Argos Ltd & Anor v Office of Fair Trading [2004] CAT 24 (14 December 2004) [2004] CAT 24

"2. – (1) … agreements between undertakings, decisions by associations of undertakings or concerted practices which— (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited … (2) Subsection (1) applies, in particular, to agreements, decisions or practices which— (a) directly or indirectly fix purchase or selling prices or any other trading conditions; … (8) The prohibition imposed by subsection (1) is referred to in this Act as "the Chapter I prohibition."

"3.–(1) The Tribunal must determine the appeal on the merits by reference to the grounds of appeal set out in the notice of appeal. (2) The Tribunal may confirm or set aside the decision which is the subject of the appeal, or any part of it, and may– (a) remit the matter to the OFT, (b) impose or revoke, or vary the amount of, a penalty, (c) grant or cancel an individual exemption or vary any conditions or obligations imposed in relation to the exemption by the OFT, (d) give such directions, or take such other steps, as the OFT could itself have given or taken, or (e) make any other decision which the OFT could itself have made. (3) Any decision of the Tribunal on an appeal has the same effect, and may be enforced in the same manner, as a decision of the OFT. (4) If the Tribunal confirms the decision which is the subject of the appeal it may nevertheless set aside any finding of fact on which the decision was based."

" A Agreement between Hasbro, Argos and Littlewoods 366 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. B Agreement between Hasbro and Argos 367 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. C Agreement between Hasbro and Littlewoods 368 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."

" 1) Infant and pre-school - infant -pre-school 2) Boys' Toys -Action figures -Vehicles -Outdoor action sport 3) Girls' Toys -Large dolls -Mini dolls -Collectables 4) Games and puzzles -Family games -Children's games -Adult games -Travel games -Puzzles 5) Creative toys 6) Construction 7) Plush 8) Ride-ons 9) Electronic learning aids 10) Hand-held electronic games "

" 'Core Boys', covering Action Man, Star Wars, Transformers, Micro Machines and Batman; 'Games and Creative', covering Core Games and creative play products; and 'Growth Drivers', covering Tweenie, Pokemon, PlaySkool. Mr. Potato Head, Barney, Nerf, Feature Dolls, Art Attack and Puzz 3D."

"I would like to confirm that Gardens Galore has been reduced in [list] price to £13.67 and will retail at £19.99. The product has not been selected by your major opposition so it will be an excellent margin opportunity."

"Neil and I have spoken to our respective contacts at Argos and Index and put together a proposal regarding the maintenance of certain retails within our portfolio. This is a step in the right direction and it is fair to say that both Accounts are keen to improve margins but at the same time are taking a cautious approach in case either party reneges on a price agreement. … It goes without saying that Action Man and Games prices will be maintained as per earlier agreements."

"Both accounts have agreed to the above price points so this information should be translated to other accounts. The proof in the pudding will be when both Catalogues are published, but Neil and I are confident that they will play ball."

"Following on from various conversations regarding Price Points and opportunities to make more margin I am able to confirm a list of products and prices that Argos have committed to. Games and Action Man prices will continue to be adhered to and the retails are on your range sheets provided by me as part of the selection proposal process. Listed below are the products and prices. POKeMON Battle Figures 2 Pk 4.99 Pokeball Blaster 3 Pk 6.99 Interactive Pikachu 23.99 Micro Machines Transforming Team Truck 29.99 Rally Race Track 19.99 Hand Held Electronic Monopoly 29.99 Bop It 19.99 Girls Baby all Gone Get Set Chocolate Factory 19.99 Egyptian Mystery 29.99 Mastering Mosaics 19.99 Gardens Galore 19.99 (Not listed in Argos) Design & Draw Spirograph 14.99 Super Sticker Factory 17.99 Tweenies All Standard Plush 14.99 All Story Time Product 24.99 Cuddle and Squeeze Doodles 24.99 If you have any questions regarding the above please come back to me and I will do my best to answer them."

