'The catalogues for these seasons are produced well in advance, both reflecting the propensity of customers to buy in advance for forthcoming seasons,
FAME (Financial Analysis Made Easy) - online publisher (Bureau van Dijk). Key Note, 'Toys & Games 2001 Market Report', page 9.
In 2000, 55% of sales were made in the final quarter (Mintel, 'Toy Retailing, Retail Intelligence UK Report', November 2001, page 13, figure 5).
Key Note, 'Toys & Games 2001 Market Report', page 19. Mintel, 'Toy Retailing, Retail Intelligence UK Report', November 2001, page 86. Office of Fair Trading 10
particularly in the case of clothing, but also ensuring the catalogue is available for the full potential sales period. High Street retailers, on the other hand, can alter their product and price offering at any time. Although catalogue retailers can produce supplemental leaflets or brochures containing special offers, the basis of the retail pitch must be the main catalogue itself. This means that catalogue operators, particularly if they are also discounters, must go to [the] market with prices which are as keen as possible. This may well have effects on market prices in the High Street. High Street retailers have the opportunity to undercut but may find it difficult to do so if the catalogue operators have adopted keenly competitive pricing in their catalogues.'11

Investigation

The then Director General of Fair Trading (the 'Director') started an investigation into price-fixing by Hasbro in March 2001. The investigation looked first into possible price-fixing and/or resale price maintenance ('RPM') by Hasbro and a number of its distributors (this investigation resulted in the then Director's Decision CA98/18/2002 of 28 November 2002). As part of the process of investigating the distributors case information was sought from Hasbro about its dealings with retailers. Hasbro applied on 14 September 2001 under the then Director's leniency programme for total immunity from financial penalty in respect of its dealings with retailers or, in the alternative, a reduction in the level of penalty. Leniency was granted on the then Director's usual terms, and in particular on condition that Hasbro co-operated fully with the OFT's investigation. The investigation was then expanded to look at possible pricefixing agreements between Hasbro and retailers, in particular Argos and Littlewoods. INVESTIGATION INTO HASBRO AND THE RETAILERS
On 10 August 2001, the OFT sent Notices under section 26 of the Competition Act 1998 to Hasbro and a number of retailers seeking information. On 26 and 27 September 2001, OFT officials carried out on-site investigations under section 27(3) of the Act at the headquarters of Argos and Littlewoods. A large number of e-mails and other documents were obtained as part of the investigation.

'- Dialogue opened to stabilise RRP's (initially core Games, Action Man) - Build in additional rebate earning'
It would appear from the evidence that this meeting was attended by Alistair Richards, Hasbro's Commercial Director Northern European Region, and Simon Gardner, Head of Hasbro Europe, and by Terry Duddy, Argos's Chief Executive Officer, and Maria Thompson, Argos's Commercial Director for toys and other products. A letter from Alistair Richards to Terry Duddy about this meeting,
Witness statement of Ian Thomson, paragraphs 62 to 67. Witness statement of Neil Wilson, paragraph 8. Office of Fair Trading 24
dated 18 March 1999, refers to the desire on the part of Mr Duddy and Ms Thompson for 'extra focus by Hasbro' on 'product availability and particularly profitability'.42 Hasbro's pricing initiative was also discussed in this meeting, as is stated by David Bottomley in his witness statement43 and as is shown by an email that Sue Porritt, Argos's Senior Buyer/Trading Manager, sent to Argos's toys buyers on 19 February 1999. The e-mail has as its subject 'Hasbro Debrief from Terry Duddy Meeting' and, although the e-mail does not specify the date of the meeting, it can be reasonably inferred, given the immediate proximity of the e-mail to the meeting of 17 February 1999, that it refers to this meeting.A 'contact report' prepared by Neil Wilson gives another example of a meeting between Hasbro and Argos in which Hasbro's pricing initiative was discussed. The meeting was held on 29 March 1999 and was attended by Neil Wilson for Hasbro and Sue Porritt for Argos. Wilson notes in his contact report:
'Hasbro's retail pricing strategy to increase trade brought [sic] in margin was discussed. Sue understands our strategy but categorically stated that Argos will react to competitor pricing and 'may be forced to react on price if sales are sluggish later in the year'. She implied that this would be out of her control!'45
The Hasbro managers of the Argos and Littlewoods accounts (Neil Wilson and Ian Thomson respectively) were asked to enter into dialogue with the two retailers to try to ensure that they supported the pricing initiative.46 Hasbro set the RRPs after separate discussions with Argos, Littlewoods- and other retailers. This is normal practice in the industry. Argos and Littlewoods then selected, independently from each other, the Hasbro products they would include in their catalogues. Neil Wilson, Hasbro's account manager for Argos, describes how the pricing initiative then worked in practice:
'When I was given the products selected for the catalogue, I established which were the common products carried by the majority of retailers (not specifically Index) and asked Argos what its price intentions were in relation to each of these products. I did not do this for products that were not common. I informed Argos what the Hasbro RRPs for the common products were and asked them whether any of our RRPs were a problem for them to match. Argos let me know whether they considered that a particular RRP was inappropriate. This was nearly always because Argos had spotted a different retailer charging a lower price, but it could also be because Argos felt the market would not stand the RRP and wanted to

