Cabo Concepts Ltd v MGA Entertainment (UK) Ltd

Hearing dates: 8 October–15 November 2024, 14–21 January 2025

Approved Judgment

This judgment was handed down remotely at 10 am on 16 June 2025 by circulation to the parties or their representatives by email and by release to the National Archives.

INTRODUCTION

This claim concerns the sale of rival brands of small plastic toys. In 2017 the claimants ( Cabo), a toy start-up company, launched a new toy brand called Worldeez, which was a line of surprise collectible figurines with a world travel theme, packaged in a plastic capsule designed to represent a globe. Cabo contends that the defendants ( MGA) stifled the launch of Worldeez by claiming that the globe was a “knock off” of MGA's very popular “LOL Surprise!” toy, and by threatening toy retailers that their supplies of LOL Surprise would be withheld if they stocked the Worldeez globe. The Worldeez toy went on to fail, and was discontinued in 2018.

Cabo's case is that MGA's conduct amounted to (i) an abuse of a dominant position contrary to the prohibition in Chapter II of Part I of the Competition Act 1998 (the 1998 Act) and/or Article 102 TFEU; (ii) unlawful agreements contrary to the prohibition in Chapter I of Part I of the Competition Act 1998 and/or Article 101 TFEU; and (iii) unjustified threats of patent infringement proceedings within the meaning of s. 70 of the Patents Act 1977 (the 1977 Act). Cabo claims that but for MGA's unlawful conduct Worldeez would have been a successful product and Cabo would have gone on to become a successful toy business. Cabo claims loss and damage in the form of lost profits. The initial claim was for in excess of £170m. By the end of the trial, the claim had reduced to £53–90m, depending on the assumptions used in Cabo's quantum models.

MGA denies any infringement of competition law. It denies dominance during the relevant period; contends that even if dominant, its conduct was not abusive; and argues that any agreements between MGA and retailers not to stock the Worldeez globe were not restrictive of competition and were in any event exempted from the Chapter I prohibition and Article 101 TFEU by virtue of the Vertical Agreements Block Exemption Regulation 2010/330/EU [2010] OJ L102/1 (the VBER). MGA further contends that its threats to retailers were not (properly characterised) threats of patent infringement proceedings, and that even if there were such threats they did not cause retailers not to stock Worldeez. More generally, MGA argues that irrespective of its conduct Cabo's toy business would most likely have failed, on the grounds that the founders of the business were inexperienced and naïve, with inadequate operational control, insufficient capital support and an insufficiently appealing and innovative product to achieve commercial success in the highly competitive toy industry (both UK and worldwide). On that basis MGA says that Cabo's damages claim should fail.

The case was originally listed for trial in June 2022. A few weeks before the trial was due to commence, however, it was adjourned because of the discovery of significant flaws in MGA's disclosure process. Further disclosure was then provided in 2023 and the trial was relisted for 2024. The main part of the trial took place over four weeks in October and November 2024. The trial was then adjourned by the court shortly before the written closing submissions were scheduled to be delivered, with the closing submissions ultimately filed in December 2024 and oral closing submissions in January 2025.

Along with their written closing submissions, the parties filed various additional excel spreadsheets with further or updated figures and calculations supporting their respective submissions on the quantum assessment. The parties also filed an updated version of the agreed Decision Tree Model ( DTM), an excel spreadsheet combining the parties' central inputs for the quantum assessment, in a form which could be manipulated by the court. Numerous further materials relating to (in particular) the economic evidence, including the quantum models, were filed during the course of the oral closing submissions, including further excel spreadsheets on both sides, and a further iteration of the DTM.

By the last day of the oral closing submissions, it became apparent that the parties' positions on the quantum assessment were still evolving. The parties' final positions on a number of specific points were subsequently filed on 17 February 2025, and a final version of the DTM was provided on the same date. In response to questions from the court, further figures and explanations were provided by the parties on 12 March and 9 and 14 April 2025. Those addressed specific points on the market shares, the DTM, and the parties' profitability calculations.

During the trial, submissions on behalf of Cabo were made by Ms Kreisberger KC, Mr Chacksfield KC and Mr Kuppen, with cross examination and re-examination divided between them and Mr Artley, and Mr Adey assisting as junior counsel. MGA's submissions, cross-examination and re-examination were divided between all three of its counsel team, namely Ms Wakefield KC, Ms MacLeod and Mr Howell.

I am very grateful for the assistance of all of the counsel instructed in these proceedings, noting not least the efforts on both sides to accommodate the adjourned closing submissions in the case. It will be apparent from the comments above and the remainder of this judgment that this was a case of considerable complexity, on both issues of substance and procedure. It is, in those circumstances, to the credit of the counsel teams that the trial was conducted with the utmost professionalism and courtesy on both sides.

THE EVIDENCE OF FACT Cabo's witnesses of fact

Cabo's main witnesses were Mr and Mrs Michaelson and Mr and Mrs Cohen. These two couples were the founders of Cabo alongside two further individuals, Marc Sivner and Alexander Lazarus, who have since exited the company. The Michaelsons and Cohens are now the sole shareholders of Cabo; Mr Lazarus is, as discussed below, a witness for MGA; and Mr Sivner has not participated in these proceedings in any way. I will refer to the Michaelsons and Cohens in this judgment as the Cabo founders.

Marc Michaelson had been a director of a sports equipment business prior to founding Cabo. Within Cabo he contributed to the product design of Worldeez and led the marketing of the product. Mr Michaelson provided five witness statements, giving extensive evidence about the background to the creation of Cabo, the design and launch of the Worldeez brand, MGA's intervention in May 2017 and the retailer response, Cabo's efforts to sell Worldeez despite the dispute with MGA, and the eventual demise of both the product and Cabo's business. He was cross-examined on that evidence over one and a half days (with the evidence of Mr Hunter, one of MGA's witnesses, interposed briefly on the second morning). His evidence was unfortunately very defensive, and evasive on numerous points. It was apparent that his answers were designed to advance Cabo's case, even when those answers were inconsistent with the contemporaneous documentation or otherwise implausible. It was also apparent that he did not have a firm grasp of the details of Cabo's business, including on points...