"Ian … This is a great initiative that you and Neil have instigated!!!!!!!!! However, a word to the wise, never put anything in writing, its highly illegal and it could bite you right in the arse!!!! suggest you phone Lesley and tell her to trash? Talk to Dave. Mike." (Decision, paragraph 73) According to paragraph 74 of the Decision, Mr. Brighty told Mr. Thomson to contact Lesley Paisley immediately and tell her to destroy the email. According to Mr. Thomson, Lesley Paisley said she had been surprised that he had sent the email and would destroy it. Mr. Thomson believes her surprise was due to the fact that he had referred to the agreement in writing, as she already knew about the pricing initiative and its extension to other products because Mr. Thomson had told her at one of the meetings with Index. Interactive Pikachu A few days later, on 25 May 2000, Mr. Wilson emailed Ian Thomson and Mike Brighty to inform then that "

"…an example of how information was passed to me by Argos and then passed on internally within Hasbro to be disseminated to other accounts"

"The object of the agreement or understanding was to agree prices, and in the overwhelming majority of cases, it succeeded."

"The whole point of making Argos and Index toe the line on Retails was to set precedent that the rest of the trade would follow."

"…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." (Decision, paragraph 107) Mr. Cowley of Littlewoods stated in an email to Mr. Thomson of 28 December 2000, cited at paragraph 84 of the Decision: "

"Index are keen to price the Ferris Wheel at the Argos S/S price of £49.99 in their A/W 2001 catalogue. Can you ensure that Argos will match the price and if you know of any retail price difference will you try and get them to comply."

"Re: ARGOS ACCOUNT UPDATE Charles, please follow this up urgently, as we can not allow a £14.99 price on the dinghy. thanks DB"

"… As a result of this email, the error was corrected and the dinghy was priced at the RRP. I was the person who spotted that potentially we could have had a retailer undercutting RRP, which we could not allow given the arrangements which were then in place and working well."

"I had a call today from Jacqui Wray at Argos stating that the following items are on sale in the trade at prices lower than recommended retail prices … I stated that Hasbro cannot control retails prices due to it being illegal."

"It is the OFT's view that Hasbro's pricing initiative led directly to an overall infringing agreement and/or concerted practice between Hasbro, Argos and Littlewoods. This overall agreement included two bilateral infringing agreements and/or concerted practices, contingent on each other, between Hasbro and Argos and between Hasbro and Littlewoods, which formed part of a pattern of continuous conduct with a common objective. These agreements and/ or concerted practices may thus be read together as one agreement and/ or concerted practice". (paragraph 95) More particularly, the OFT found at paragraph 96 of the Decision: "

"The witness statements of David Bottomley, Neil Wilson and Ian Thomson clearly show that Argos and Littlewoods took part in the pricing initiative (to price agreed products at or near Hasbro's RRP) on the understanding with Hasbro that Hasbro would get the other retailer to do the same." (paragraph 97) "

"On the basis of the evidence taken as a whole, it is the OFT's view that there was collusion between Hasbro, Argos and Littlewoods which pursued a common objective regarding the price of certain Hasbro toys and games. Each was aware of the others' involvement and the nature of its intentions regarding its conduct in the relevant markets. The OFT concludes that this conduct constituted an overall agreement and/or concerted practice between these three undertakings."

"64. Article [81] draws a distinction between the concept of 'concerted practices' and that of 'agreements between undertakings' or of 'decisions by associations of undertakings'; the object is to bring within the prohibition of that article a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition. 65. By its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. 66. Although parallel behaviour may not by itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market." - Suiker Unie In Case 40/73 etc Suiker Unie v Commission [1975] ECR 1663 ("

"173. The criteria of coordination and cooperation laid down by the case-law of the Court, which in no way require the working out of an actual plan, must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that each economic operator must determine independently the policy which he intends to adopt on the common market including the choice of the persons and undertakings to which he makes offers or sells. 174. Although it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market. 175. The documents quoted show that the applicants contacted each other and that they in fact pursued the aim of removing in advance any uncertainty as to the future conduct of their competitors."