E-mails of May 2000 extending arrangements to products other than Action Man and Core Games (see from paragraph 62 below) A/W 2000 All 14 common products are at the same price All 8 common products are at the same price 20 of the 21 common products are at the same price 13 of the 14 common products are at the same price 17 common products, 14 of which are at the same price** All 5 common products are at the same price***

S/S 2001

Source: catalogues of Argos and Littlewoods, as summarised in Document D.5 of Annex A. * 'Additional Toys' are the toys mentioned in the e-mail of 18 May 2000 from Hasbro to Littlewoods (see paragraph 69 below). ** This includes Interactive Pikachu which was priced by both Argos and Littlewoods at 23.75 (see paragraph 75 below). *** This includes the two Tweenies dolls (Tweenies Pop Star Poseable Plush and Tweenies Doodles) that were the subject of discussions in the autumn of 2000 and which were subsequently priced by Argos and Littlewoods at the same price (see further at paragraph 107 below).
Autumn/Winter 1999 catalogues 57 The Argos and Littlewoods Autumn/Winter 1999 catalogues were the first catalogues for which the Hasbro account managers for Argos and Littlewoods had applied the process that is described in paragraph 53 above. When the catalogues were published in July 1999, it became clear to Hasbro that Argos and Littlewoods had priced nearly all the Action Man products and core games at the levels they had indicated to Hasbro, normally at Hasbro's RRPs.52 This had been very different in the three previous catalogues, as shown in Table 3 (paragraph 56 above). Before the Autumn/Winter 1999 catalogues came out, there was uncertainty about whether Hasbro's pricing initiative would work. The actual price levels in the catalogues reassured both Hasbro and retailers that the price levels of Hasbro products would be at or close to RRP. As indicated at paragraph 55 above, Ian Thomson says in his witness statement:
'The impact of the new Hasbro 1999 Terms by Argos and Index was felt throughout the trade and nearly all of our customers stuck to the price points
Witness statement of David Bottomley, paragraph 22; witness statement of Neil Wilson, paragraph 34; witness statement of Ian Thomson, paragraphs 69 to 71. Office of Fair Trading 29
because Argos and Index who were the price leaders had demonstrated that the new strategy was working.'53
Spring/Summer 2000 catalogues 59 It is clear that after A/W 1999, the arrangements for the Action Man range and core games were in operation for the S/S catalogues in 2000. However, there were fewer discussions on pricing between Hasbro and each of Argos and Littlewoods.54 This was partly because the Autumn/Winter season is more important for toy sales than the Spring/Summer season, because the Autumn/Winter catalogue applies in the Christmas period, when the majority of toys is sold. In addition, at the time that the prices for the S/S 2000 catalogues had to be set, in November or December 1999 and hence before the Christmas period, Argos and Littlewoods were still concerned about possible undercutting of their prices. Neil Wilson says in his witness statement:

