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

The parties’ submissions were based on the evidence of Mr Colley (for Cabo) and Mr Parker (for MGA) on this issue. The experts agreed on the overall framework of analysis, namely that the focal product was LOL Surprise, and that the relevant product market for the purposes of Cabo’s abuse claims was (conceptually) a wholesale market on which LOL Surprise was sold to retailers, since the abuse is said to have been committed by MGA at the wholesale level of the distribution chain. They also agreed that the retail demand on that market was essentially derived from the consumer demand on the downstream retail market, because retailers make decisions about which products to carry and stock based on the purchasing behaviour of consumers. The wholesale market should therefore be defined by reference to the extent to which consumers would regard other products as substitutable for LOL Surprise.

The experts also agreed that although the SSNIP test would in principle be the right approach to adopt, the relevant data are not available in this case: there are simply no data which would make it possible to determine the extent of consumer switching in response to a “shock” in the supply of LOL, such as a cost shock or supply shortage. It is, therefore, necessary to consider other evidence to determine the products that should be regarded as substitutable for LOL Surprise, and therefore within the relevant product market.

The dispute between the experts lay in their assessment of what further evidence was relevant in that regard, and the conclusions to be drawn from that evidence as to the definition of the product market. On those points their positions were unfortunately a very long way apart, and reflected a fundamental disagreement as to the approach to be taken to the available evidence, in respect of what was agreed to be a highly differentiated product market.

Mr Colley proposed that the market should be defined as surprise collectible toys with a sophisticated unwrapping experience aimed at girls aged 6–9 years. He accepted that this was based on an essentially qualitative assessment. Starting with LOL Surprise as the focal product, he identified from the evidence of the industry experts and other evidence what he considered to be the three key features of LOL Surprise which drive demand for that product, namely that it is (i) a surprise collectible toy; (ii) targeted at girls aged 6–9 years; (iii) with a sophisticated unwrapping experience. A “sophisticated unwrapping experience” was defined on the basis of Ms Munt’s evidence as requiring more than a single layer of unwrapping, in other words something more than a simple blind bag or equivalent.

On that basis, Mr Colley’s candidate market comprised (i) various different LOL Surprise products, (ii) all of the Worldeez products, (ii) a list of collectible toys produced by the following major brands: Shopkins, Num Noms, Hatchimals Colleggtibles and Mash’ems/Fash’ems, and (iv) a few smaller brands: Fisher Price, Fizz N Surprise Mermaids, Gift’ems, My Mini Mixie and Twozies. Those products all fell within the playset dolls and collectibles class of the NPD playset dolls segment, although Mr Colley did not base his analysis specifically on the NPD classifications.

Although Mr Colley recognised that in a highly differentiated market the line between products within and outside the defined market might be a somewhat arbitrary one, he said that it was necessary to draw a line somewhere, and maintained that his set of characteristics was the most coherent basis upon which to do so. His view was that since the surprise element was a fundamental feature of LOL Surprise, he did not consider that collectibles without that feature, and without some form of innovative packaging, to be close substitutes for LOL Surprise. Likewise, he did not consider that collectibles targeted at boys or a different age range of girls would be regarded as close substitutes for LOL Surprise. Nor did he consider that other dolls generally (outside the collectibles category) were substitutes for LOL Surprise, particularly in light of the differences in the play experiences between collectibles and other types of dolls, such as nurturing dolls and fashion dolls.

Mr Parker’s view evolved during the course of the proceedings. He originally took the view that the market should be defined as encompassing at least the whole “dolls” supercategory in the NPD classification, and possibly even all toys, if supply-side substitution was taken into account. Even on the narrower of those two potential market definitions, the dolls supercategory would have included all four of the NPD segments of that supercategory: nurturing dolls, fashion dolls, playset dolls and large dolls. He subsequently revised that analysis and his final primary market definition was a market comprising the two NPD segments of fashion dolls and playset dolls. Even that market, however, extended far beyond Mr Colley’s market to include playset dolls with no surprise unwrapping element, such as Sylvanian Families, as well as fashion dolls such as Barbie and Bratz. As discussed below, Mr Parker’s market also included accessories for dolls, such as dolls’ dresses, and role play and dressing up accessories, such as glitter tattoos.

Mr Parker arrived at that market definition by taking as his starting point the NPD product segment containing LOL Surprise, namely the playset dolls segment, and testing whether there was substitution between that segment and the fashion dolls segment, by looking at NPD revenue data for the two segments over the period 2017–2021. He concluded that the overall market size of the two market segments was broadly constant over that period, but that there were significant fluctuations in the size of the two segments. Crucially, however, he found a very strong negative correlation of -0.98 between the monthly annual rolling average of sales of the playset and fashion dolls segments over the period: as one segment grew, the other almost always shrank. His conclusion was that this was consistent with a market that included both segments, and inconsistent with any narrower market.

In response to a question from the court during the opening submissions as to how one might analyse the spectrum of products which are (more strongly through to more weakly) substitutable for LOL Surprise, Mr Parker provided two successive reports (his eighth and ninth reports) which considered the individual brands in the playset and fashion dolls segments which lost monthly sales during periods in 2017 and 2018, during which period there was a significant increase in the LOL Surprise monthly sales. He said that this analysis showed the brands that were the strongest economic substitutes for LOL Surprise. For 2017 those were, in order, Shopkins, Monster High, My Little Pony, Trolls and Twozies. The results for 2018 were similar but included several further brands, including Num Noms and Barbie whose sales increased during 2017 but decreased during 2018. He said that this analysis would provide a useful guide if the court wanted to build up a market starting from LOL Surprise, although he maintained that the market was more appropriately defined as encompassing all products in the playset and fashion dolls segments.

Each party robustly rejected the approach taken by the other party’s expert. I will address the criticisms of each of the two approaches, before setting out my conclusions on the approach which should in my judgment be adopted in the present case.