" … to apply to all collusion between undertakings, whatever the form it takes. … The only essential thing is the distinction between independent conduct, which is allowed, and collusion, which is not, regardless of any distinction between types of collusion"

"130. … it is clear from the settled case-law of the Court of Justice… that an agreement within the meaning of Article 81(1) of the Treaty arises from an expression, by the participating undertakings, of their joint intention to conduct themselves on the market in a specific way." 131. A comparison between that definition of agreement and the definition of a concerted practice…shows that, from the subjective point of view, they are intended to catch forms of collusion having the same nature and are only distinguishable from each other by their intensity and the forms in which they manifest themselves." - Bayer In Case T-41/96 Bayer v Commission [2000] ECR II-3383, on appeal Cases C-2/01P and C-3/01P Bundesverband der Arzneimittel – Importeure v Commission, judgment of 6 January 2004, not yet reported, ( "

"66. The case-law shows that, where a decision on the part of a manufacturer constitutes unilateral conduct of the undertaking, that decision escapes the prohibition in Article 81(1) of the Treaty (Case 107/82 AEG v Commission [1983] ECR 3151 , paragraph 38; Joined Cases 25/84 and 26/84 Ford and Ford Europe v Commission [1985] ECR 2725 , paragraph 21; Case T-43/92 Dunlop Slazenger v Commission [1994] ECR II-441 , paragraph 56). 67. It is also clear from the case-law in that in order for there to be an agreement within the meaning of Article 81(1) of the Treaty it is sufficient that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661 , paragraph 112; Joined Cases 209/78 to 215/78 Van Landewyck and Others v Commission [1980] ECR 3125 , paragraph 86; Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711 , paragraph 256). 68. As regards the form in which that common intention is expressed, it is sufficient for a stipulation to be the expression of the parties' intention to behave on the market in accordance with its terms (see, in particular, ACF Chemiefarma , paragraph 112, and Van Landewyck , paragraph 86), without its having to constitute a valid and binding contract under national law ( Sandoz , paragraph 13). 69. It follows that the concept of an agreement within the meaning of Article 81(1) of the Treaty as interpreted by the case-law, centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties' intention. 70. In certain circumstances, measures adopted or imposed in an apparently unilateral manner by a manufacturer in the context of his continuing relations with his distributors have been regarded as constituting an agreement within the meaning of Article 85(1) of the Treaty (Joined Cases 32/78, 36/78 to 82/78 BMW Belgium and Others vs Commission [1979] ECR 2435 , paragraphs 72 and 73; Sandoz, paragraphs 7 to 12; Case C-70/93 BMW v ALD [1995] ECR I-3439 , paragraphs 16 and 17). 71. That case-law shows that a distinction should be drawn between cases in which an undertaking has adopted a genuinely unilateral measure, and thus without the express or implied participation of another undertaking, and those in which the unilateral character of the measure is merely apparent. Whilst the former do not fall within Article 85(1) of the Treaty, the latter must be regarded as revealing an agreement between undertakings and may therefore fall within the scope of that article. That is the case, in particular, with practices and measures in restraint of competition which, though apparently adopted unilaterally by the manufacturer in the context of its contractual relations with its dealers, nevertheless receive at least the tacit acquiescence of those dealers. 72. It is also clear from that case-law that the Commission cannot hold that apparently unilateral conduct on the part of a manufacturer, adopted in the context of the contractual relations which he maintains with his dealers, in reality forms the basis of an agreement between undertakings within the meaning of Article 85(1) of the Treaty if it does not establish the existence of an acquiescence by the manufacturer ( BMW Belgium , paragraphs 28 to 30; AEG, paragraph 38; Ford and Ford Europe , paragraph 21; Metro II, paragraphs 72 and 73; Sandoz, paragraphs 7 to 12; BMW v ALD, paragraphs 16 and 17)."

"100. Concerning the appellants' arguments that the Court of First Instance should have acknowledged that the manifestation of Bayer's intention to restrict parallel imports could constitute the basis of an agreement prohibited by Article 85(1) of the Treaty, it is true that the existence of an agreement within the meaning of that provision can be deduced from the conduct of the parties concerned. 101. However, such an agreement cannot be based on what is only the expression of a unilateral policy of one of the contracting parties, which can be put into effect without the assistance of others. To hold that an agreement prohibited by Article 85(1) of the Treaty may be established simply on the basis of the expression of a unilateral policy aimed at preventing parallel imports would have the effect of confusing the scope of that provision with that of Article 86 of the Treaty. 102. For an agreement within the meaning of Article 85(1) of the Treaty to be capable of being regarded as having been concluded by tacit acceptance, it is necessary that the manifestation of the wish of one of the contracting parties to achieve an anti-competitive goal constitute an invitation to the other party, whether express or implied, to fulfil that goal jointly, and that applies all the more where, as in this case, such an agreement is not at first sight in the interests of the other party, namely the wholesalers."

