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Record fines for toys price fixing

OFT finds Argos, Littlewoods and Hasbro in breach of competition law

PN 18/03    19 February 2003

Argos and Littlewoods have been fined a record £22.65 million by the OFT for fixing the price of toys and games together with Hasbro in breach of the Competition Act 1998.

Argos, Littlewoods and Hasbro entered into agreements to fix the prices of Hasbro toys and games between 1999 and May 2001, breaching Chapter I of the Competition Act from 1 March 2000 when it came into force.

Argos was fined £17.28 million, reflecting its high turnover, and Littlewoods was fined £5.37 million. Hasbro was granted full leniency, and so its potential penalty of £15.59 million was reduced to zero, because it provided crucial evidence that initiated the investigation and co-operated fully. In November 2002 Hasbro was however fined £4.95 million for entering into price-fixing agreements with 10 distributors (see note 2).

John Vickers, Director General of Fair Trading, said:

'This case shows how leniency arrangements help uncover price-fixing agreements, which distort competition and keep prices artificially high. Price fixing is a serious breach of the Competition Act as the fines imposed in this case reflect.'

NOTES

1. The OFT wrote to Hasbro, Argos and Littlewoods on 1 May 2002 saying that it proposed to make a decision that they had infringed competition law by entering into agreements to fix the price of Hasbro toys and games (see PN 24/02).

2. Hasbro was fined £4.95 million in November 2002 for entering into agreements with 10 distributors which prevented them from selling Hasbro toys below list price (see PN 83/02). The fine was reduced from £9 million with leniency. Hasbro was granted only partial leniency in that case as it initiated and imposed the agreements on the distributors and the OFT investigation of those agreements was already under way.

3. The Competition Act 1998 came into force in March 2000. The Act contains two prohibitions:

i) the Chapter I prohibition prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition within the UK (or any part of it) and which may affect trade within the UK (or any part of it)

ii) the Chapter II prohibition prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).

4. The OFT may impose a penalty of up to 10 per cent of UK turnover for a maximum of three years for infringement of either of the above prohibitions. The OFT has calculated the fines in accordance with its published guidance on financial penalties. These take into account the serious nature of price-fixing, the need for deterrence and the turnover of the parties concerned. Hasbro's full co-operation with the investigation and provision of crucial evidence was taken into account in granting 100 per cent leniency. Argos has the highest turnover of the three parties and therefore incurred the highest penalty. The financial penalties on Argos and Littlewoods, though the largest so far under the Competition Act, are well below 10 per cent of their respective UK turnovers.

5. The text of the decision will be published on the OFT website once commercially sensitive information has been removed. It will appear on the Competition Act Public Register.

6. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Act 2002 will replace the office of the DGFT with the OFT, to which will be transferred the DGFT's functions. The relevant provisions of the Enterprise Act are expected to come into force in April 2003.

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