' Hasbro and Argos could not have been confident that the pricing initiative had worked until after Christmas 1999. As the Christmas period is the most important period of the year for selling toys, Argos wanted to see if there was any undercutting during that period. This could be undercutting by Index in the form of flyers distributed after the A/W 1999 catalogue had come out in August 1999, or undercutting by other retailers. By the time we knew how the pricing initiative had worked after Christmas 1999, the prices for the Spring/Summer 2000 catalogue had already been set.'55
In the autumn of 1999, during the preparation of the S/S 2000 catalogue, Ian Thomson spoke to Alan Cowley (Littlewoods's buyer for pre-school and musical toys). Thomson told Cowley that Argos were going out at the RRP of 14.99 for a Tweenies doll. Cowley on behalf of Littlewoods was at that time considering a price of 12.99 for the Tweenies doll, but Thomson told him it was safe to go out at 14.99 in view of Argos's intentions. When Cowley refused to confirm the higher price, Thomson pointed out that both Littlewoods and Argos had gone out at RRPs for the toys in the Action Man range in the last catalogue (i.e., A/W 1999), but Cowley said that was no guarantee. So Thomson told him to talk to his colleague, John McMahon (buying director of Littlewoods until end September 2000) who had been talking to Mike McCulloch about prices. Cowley then spoke to John McMahon who told him that they (i.e. he and Hasbro) had discussed prices, and recommended that Cowley go along with the suggestion
Witness statement of Ian Thomson, paragraph 75. See also witness statement of David Bottomley, paragraph 23. Witness statement of David Bottomley, paragraph 23; witness statement of Neil Wilson, paragraphs 35 and 36; witness statement of Ian Thomson, paragraphs 83 to 99.
Witness statement of Neil Wilson, paragraph 36. Office of Fair Trading 30
of a 14.99 price point and see how it went along.56 Both Argos and Littlewoods did in fact price the Tweenies doll at 14.99 in their S/S 2000 catalogues (see Document D.5 of Annex A). This evidence shows a high degree of co-operation and concerted action between Littlewoods and Hasbro, and is consistent with the existence of the price fixing agreements and/or concerted practices which the OFT has found were in existence. 61 That the arrangements did in fact continue is shown by Ian Thomson's internal e-mail of 18 May 2000, quoted at paragraph 67 below, which states 'Action Man and Games prices will be maintained as per earlier agreements.' Also, an analysis of the S/S 2000 catalogues, which came out in January 2000, demonstrates that both Argos and Littlewoods continued to price Hasbro's core games and Action Man range at identical prices in respect of all but one product (see Table 3 in paragraph 56): all 9 common products in the core games range were at the same price, while of the Action Man range, 16 were at the same price and only one was priced differently.57 Extending the initiative beyond Action Man and core games 62 After the publication of the S/S 2000 catalogues, the initiative was extended to other products. Ian Thomson states:

Argos for its part monitored the arrangements by seeking to make Hasbro aware of undercutting by other retailers. Neil Wilson states in his witness statement:
' Argos monitored other retailers' prices. If they found out that a retailer was not at the Hasbro RRP, they contacted me to find out why there was a difference. When Argos called me about the apparently lower price of another retailer, they contacted me to see if Hasbro could do something about it, i.e. get the other retailer to go back to RRP. The understanding was that if Hasbro could give Argos an assurance that the other retailer would put the price back up to the RRP, Argos would also remain at the RRP. If not, Argos would have to make a decision about how it would price the product usually by matching the competitor's price.'101
Wilson specifically names Andrew Needham and Vanessa Clarkson, both toys buyers at Argos, as persons who contacted him about undercutting:
' Andrew Needham was certainly aware that Hasbro was communicating with retailers with a view to increasing margins by moving towards RRPs. I know this from conversations I had with him, including when he would pick up the telephone, say that he had seen an Action Man product for, say, 2 less than the RRP, and could Hasbro do anything about it. His purpose in calling me was that he wanted Hasbro to persuade the retailer to go back to RRP or, if we could
Alan Cowley noted on his print-out of this e-mail: 'Lesley, The charge has been accepted by Ian' (Document D.11 of Annex A). Witness statement of Ian Thomson, paragraphs 77 and 78; see also paragraph 132 of his witness statement. Witness statement of Neil Wilson, paragraphs 22 and 23; see also paragraph 61 of his witness statement. This is supported by David Bottomley at paragraph 46 of his witness statement. Office of Fair Trading 42

