HP-2020-000016 - [2025] EWHC 1451 (Ch)

Cabo advanced three main criticisms of Mr Parker’s significant success model, by reference to the comparator chosen and the cost and revenue inputs to the model.

Product comparison.Cabo’s first objection was that My Little Pony Fash’ems was a poor indicator for the performance of Worldeez in a “significant success” scenario, on the basis that the product was first launched some years previously, in 2013; each series had a smaller number of figurines to collect than the Worldeez launch series; and the packaging was simpler than Worldeez.

I do not accept those objections. In a model which attempts to predict profitability in a counterfactual scenario using a real-world comparator, the question is not whether the comparator product shares precisely the same qualitative features as the product under investigation (which in a highly differentiated product market will inevitably be difficult to replicate). Rather, the question is whether the comparator is a reasonable proxy for the performance of the product under investigation, in the counterfactual scenario being investigated. That will undoubtedly involve consideration of the features of the product, but will also take into account other factors relevant to the comparison of likely market performance, such as the price point at which it was sold and the experience and reputation of the supplier.

In that regard, My Little Pony Fash’ems had qualitative features which made it in at least some relevant respects comparable to Worldeez: it was one of the main collectibles included in Mr Colley’s market definition, and as such it was considered by Cabo (and its toy expert Ms Munt) to have a “sophisticated unwrapping experience”. It was also sold at a price point very similar to that of Worldeez. Although each series had only six or seven characters to collect, which was a much smaller number of characters than the figurines in the Worldeez series, numerous series had been released since the initial launch of the product (and further series were released in the years 2016–18). There was, moreover, no evidence that the limited number of characters in each series diminished the playability or likely commercial success of the product compared with that of Worldeez. On the contrary, Mr Harper considered Mash’ems/Fash’ems to be a better and more playable product than Worldeez.

The main reason for caution in respect of this comparator is that My Little Pony Fash’ems was not merely a significantly successful product, but was in fact a very successful product in its price range. The NPD sales data showed that in 2016, for similar priced collectibles, My Little Pony Fash’ems was only outsold by the Shopkins 2-pack and Num Noms. In 2017 there were only three more successful collectible products at a similar price point: the Shopkins 2-pack, Trolls blind bags and Hatchimals Colleggtibles single pack. The product was, moreover, marketed under the banner of an established and very successful brand, produced by an experienced international toy company.

Given the findings I have already made as to Worldeez’ product quality, marketing and retailer support, and Cabo’s operational abilities, I consider that My Little Pony Fash’ems represented a level of success that was greater than Worldeez would have been likely to achieve in practice. That conclusion is supported by consideration of the sales volumes of My Little Pony Fash’ems during the years used for the comparison. The NPD data for 2016, uplifted to account for its 75% market coverage (see below), indicated My Little Pony Fash’ems unit sales volumes of 639,429, or on average almost 12,300 a week. In similar vein to the discussion at §579.i) above, that is far greater than Cabo could have been expected to achieve, given the known peak sales of 4,500 per week at B&M.

Use of a single product. Cabo’s second criticism was that the My Little Pony Fash’ems product was only a single product in the Mash’ems and Fash’ems range, and was therefore not a reliable benchmark for the success of the entire Worldeez brand. That criticism, in my judgment, failed to appreciate the fact that, as MGA pointed out, Mash’ems/Fash’ems split their products by theme, e.g. My Little Pony Fash’ems, Disney Frozen Fash’ems, Peppa Pig Mash’ems, Paw Patrol Mash’ems, etc, with each theme having a completely different character range which did not necessarily interact with the other themes. It was therefore reasonable for this scenario to use My Little Pony Fash’ems rather than the whole of the Mash’ems/Fash’ems range, particularly given that My Little Pony Fash’ems was by far the best-selling Mash’ems/Fash’ems product at the time, with almost double the sales of the next-best selling product (Peppa Pig Mash’ems). Again, the real concern with the comparator is that it is likely to represent an overstatement of Worldeez’ counterfactual success.

It follows that while MGA’s closing submissions provided a profitability analysis based on the sales volumes of the entirety of the Mash’ems/Fash’ems range, by way of a sensitivity analysis, Worldeez could a fortiori not realistically have expected to achieve that level of sales. It is therefore not necessary to comment further on that analysis.

Cost and revenue assumptions. Cabo’s third criticism was that Mr Parker’s model contained serious errors in its assumptions of costs and revenues. In particular (among other things), Mr Parker had adopted the costs figures from the Cabo projections without giving any consideration to whether those figures would have been reasonable in a scenario which assumed far smaller sales figures than the predictions of the Cabo projections.

That was, in my judgment, a fair criticism. As an example of the problems with Mr Parker’s approach to costs, his year three model (based on the My Little Pony Fash’ems 2018 sales figures set out above) assumed that domestic revenues would have reduced by almost 50%. But his marketing and product development costs figures simply lifted the Cabo projections, which had assumed a significant increase in revenues, and on that basis a significant increase in the marketing and development costs. As a result, in Mr Parker’s model the assumed marketing and product development costs in year 3 exceeded the assumed domestic revenues. When asked about this in his cross-examination, Mr Parker did not even attempt to justify what he had done:

“Q. So in essence, in the actual outcome, management does what one might call the sensible thing and cut its losses, whilst in your scenario you assume revenues fall off the cliff, we know it is the end of the product life and we keep on spending on product development at 6 times the rate that the toy experts say we should be doing and spend essentially 100% of revenues on marketing.

A. I agree that doesn’t seem very sensible. Unfortunately … those are the numbers that are in the Cabo projections and they don’t come with revenue shares attached.

Q. I am not talking about the Cabo projections. I am talking about your scenario.

A.

Agreed, yes. So I don’t make any adjustments.”

While it was to Mr Parker’s credit that he gave frank answers to these questions, the fact that he had seen fit to base his analysis on costs figures which related to a very different revenue projection, without any reflection on whether those costs figures were realistic in the light of his reduced revenue projections, indicates a lack of objectivity in this part of his evidence. It was also apparent that Mr Parker had based his annual revenue figures on the NPD data for My Little Pony Fash’ems (see §642.i) above) without uplifting those figures to account for the fact that the NPD data covered only 75% of the market.

These and other errors were corrected in MGA’s amendments to Mr Parker’s model in its closing submissions, producing the updated profitability calculations set out in Table 7 above. It is, however, necessary to consider the effect of other disputes on the cost stack which remained by the end of the trial (see §578 above). The following table shows the effect of using (i) MGA’s cost stack with Mr Parker’s wholesale prices (£1.33 and £1.37) – as above in Table 7; (ii) Cabo’s cost stack with Cabo’s proposed wholesale price (£1.52); and (iii) a combined calculation requested by the court, after the trial, using Mr Parker’s prices but Cabo’s cost stack.