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

The different approaches of the parties to the modelling of profitability highlighted some of the limitations of the use of statistical modelling for the purposes of estimation of counterfactual profitability. Bearing in mind the inherently speculative nature of the exercise, a good counterfactual model is one that is based on reliable and unbiased data, with assumptions that are as close to reality as possible. As Oxera noted in its 2009 report for the European Commission “Quantifying antitrust damages: Towards non-binding guidance for courts”, §3.1.1:

“A model will only be as good as the quality of the input data used to populate it. … A sophisticated model based on unreliable or biased data is likely to be less robust than a simpler model based on better data. A critical question for a court to ask when reviewing a model is therefore whether the data used is of sufficient quality and reliability, and whether a simpler model relying on less, or more easily available, data could be used.

There are many methods and models to describe the impact that an infringement of competition law might have. The robustness of each of these models partly depends on the validity of the assumptions that the model uses in the situation to which it is being applied.”

By the end of the trial, Cabo only really relied on Mr Colley’s simulation model. That was a sophisticated model which ultimately did not closely reflect the nature of the market being investigated. It therefore predicted a mathematical equilibrium which simply did not correspond to the reality of the market, based on the known facts. That problem was compounded by the fact that the model was populated only with data biased heavily towards extremely successful comparator products. That displayed a lack of objectivity and provided the court with no assistance if the premise of those comparators (that Worldeez would have enjoyed levels of success comparable to the most successful similar products in the market) was rejected, as I have done. Mr Colley said that it would be easy to re-run his simulation with alternative comparators, but he notably did not carry out that exercise, despite having had a period of over two and a half years between his first expert report (in February 2022) and the trial.

I do not, therefore, consider that the simulation model provided any useful and reliable indication of Cabo’s profitability in the counterfactual scenario. Nor do I consider that it would be useful to ask for the simulation to be re-run using different comparators, given the inherent problems with the application of that model to this particular market.

Mr Parker’s comparator models were simpler and, in my judgment, in principle more appropriate for the quantification exercise in this case. The moderate success model provided some insight into the sales trajectory of an average collectible product during the relevant time period, but did not take any account of the features of Cabo and what was known about its level of success while it was on the market. Ultimately therefore it did not provide a useful indication of Cabo’s counterfactual profitability.

That left Mr Parker’s significant success model using My Little Pony Fash’ems as a benchmark. Even if Worldeez had in its first three years achieved sales comparable to those of My Little Pony Fash’ems in the years 2016–18, on a reasonable assumption as to the wholesale prices at which Worldeez would have been sold, Mr Parker’s model showed that Worldeez would have been (on either version of the cost stack) either entirely loss making domestically or only marginally profitable in later years, if it had remained in the market despite losses in 2017. Moreover, given my earlier conclusions as to Worldeez’ product quality, marketing and retailer support, and Cabo’s operational abilities, and what is known of Cabo’s initial sales in 2017, I consider that this comparator overstated the likely success of Worldeez. Accordingly, in my judgment, Cabo would on any basis have been loss-making in the domestic market and would therefore not have generated either licensing revenues or international sales revenues.

The significant success model therefore supports my conclusion reached on the basis of the other evidence examined in detail above, that Worldeez would not have been profitable in the counterfactual scenario. The basic reason for that is clear from the evidence before the court: Cabo’s financial model simply did not allow it to break even without huge sales volumes, which it was never realistically going to be able to achieve without a better and more innovative product, stronger retailer support and (crucially) better operational capabilities than it had, even with the support of Singleton.

In those circumstances it is neither necessary nor appropriate to consider the further issues raised by the parties concerning the quantification of Cabo’s claim, based on the remaining options under the DTM.