101 100

not do that, to tell him so he could take account of that in his pricing. It was clear from this that he knew that Hasbro was persuading accounts to go to RRP.' 'I understand that Vanessa Clarkson of Argos is suggesting that when she made a call such as this to me, it was to enquire about whether or not we had a special deal on cost price with that retailer (i.e. was this retailer being treated by Hasbro in a more advantageous way as compared with Argos). That may have been the case. However, in my conversations with Argos representatives, including Vanessa Clarkson and Andrew Needham, focus was more on retail price than cost price. They wanted to know if Hasbro could get the other retailer to move up to the RRP.'102

Ian Thomson states:

' There was no doubt that Alan Burgess [Littlewoods's buyer of boys' toys] knew that I was passing on to the Argos account handler (Neil Wilson) the contents of our discussion and that I would confirm the Argos intentions back to him after Neil had concluded his discussions with Argos.'121
Evidence is also provided by Ian Thomson's e-mail to Littlewoods of 18 May 2000 (see paragraph 69 above) where he lists products and prices that 'Argos have committed to.' 98 The agreements also had the same clear objective of fixing the prices of Hasbro's toys and games and were entered into by Hasbro, Argos and Littlewoods as a joint operation. This is clear from the evidence as a whole, as set out above, and David Bottomley's witness statement:
' The listing and pricing initiatives came about as a result of low margins that were a concern across the entire industry and shared by Argos and Littlewoods. Argos was sympathetic to both initiatives and was actively involved in

120 121

Witness statement of Neil Wilson, paragraphs 22, 23, 30 and 32.
Witness statement of Ian Thomson, paragraph 108 (with regard to the proposal to extend the pricing initiative); see also at paragraphs 65 and 67 regarding the beginning of the initiative and at paragraphs 86 and 87 regarding the Spring/Summer 2000 catalogue. Office of Fair Trading 48
discussions on pricing. Littlewoods followed Argos' lead, but was also involved in discussions with Hasbro about pricing .'122
Although the OFT has no evidence that Argos and Littlewoods spoke directly, confidential information was exchanged between them with Hasbro acting as the fixer or middleman. This is supported, in particular, by the witness statement of Neil Wilson:
' Hasbro acted as middlemen . Hasbro asked its accounts for an indication of whether or not they would adopt the RRP for individual products, this indication was given, it was then passed on to other account managers within Hasbro and then general indications were passed back to our accounts. There was a two-way dialogue between Hasbro and Argos on pricing intentions. Whilst it is fair to say that Hasbro led this dialogue, it was not a question of Hasbro forcing this information from Argos or Argos not being clear about what this information was to be used for. There was an open dialogue, although Argos would only give an indication, not a guarantee, and would sometimes change a price without any consultation with Hasbro. Argos knew that Hasbro was talking to its other accounts in order to increase retail margins and was using indications received on prices for this purpose.'123

