The
OFT
fined Argos and Littlewoods a total of
£22.5 million in February 2003, after finding that the two
retailers and Hasbro had entered into agreements to fix the prices
of Hasbro products, in breach of the Competition Act. Hasbro is the
US
toy maker behind Sindy, Action Man, Twister and My
Little Pony.
The
UK
's Competition Act 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
,
and which may affect trade within the
UK
."
The Act further 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
."
The Act allows the
OFT
to impose a penalty of up to
10% of a company's turnover for a maximum of three years for
infringement of the Act.
In the event the
OFT
took a strong line – imposing
the largest financial penalties ever imposed under the Act. Argos,
which has the highest turnover, was fined £17.28 million, and
Littlewoods was fined £5.37 million.
Hasbro, which was potentially facing a penalty of £15.6 million,
was granted full leniency on the basis that it had co-operated with
the investigation and provided "crucial evidence."
Argos and Littlewoods appealed to the Competition Appeals
Tribunal against both the findings of liability (i.e. the issue of
whether they were party to illegal price fixing agreements) and the
penalties imposed.
The Appeals Tribunal ruled on the question of liability in
December, finding that the parties had indeed illegally fixed the
prices of Hasbro games and toys. And on Friday, it issued its
ruling on the penalties – upholding the
OFT
's approach
and confirming that the level of penalties imposed was
proportionate.
The Appeals Tribunal nonetheless reassessed the penalties on a
more conservative basis, reducing the penalty on Argos by £2.28
million to £15 million, and the penalty on Littlewoods by £870,000
to £4.5 million.
It put its reduction down to "a reassessment of the penalties
... with a view to taking a conservative approach." It added that
these were "the lowest penalties that could reasonably be justified
in the circumstances to meet the gravity of the case and to have an
appropriate deterrent effect."
Sir John Vickers,
OFT
Chairman, welcomed the
ruling. He said that the ruling "confirms the gravity of
price-fixing and that serious penalties providing deterrence are
right and fair."
