurs first.
A total of 36 applicants, including Sekunjalo Group chairperson Dr Iqbal Survé, brought the interim relief application against nine banks, claiming that the banks’ termination of their banking relationship with the applicants and/or refusal to provide them with banking and payment services constituted an abuse of dominance and/or collusive conduct in contravention of the Competition Act.
The nine banks are Absa, Access, Bidvest, First Rand, Investec, Mercantile, Nedbank, Sasfin and Standard.
The applicants asked the tribunal for an interim order prohibiting the closure of their existing bank accounts, where the accounts had not been terminated, and directing the banks to restore accounts that had already been closed.
Absa, Access, First Rand, Nedbank and Sasfin were ordered to reopen certain bank accounts on the same terms and conditions as existed before they had been closed.
Bidvest, Mercantile and Standard were interdicted from closing the accounts of the applicants that hold accounts with them and from unilaterally changing the terms and conditions attached to the accounts and/or the services provided.
The banks were not required to open any new account that did not previously exist or provide any additional services not previously provided.
The tribunal dismissed the applicants’ application in relation to Investec, because the relevant accounts were seemingly used for Dr Survé’s personal banking. It said these accounts have no bearing on the ability of the Sekunjalo Group to compete or sustain itself in the markets in which it operates.
The tribunal made no order as to costs.
The tribunal’s order came days after the Western Cape High Court reserved judgment in Nedbank’s appeal against the interim interdict granted to Sekunjalo in June preventing the bank from closing its bank accounts.
In terms of the ruling in June, any of Sekunjalo’s accounts that had already been closed at the time of the hearing of the application had to be reopened immediately, pending the final determination of Sekunjalo’s application to the Equality Court.
Exclusions from the order
The tribunal’s order excludes:
- Dr Survé’s personal accounts with Nedbank unrelated to any business activities.
- An account of Ayo Technology Solutions, a company in the Sekunjalo Group, held with a Nedbank entity in Lesotho not cited as a respondent before the Tribunal.
- A Sasfin account held by ESP Africa, a company in the Sekunjalo Group, because it was blocked from inception due to non-compliance with the Financial Intelligence Centre Act.
- With respect to Absa, nine of the applicants accepted an offer of a six-month extension of the subsistence of their accounts before their closure. Their closure was agreed to by the nine applicants.
The parties’ cases
Sekunjalo argued that the banks’ closing of its accounts or refusing to provide banking and payment services constituted an abuse of dominance, or collusion, or co-ordinated conduct, which reduced competition in contravention of the Competition Act.
The group argued that without access to banking and payment services, it would cease to trade, and effective competition within the various markets in which it operated would be eliminated.
In response, the banks argued that the case concerned their right and ability to enforce the contractual terms that govern the subsistence and management of accounts lodged with them, where the accounts in question may cause the bank significant reputational risk.
The banks argued that the enforcement of these contractual terms did not constitute a contravention of the Act. Furthermore, the banks argued that dealing with the applicants, allegedly implicated in wrongdoing, was a risk to their reputation.
The banks undermined their case
The tribunal found that the Sekunjalo Group established prima facie that the banks have engaged in a concerted practice involving a refusal to supply banking services to the group amounting to a restricted horizontal practice in terms of section 4(1)(a) of the Competition Act.
The banks justified their conduct on the basis of the reputational risk of dealing with Sekunjalo because of findings of malfeasance and impropriety made by Judge Lex Mpati, following a commission of inquiry into Ayo’s dealings with the Public Investment Corporation.
The tribunal underlined the significance of the banks managing risk. However, it found that the banks’ justification was undermined by their not having shown consistency in its application.
“The undisputed and non-speculative fact before us is that a number of other companies have been implicated in serious allegations of misconduct, such as alleged state capture and serious allegations of corruption. Concrete evidence of consistency in approach by the respondents in relation to reputational risk would have given their stated case more weight.”
Third-party payment providers not a substitute
The Sekunjalo Group argued that without interim relief, they were likely to be left unbanked and would not be able to compete effectively in the markets in which they operate. The result would be the loss of jobs and livelihoods of tens of thousands of people and the loss of a competitive black-owned businesses. If no relief was granted, that would cause serious or irreparable damage.
The banks argued that the Sekunjalo Group could approach alternative banks or make use of third-party service providers.
The tribunal found that third-party payment providers are not economic substitutes for the services provided by the banks.
It said if the Sekunjalo Group did not have access to banking and payment services, “they will be significantly hampered in operating effectively […] This will prima facie affect competition in the markets that they operate in, and from a consumer perspective, affect the choices of customers in the affected markets, which the Act seeks to promote [… If] the applicant firms are hampered in their ability to compete in the markets that they operate in, the public interest, such as the promotion of employment and retention of jobs, as well as empowerment, could be severely affected.”
The tribunal also noted that the Sekunjalo Group was a black economic empowerment entity.
“Sekunjalo Group provides employment to over 8 500 people with tens of thousands of dependants, mostly from poor black communities. Should Sekunjalo not have access to banking and payment services, many if not all of those jobs could be in danger of being lost, and the participation of tens of thousands of people from black communities in the economy could be in danger of being lost,” it said.