'If we cannot ensure level pricing between GUS and Littlewoods for A/W I would suggest there will be cause for concern on the Argos/Index agreement for A/W 2001.'
The GUS home shopping catalogue business is separate from Argos (see paragraph 2 above) and the OFT has not alleged that it formed part of the agreements. Sharon Clarke's statement that she would not be telling David Snow her retail prices is in contrast to the practice followed by Argos and Littlewoods, who would inform Hasbro of their intended retail prices (see, for example, paragraph 99 above). Apparently, David Snow was not aware of the different position of the GUS home shopping catalogue business. In his oral statement to OFT officials, in response to a question as to whether he was aware of what was described as an agreement on RRPs with Argos and Index, David Snow says:
'Yes. Discussions with GUS on home shopping were just a continuation of that.'
David Snow may have thought they were a continuation of the agreement on RRPs, but it is clear that Sharon Clarke did not know about them or was not willing to involve GUS Home Shopping in this price fixing arrangement. 107 It is also clear that without both Argos's and Littlewoods's involvement the move towards recommended prices would not have succeeded, since they were in a special position as catalogue retailers to provide a signal to the market that margins would not be eroded. This is clearly demonstrated by an exchange of emails within Hasbro about a last-minute reduction in Hasbro's RRP for Tweenies toys that was made around the time that Littlewoods was finalising the prices for its Spring/Summer 2001 catalogue (this price change resulted in Alan Cowley's e-mail at paragraph 84 above). An e-mail from Ian Thomson to Henry Foulds of Hasbro's marketing department of 30 November 2000 contains the following passage:
'The whole point of making Argos and Index toe the line on Retails was to set a precedent that the rest of the trade would follow.'
Ian Thomson also indicates in his witness statement what the result could be if Littlewoods charged a higher price than competing retailers:
Office of Fair Trading 52
' This would mean that our policy of using the catalogues to set the price points would backfire and could potentially lead to the start of price-cutting again.'128
This is confirmed by a reply e-mail from David Bottomley that was sent on the same day:
' given the huge amount of work we have put into retail pricing in the last 2 years, the last thing we need is for 2 major customers to be out of line.'129

Competition Commission Appeal Tribunal, Case No 1001/1/1/01 Napp Pharmaceutical Holdings Limited and Subsidiaries v The Director General of Fair Trading, 15 January 2002, [2002] CAT 1 at [109], [2001] CompAR 1.
European Court of Justice, Case C-277/87 Sandoz Prodottie Farmaceutici v Commission [1990] ECR I-45. European Court of Justice, Case C-279/87 Tipp-Ex v Commission [1990] ECR I-261. Office of Fair Trading 66
CLARITY OF THE ALLEGATIONS AGAINST LITTLEWOODS 146 Representations: LittIewoods states that the original rule 14 Notice is confused as to whether the OFT is alleging against Littlewoods an agreement to fix prices simpliciter or alternatively an agreement to fix prices at the level of the RRPs of Hasbro. OFT's response: It has always been the OFT's case that there was agreement to fix the retail prices of toys and games normally at RRP. This can be seen from the e-mails of 18 May 2000 and the follow up e-mail of the 25 May 2000. The prices set out in the first e-mail are generally at the RRPs, but it is clear that they could be agreed at a different level e.g., Interactive Pikachu had an RRP of 23.99, but it was subsequently agreed that the price would be fixed at 23.75, a price that was below the RRP. Also, David Bottomley speaks in his witness statement of 'an understanding that prices would be at or near RRP' (emphasis added).151 Representations: Littlewoods argues that the factual allegations made are very superficial. There is, for example, no identification of who at Littlewoods is alleged to have engaged in an agreement with Ian Thomson of Hasbro. OFT's response: The OFT does not agree that the allegations are not specific enough. The names of the Littlewoods buyers in receipt of, and sending out, emails that constitute evidence of agreements are clearly set out in this Decision (see paragraphs 69 and 84). In addition, in his witness statement Ian Thomson identifies who he spoke with at Littlewoods.152 The authority of these buyers to commit to certain retail prices is discussed below (see paragraphs 194 to 199). Furthermore the OFT does not concede that it is always necessary for it to identify the precise individuals within an undertaking who took part in negotiating the infringing agreement; it is sufficient for the OFT to show that an agreement or concerted practice existed. Representations: Littlewoods asserts that the need for any agreement to fix prices at RRP had been overtaken by events, since in 2000 most retailers were following RRPs as a matter of market necessity. OFT's response: The OFT agrees that many retailers had begun to move towards RRP in 2000, but this does not alter the OFT's case. It is the OFT's case that this change in policy was facilitated by the Hasbro/Argos/Littlewoods agreements. Furthermore, the evidence shows that the agreements in relation to