"1849. In that connection, the Court points out that the concept of concerted practice does in fact imply the existence of reciprocal contacts (Opinion of Advocate General Darmon in Woodpulp II , cited at paragraph 697 above, points 170 to 175). That condition is met where one competitor discloses its future intentions or conduct on the market to another when the latter requests it or, at the very least, accepts it… … 1852. … In order to prove that there has been a concerted practice, it is not therefore necessary to show that the competitor in question has formally undertaken, in respect of one or several others, to adopt a particular course of conduct or that the competitors have colluded over their future conduct on the market (Opinion of Advocate General Darmon in Woodpulp II , cited at paragraph 697 above, point 172). It is sufficient that, by its statement of intention, the competitor should have eliminated or, at the very least, substantially reduced uncertainty as to the conduct [on the market to be expected on his part]... (Case T-4/89 BASF v Commission [1991] ECR II-1523, paragraph 242, and Hercules Chemicals v Commission , cited at paragraph 140 above, paragraph 260)." - Tate & Lyle Cases T-202/98, T-204/98 and T-207/98 Tate & Lyle plc v Commission [2001] ECR II-2035 ("

"54. Moreover, the fact that only one of the participants at the meetings in question reveals its intentions is not sufficient to exclude the possibility of an agreement or concerted practice … 57. In the present case, it is undisputed that there were direct contacts between the three applicants, whereby British Sugar informed its competitors, Tate & Lyle and Napier Brown, of the conduct which it intended to adopt on the sugar market in Great Britain. 58. In Case T-1/89 Rhône-Poulenc v Commission [1991] ECR II-867 , in which the applicant had been accused of taking part in meetings at which information was exchanged amongst competitors concerning, inter alia, the prices which they intended to adopt on the market, the Court of First Instance held that an undertaking, by its participation in a meeting with an anti-competitive purpose, not only pursued the aim of eliminating in advance uncertainty about the future conduct of its competitors but could not fail to take into account, directly or indirectly, the information obtained in the course of those meetings in order to determine the policy which it intended to pursue on the market (Rhône-Poulenc, paragraphs 122 and 123). This Court considers that that conclusion also applies where, as in this case, the participation of one or more undertakings in meetings with an anti-competitive purpose is limited to the mere receipt of information concerning the future conduct of their market competitors." - Responding to complaints One of the allegations in Suiker Unie , cited above, was that certain producers of sugar had concerted their actions so as to restrict exports of sugar from Belgium to Germany. In its judgment the Court held at paragraphs 282 to 283: "282 However the before mentioned letter shows clearly that the German producers to which it referred … never at any time kept their dissatisfaction to themselves but told RT about it. 283 If an economic operator accepts the complaints made to him by another operator in connexion with the competition to which the products manufactured by the former operator expose the latter, the conduct of the operators concerned amounts to a concerted practice."

