Section 14



The removal of the first two layers of wrapping reveals paper “teasers” to the contents of the sphere. As further layers are removed, recesses in the sphere reveal miniature toy accessories (themselves in wrapped packages), such as a baby bottle, shoes and clothes. The final layer is the plastic sphere itself which opens revealing the doll. The container can be arranged to stand open as a presentation platform for the doll, and an arched handle is attached to the container, allowing the container and doll within to be carried like a handbag. An example of the container and doll, fully assembled, is shown below.

LOL Surprise was an immediate and phenomenal success, selling out in weeks following its US launch. By January 2017 it was the top selling doll in the US. The industry experts agreed that toys that perform successfully in the US generally go on to repeat that success in the UK market. That was the case for LOL Surprise, which launched in the UK in February 2017. It is common ground that in the UK market, as in the US, the product was an outstanding commercial success. By May 2017 it was the second best-selling toy in the UK across all toy categories (the best-selling toy at the time being one of the Lego minifigures series). Mr Larian described it as a “once in a lifetime product” and a “billion dollar, lightning-in-a-bottle success stor[y]”. Mr Laughton said that “as far as I am aware, no MGA toy (or indeed any toy) has sold as quickly in such a short period of time”. Mr Hunter commented, similarly, that “I have dealt with collectibles for my entire career, and nothing has ever struck a chord with girls like that did”. Stuart Grant said that at that time “LOL was the number one brand in the industry”.
Following the success of LOL Surprise, MGA expanded the range to include other LOL toys, releasing LOL Lil Sisters in August 2017 and a Big Surprise Ball in October 2017. These were also hugely successful toys, and by the end of the year all three toys were ranked within the top ten toys in the UK across all toy categories, with the original LOL Surprise as the best-selling toy. In the course of 2018, further products were added including Pets and Confetti Pop. Numerous further products have been added to the range since then, to maintain consumer interest in the brand.
- 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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