showing that persistent and serious problems in its distribution network had brought Hasbro's relationship with many of its retail customers to a low ebb. APPRECIABILITY 255 Representations: The OFT must show with strong and compelling evidence that the alleged agreement did have an appreciable effect at the relevant time. The original rule 14 Notice does not say that the agreement would have such an effect, only that it might. The OFT must prove that the alleged agreement caused prices in the Argos and Littlewoods catalogues to be higher than they would have been in the absence of an agreement. OFT's response: In essence these representations are all saying the same thing that it is not sufficient to show that the agreement had as its object the restriction of competition but it must also be demonstrated that there was an actual and appreciable effect on competition. In answering these representations it is important to point out that section 2(1)(b) of the Act speaks of 'object or effect' and that, as a result of their actual or potential impact on competition, section 2(2)(a) of the Act expressly provides that the Chapter I prohibition applies to agreements which directly or indirectly fix purchase or selling prices. The European Commission has recorded its view that 'Market sharing and pricefixing by their very nature restrict competition within the meaning of Article [81](1) .'.171 There are also various judgments of the European Courts where it has been held clearly that it is not necessary to consider whether there are effects on a market or how appreciable those effects might be when dealing with an agreement whose object is the restriction of competition (see paragraph 125 above), for example:
' [It] must be borne in mind that in assessing an agreement under Article [81](1) of the Treaty, account should be taken of the actual conditions in which it functions, in particular the economic context in which the undertakings operate, the products or services covered by the agreement and the actual structure of the market concerned unless it is an agreement containing obvious restrictions of competition such as price-fixing, market sharing or the control of outlets .'172 (emphasis added) 'It is clear from case law that, for the purposes of applying Article [81](1) of the Treaty, there is no need to take account of the concrete effects of an agreement when it is apparent that it had as its object the prevention, restriction or distortion of competition within the common market (Case T-142/89 Boel v

Respectively cases 5/69 Vlk v Vervaecke [1969] ECR 295, 19/77 Miller International Schalplatten GmbH v Commission [1978] ECR 131, 27/87 Erauw-Jacquery v Hesbignonne [1988] ECR 1919 and T-374/94 etc European Night Services v Commission [1998] ECR II-3141. Office of Fair Trading 94
paragraph 45 above).177 Indeed, it was this concern that in the OFT's view was the main driving force behind the Hasbro pricing initiative that led directly to the infringing agreements coming into existence. Argos's contention that Hasbro was unconcerned sits uneasily with its assertion that Hasbro faces the risk of delisting on at least some its products. There is clear linkage between the threat of delisting and low retail margins. Indeed it is the OFT's view that Hasbro was likely to have been concerned that low margins on its 'must have' products might be a contributory factor to the delisting of its other products even if the 'must have' products were not themselves subject to the threat. 266 Representations: Andrew Needham was not aware of any Hasbro pricing initiative: [*]. Maria Thompson, Argos's Commercial Director for toys and other products, recalls Mike McCulloch, Hasbro's Head of Sales and Marketing, wanting to ensure that all retailers went out at RRPs but dismissed this as she knew that Hasbro had no means of ensuring this. Hasbro never offered any terms or payment in return for Argos agreeing to adhere to RRPs. OFT's response: Andrew Needham may not have recalled a Hasbro pricing initiative but it appears that Maria Thompson did, although she does not describe it in just those terms. The e-mail from Sue Porritt of Argos, the Hasbro reports of meetings with Argos and the witness statements of David Bottomley and Neil Wilson, as discussed at paragraphs 50 to 52 above, show that Argos was willing to cooperate with Hasbro's initiative, even though Maria Thompson and Sue Porritt emphasised that Argos would react if it would be undercut. The OFT accepts that at the time its initiative began, Hasbro could not ensure adherence to RRPs and this is stated explicitly in several of the statements from Hasbro employees that the OFT relies on. There was no absolute guarantee that the agreements would be adhered to by Argos and Littlewoods or that other retailers would follow suit. However, the OFT finds that this does not take away from the fact that they entered into agreements to adhere to RRPs. An element of distrust and the possibility of one of the parties failing to comply are inherent in the nature of such agreements (see earlier at paragraphs 143 and 248). The OFT finds moreover that the agreements were in fact largely adhered to. It is not part of the OFT's case that Hasbro offered special terms or payment to Argos to induce it to agree to follow RRPs and the OFT does not regard this representation as having relevance. However, the OFT takes the view that there was an inducement in the form of higher margins (even if at first it could not be guaranteed) that Hasbro did offer Argos if it entered into an agreement to adhere to RRPs.

