Discussion and conclusions
Discussion and conclusions
The relevant communications between MGA and The Entertainer are set out at §§117–134 above. It is now common ground that an agreement was reached between MGA and The Entertainer on 24 May 2017, pursuant to which The Entertainer agreed to put its orders of Worldeez “on hold” in return for MGA reinstating supplies of LOL Surprise. MGA said that this was temporary and quickly superseded by an “independent decision” taken by the Grants not to stock the Worldeez globe, based in particular on Stuart Grant’s evidence on this point. I have already rejected Stuart Grant’s characterisation of that decision as being “independent” (§128 above). It is clear that The Entertainer’s decision was not an independent one but was taken as a result of coercion from MGA. I find, therefore, that The Entertainer’s initial agreement to put Worldeez orders on hold was replaced, on 31 May 2017, with an agreement not to stock the Worldeez globe, as a condition of continued supplies of LOL Surprise. It is apparent from the exchanges of emails in September 2017 and February 2018 that MGA’s position remained unchanged throughout that period.
The relevant communications between MGA and TRU are set out at §§135–143 above. It appears from those communications that TRU agreed not to stock (at least) the Worldeez globe, in return for continued supplies of LOL Surprise. I do not accept MGA’s contention that TRU had formed its own “independent view” that the Worldeez globe was a “knock-off” of LOL. That claim was based on Mr Larian’s evidence of a purported conversation with Kevin Macnab of TRU. I have already rejected Mr Larian’s account of that conversation (§§139–140 above). As with The Entertainer, I consider that TRU’s decision was not independent, but was taken as a result of coercion from MGA. TRU did not in the event stock any of the Worldeez range. The evidence indicates, however, that MGA’s concern was with the Worldeez globe rather than with the 5- and 10-pack, and that the discussion between Mr Laughton and TRU (and other retailers) focused on the packaging of the globe. While Mr Larian’s email to TRU on 24 May 2017 was not expressly confined to a complaint about the globe, that needs to be read in the context of Mr Laughton’s previous discussions with TRU. There is, moreover, no suggestion in any other evidence that TRU agreed to refrain from supplying the 5- and 10- packs of Worldeez. I do not therefore find an agreement going beyond the globe.
The relevant communications between MGA and Smyths are set out at §§144–147 above. As I have already found, it is likely that Smyths agreed not to stock the globe, in return for continued supplies of LOL Surprise. As with TRU, while Smyths did not ultimately stock any of the Worldeez range, I do not consider that the evidence is sufficient to support the existence of an agreement going beyond the sales of the Worldeez globe.
As described at §§158–168 above, the Worldeez range was sold in B&M stores from July 2017 through to early 2018. That included not only the globe but also the 5- and 10-pack products. §§170–171 above set out the subsequent agreement in March 2018 between MGA and B&M for B&M to start receiving supplies of LOL, ostensibly on the basis that B&M would drop both Worldeez and Zuru’s 5 Surprise toy from its range. By that time, however, it is clear from the evidence that Worldeez had either been or was likely to be discontinued by B&M.
I have already found that the evidence does not establish an agreement between MGA and AB Gee (§§151–153 above).
- Heading
- INTRODUCTION
- THE EVIDENCE OF FACT
- MGA’s witnesses of fact
- Mr Larian’s breaches of purdah
- THE EXPERT EVIDENCE
- The economic and valuation experts: preliminary comments
- Assessment of the economic and valuation evidence
- The Decision Tree Model (DTM)
- ISSUES
- FACTUAL BACKGROUND
- The UK toy industry
- Table 1: NPD dolls classifications
- MGA and LOL Surprise
- Section 14
- The founding of Cabo and development of Worldeez
- Section 16
- The initial marketing of Worldeez
- Discussions with the launch retailers
- The Entertainer
- Toys R Us
- Smyths
- Other retailers
- MGA’s intervention
- Contacts with Cabo and Singleton
- The Entertainer
- Toys R Us
- Smyths
- B&M and other retailers
- AB Gee
- Worldeez repackaging and relaunch
- Launch of Worldeez globe in B&M
- Decline in B&M sales after August 2017
- Sales to other retailers
- Licensing and international distribution
- Nickelodeon advertising
- Demise of Cabo
- PROCEDURAL BACKGROUND
- ABUSE OF DOMINANCE CLAIM
- The relevant market definition
- The parties’ submissions
- Mr Colley’s approach
- Mr Parker’s approach
- Section 44
- Conclusions on market definition
- Whether MGA was dominant on the relevant market
- The parties’ submissions
- Table 2: 2017 market shares for Colley and Parker markets (%)
- Table 3: Parker market share estimates for 2018–19 (%)
- Table 4: 2017 market shares for extended Colley market (%)
- Market shares
- Figure 1: Colley diagram of 2017 MGA and competitor market shares
- Competition from products outside the relevant market
- Barriers to entry and expansion
- Countervailing buyer power
- MGA’s conduct
- Conclusions on dominance
- Whether MGA’s conduct amounted to an abuse
- The parties’ submissions
- The overall exclusionary campaign
- MGA’s “response to commercial attack” argument
- MGA’s passing off defence
- Section 63
- Conclusion on abuse of dominance
- UNLAWFUL AGREEMENTS CLAIM
- Agreements with the toy traders
- Discussion and conclusions
- Anticompetitive object or effect
- Discussion and conclusions
- Exemption under the VBER
- Scope of the VBER
- Market share threshold
- Excluded restrictions
- Conclusion on the VBER
- Exemption under s. 9 / Article 101(3)
- Conclusion on the unlawful agreements claim
- PATENT THREATS CLAIM
- Threats of patent infringement proceedings
- The parties’ submissions
- Discussion
- “Person aggrieved”
- Conclusion on the patent threats claim
- CAUSATION AND QUANTUM
- Legal principles
- Quantification of the loss
- The approach to claims for lost profits
- Conclusions on the overarching approach
- Causative effect of MGA’s conduct
- Actionable damage and causation: Cabo’s heads of loss
- Whether Cabo would have traded profitably in the counterfactual case
- Product quality
- Section 92
- Marketing campaign
- Retailer support
- Business plan/financial projections
- Inventory management
- Working capital
- Toy expert evidence on commercial success
- Breakeven analysis
- Table 5: Volumes and working capital required to break even in 2017
- International sales
- Conclusions on whether Cabo would have traded profitably
- The parties’ quantum models
- Mr Colley’s quantum models
- Table 6: Cabo calculations of losses (£m)
- Assessment of Mr Colley’s models
- Mr Parker’s quantum models
- Table 7: MGA calculations of losses (£)
- Assessment of Mr Parker’s significant success model
- Table 8: Loss calculation for significant success model, comparing MGA and Cabo cost stacks (£)
- Assessment of Mr Parker’s moderate success model
- Figure 2: Parker moderate success model: average monthly revenue (£)
- Conclusions on the quantum models
- DECLARATORY RELIEF
- Conclusions
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