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."