Representations: Littlewoods notes that, in its representations to the original rule 14 Notice, Hasbro denies an infringement of the Chapter I prohibition and agrees with Hasbro's assessment that its pricing initiative, about which Littlewoods knows no more than was set out in the original rule 14 Notice, was lawful.
Office of Fair Trading 113
OFT's response: As already stated in response to Argos's further representations above (paragraph 319 above), in its decision that the Chapter I prohibition has been infringed, the OFT does not rely on any mere admission by Hasbro of an infringement, other than the statements made by the Hasbro employees. In addition, any denial of Hasbro is not sufficient to show that the Chapter I prohibition has not been infringed. The OFT has already responded to Hasbro's representations above (paragraphs 305 to 314 above), including any denials included in those representations and Hasbro's assertions about its pricing initiative. The OFT has noted in paragraph 319 above that Hasbro's application for leniency necessarily implies that Hasbro has admitted to a possible infringement of the Chapter I prohibition. In the OFT's view the most reasonable interpretation of the redacted version of the Hasbro representations that was given to Littlewoods is that, while Hasbro denied infringing the Chapter I prohibition as set out by the OFT in the original rule 14 Notice, it did not deny that it had committed an infringement of some kind. Representations: It is not clear how Littlewoods and Argos could have known or sought reassurance about each other's pricing intentions, as Hasbro seems to indicate they did, given that Hasbro denies involvement in an infringement and that the OFT has accepted that there was no direct contact between Littlewoods and Argos. Ian Thomson wrote in his internal e-mail of 18 May 2000 (see paragraph 67 above) that ' both Accounts are taking a cautious approach in case either party reneges on a price agreement.' This clearly does not refer to a particular price agreement, as then Thomson would have written 'the price agreement'. This also shows that there was no reassurance for Littlewoods and Argos about pricing intentions. OFT's response: The OFT has already set out in this Decision the evidence of how Littlewoods and Argos knew about each other's pricing intentions. The email that Ian Thomson sent to Littlewoods on 18 May 2000, a few hours after the e-mail referred to above, is part of this evidence (see paragraph 69 above). Why Ian Thomson refers to 'a price agreement' becomes clear when a few lines later he writes that 'It goes without saying that Action Man and Games prices will be maintained as per earlier agreements.' Ian Thomson's e-mail is the beginning of the extension of the agreement on Action Man and games to the other Hasbro products listed in the e-mail and with the words 'a price agreement' he refers to this newly extended agreement. The OFT finds that Ian Thomson's remark about 'a cautious approach' merely refers to the uncertainty inherent in such agreements about the other parties' actions. Representations: Littlewoods notes that the conclusions of the report of RBB Economics, which was submitted by Hasbro together with its representations, support its assertion that any agreement exerted no material influence on the

Representations: The witness statements of David Bottomley, Neil Wilson and Ian Thomson are unreliable, as they were drafted in June 2003, i.e. a long time after the events in question, and with the assistance of the OFT. Where there is a conflict with the witness statements of the Littlewoods employees, the latter are to be preferred. OFT's response: Ian Thomson's witness statement was almost entirely drawn up by himself, with the aid of independent legal advice. David Bottomley was also assisted by a lawyer of his own in preparing his witness statement. Neil Wilson declined the opportunity to have his own lawyer present. The witness statements contain the witnesses' own words and the witnesses have indicated by signing their statements that they consider them to be true. The witnesses largely confirmed or clarified what they had said at their interviews with OFT officials. Those interviews had taken place five months after the end of the infringing agreements. The witness statements were prepared in May/June 2003. As noted above (see paragraphs 15, 16, 137 and 138), the statements are supported by contemporaneous documents. The OFT is satisfied that the witness statements in question are reliable and are a true account of the evidence which each of these witnesses can give to the CAT.

