Antitrust: Commission fines defence company €1.2 million in cartel settlement

The European Commission has fined defence company Diehl €1.2 million for participating in a cartel concerning the sale of military hand grenades together with its rival RUAG.  Both companies admitted their involvement in the cartel and agreed to settle the case. RUAG was not fined as it revealed the cartel to the Commission under the leniency programme.

The infringement

The product concerned by the cartel is military hand grenades.

The Commission investigation revealed that the two manufacturers split national markets across the European Economic Area (‘EEA’) between themselves during almost 14 years. Following this allocation, only the designated manufacturer was entitled to sell military hand grenades in its allocated territory unless the other party gave its consent.

The Commission investigation revealed the existence of a single and continuous infringement in the EEA spanning from 7 November 2007 to 23 November 2021. RUAG’s participation in the infringement ended on 15 April 2021.

Fines

The fines were set on the basis of the Commission’s 2006 Guidelines on fines (“Guidelines” – see also MEMO).

In setting the fines, the Commission took into account in particular, the nature of the infringement, its geographic scope and its duration. Moreover, since by applying the general methodology of the Guidelines the resulting fine would have been very low, to achieve sufficient deterrence the Commission used its discretion under point 37 of the Guidelines to significantly increase its amount.

Both companies cooperated with the Commission under the leniency programme (2006 Leniency Notice):

• RUAG received full immunity for revealing the cartel, thereby avoiding a fine of ca. € 2.5 million.
• Diehl benefited from a 50% reduction of the fine for its cooperation with the Commission’s investigation. The reduction reflects the timing of its cooperation and the extent to which the evidence it provided helped the Commission prove the existence of the cartel in which it was involved.

In addition, under the Commission’s 2008 Settlement Notice, the Commission applied a reduction of 10% to the fines imposed on the companies in view of their acknowledgment of their participation in the infringement and of their liability in this respect.

Background

Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) and Article 53 of the EEA Agreement prohibit cartels and other restrictive business practices. This is the first cartel case in the defence sector.

The Commission’s investigation was triggered by an immunity application under the Commission’s 2006 Leniency Notice submitted by RUAG, which was followed, after the inspections in November 2021, by an application for reduction of the fine by Diehl.

More information on this case will be available under the case number AT.40760 in the public case register on the Commission’s competition website, once confidentiality issues have been resolved. For more information on the Commission’s action against cartels, see its cartels website.

The settlement procedure

Today’s decision is the 41^st settlement since the introduction of this procedure for cartels in June 2008 (see press release and MEMO). In a settlement, parties acknowledge their participation in a cartel and their liability for it. They also accept the maximum amount of the fine which the Commission intends to impose. Cartel settlements are based on Antitrust Regulation 1/2003 and allow the Commission to apply a simplified and shortened procedure. This benefits consumers and taxpayers as it reduces costs. It also benefits antitrust enforcement as it frees up resources. Finally, the parties themselves benefit in terms of quicker decisions and a 10% reduction in fines.

Leniency programme

The Commission’s leniency programme gives companies the opportunity to disclose their participation in a cartel and cooperate with the Commission during an investigation. A successful leniency applicant will either completely avoid a potentially high fine or receive a substantial reduction from it. Further information about the Commission’s leniency programme can be found here. The Commission has recently published a Frequently Asked Questions document, which provides guidance on its leniency policy and practice to potential applicants.

Whistleblower tool

The Commission operates a tool to make it easier for individuals or companies to alert it about anti-competitive behaviour while maintaining their anonymity. This tool protects whistleblowers’ anonymity through a specifically-designed encrypted messaging system that allows two way communications. The tool is accessible via this link.

Action for damages

Any person or company affected by the anti-competitive behaviour described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the cartel participants concerned, damages may be awarded without being reduced on account of the Commission fine.