DECISION

Agreement between Hasbro, Argos and Littlewoods
The evidence set out at part II of this Decision formed the basis of the various rule 14 Notices sent to Hasbro, Argos and Littlewoods. The OFT's assessment of the representations made in response to these rule 14 Notices is set out in part III of this Decision. Having reviewed the evidence and analysed the representations, the OFT finds that there was an agreement and/or concerted practice between Hasbro, Argos and Littlewoods to fix prices of certain Hasbro products between 1 March 2000 and some time between 15 May 2001 and 14 September 2001 which infringed the Chapter I prohibition.
Agreement between Hasbro and Argos
On the basis of the evidence set out above, the OFT finds that there was an agreement and/or concerted practice between Hasbro and Argos to fix the prices of certain Hasbro products, which infringed the Chapter I prohibition from 1 March 2000 until some time between 15 May 2001 and 14 September 2001.
Agreement between Hasbro and Littlewoods
On the basis of the evidence set out above, the OFT finds that there was an agreement and/or concerted practice between Hasbro and Littlewoods, to fix the prices of certain Hasbro products, which infringed the Chapter I prohibition from 1 March 2000 until some time between 15 May 2001 and 14 September 2001.

ACTION

parties, that a starting point of [between 8 and 10, inclusive]196 per cent of the parties' relevant turnover is appropriate. Step 2 adjustment for duration 388 The starting point for the penalty may be increased to take into account the duration of the infringement. In this respect, part years may be treated as full years for the purpose of calculating the number of years of the infringement.197 The start of the agreements fixing the price of Action Man and core games predates the start of the Act (see paragraph 123 above). Hence, 1 March 2000 is the appropriate starting point for these purposes. The agreements in relation to Action Man and core games are judged to have come to an end at the earliest on 15 May 2001, when the OFT visited Hasbro's premises in Uxbridge under section 27(3) of the Act, and at the latest on 14 September 2001, when Hasbro applied for leniency. Taking either date, the duration of the agreements exceeded one year, since the agreements affected Action Man and core games from the beginning. As noted in paragraph 376 above, for the purposes of calculating the penalty, the OFT has decided to take the earlier date as the date the infringement ended. This implies a potential doubling of the step 1 figure for the categories boys' toys and games and puzzles. Due to the serious nature of the infringement, the OFT does not accept Hasbro's request, made in its written representations to the original rule 14 Notice, not to take account of the period in excess of one year in setting the amount of the penalty. However, the period in excess of one year, for the purposes of calculating the penalty, lasted only for some two and a half months and did not include the period in the run up to Christmas where sales levels are particularly high. In the circumstances the OFT will not double the turnover for these categories, but will multiply it by a factor of one point two. The extended list agreement began around May 2000, was implemented in autumn 2000 and similarly came to an end at the earliest on 15 May 2001 (see also at paragraph 123 above). The extended list agreement covered at the very least the products listed in Ian Thomson's e-mail of 18 May 2000 (see paragraph 69 above). These products fall into the categories girls' toys ('Baby All Gone'), infant and pre-school ('Tweenies All Story Time Product'), creative (the toys listed under 'Get Set' and 'Design & Draw'), plush ('Tweenies All Standard Plush' and 'Tweenies Cuddle and Squeeze Doodles') and hand-held electronic games ('Monopoly' and 'Bop It'). This implies that the turnover for these categories should not be increased. Hasbro claims that the category infant and