"98. As we have already stated in our interim judgment of 8 August 2001, we agree that the Director's concession that these proceedings are "criminal", for the purposes of Article 6 of the European Convention on Human Rights, is properly made: see Case C-235/92P Montecatini v Commission [1999] ECR I-4539, paragraphs 175 and 176. That is particularly so since penalties under the Act are intended to be severe and to have a deterrent effect: see the Director's statutory Guidance as to the appropriate amount of the penalty, (OFT 423, March 2000) issued under section 38(1) of the Act. 99. The fact that these proceedings may be classified as "criminal" for the purposes of the ECHR gives Napp the protection of Article 6, and in particular the right to "a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law" (Article 6(1)), to the presumption of innocence (Article 6(2)), and to the minimum rights envisaged by Article 6(3) including the right "to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him" (Article 6(3)(d)). 100. In our view it follows from Article 6(2) that the burden of proof rests throughout on the Director to prove the infringements alleged. 101. However, as the Court of Appeal held in Han, cited above, to which we referred in our judgment of 8 August 2001, the fact that Article 6 applies does not of itself lead to the conclusion that these proceedings must be subject to the procedures and rules that apply to the investigation and trial of offences classified as criminal offences for the purposes of domestic law: see Potter LJ at paragraph 84, and Mance LJ at paragraph 88 of that judgment. 102. Neither the ECHR itself nor the European Court of Human Rights has laid down a particular standard of proof that must be applied in proceedings to which Articles 6(2) or (3) apply, and still less that the standard should be that of "proof beyond reasonable doubt", which is not a concept to be found in the domestic systems of many of the signatory States (see Sir Richard Buxton, cited above, at pp. 338 and 339). 103. In our view it follows that neither Article 6, nor the Human Rights Act 1998, in themselves oblige us to apply the criminal standard of proof as established in domestic law in cases where the Director seeks to impose a financial penalty in respect of alleged infringements of the Chapter I or Chapter II prohibitions under the Act. 104. In our view the standard of proof to be applied under the Act is to be decided in accordance with the normal rules of the United Kingdom domestic legal systems. Neither party has cited to us any decided domestic cases which suggest that, in circumstances such as these, the criminal standard should be applied, nor invited us to apply by analogy certain civil situations where traditionally the criminal standard of proof is required (e.g. committal proceedings). 105. Infringements of the Chapter I and Chapter II prohibitions imposed by sections 2 and 18 of the Act are not classified as criminal offences in domestic law, in contrast, for example, to the criminal offences created under sections 42 to 44. Under section 38(8), penalties are recoverable by the Director as a civil debt. Directions are enforceable by civil proceedings under section 34. In our view the structure of the Act points to the conclusion that under domestic law the standard of proof we must apply in deciding whether infringements of the Chapter I or Chapter II prohibitions are proved is the civil standard, commonly known as the preponderance or balance of probabilities, notwithstanding that the civil penalties imposed may be intended by the Director to have a deterrent effect. 106. We add that in many cases under the Act the factual issues before this Tribunal will often relate to such matters as determining the relevant market, whether dominance exists, and assessing whether conduct characterised as an "abuse" is economically justified. Issues of that kind involve a more or less complex assessment of mainly economic data and perhaps conflicting expert evidence. It seems to us more likely that Parliament would have intended us to apply the civil standard of proof to issues of this kind, rather than the time-honoured criminal standard of "proof beyond reasonable doubt". 107. In our view it follows from the speech of Lord Nicholls (with whom Lord Goff and Lord Mustill agreed) in Re H , cited above, at pp. 586 to 587, that under the law of England and Wales there are only two standards of proof, the criminal standard and the civil standard; there is no 'intermediate' standard. The position is the same in the law of Scotland and Northern Ireland. Within the civil standard, however, the more serious the allegation, the more cogent should be the evidence before the court concludes that the allegation is established on the preponderance of probability: see Lord Nicholls' speech in Re H , citing notably In re Dellow's Will Trusts [1964] 1 WLR 451, 455 and Hornal v Neuberger Products Ltd [1957] 1 QB 247, 266. 108. Since cases under the Act involving penalties are serious matters, it follows from Re H that strong and convincing evidence will be required before infringements of the Chapter I and Chapter II prohibitions can be found to be proved, even to the civil standard. Indeed, whether we are, in technical terms, applying a civil standard on the basis of strong and convincing evidence, or a criminal standard of beyond reasonable doubt, we think in practice the result is likely to be the same. We find it difficult to imagine, for example, this Tribunal upholding a penalty if there were a reasonable doubt in our minds, or if we were anything less than sure that the Decision was soundly based. 109. In those circumstances the conclusion we reach is that, formally speaking, the standard of proof in proceedings under the Act involving penalties is the civil standard of proof, but that standard is to be applied bearing in mind that infringements of the Act are serious matters attracting severe financial penalties. It is for the Director to satisfy us in each case, on the basis of strong and compelling evidence, taking account of the seriousness of what is alleged, that the infringement is duly proved, the undertaking being entitled to the presumption of innocence, and to any reasonable doubt there may be."

"188. In non-criminal proceedings facts are required to be proved on the balance of probability, that is to say that the court must be satisfied on the evidence, that the occurrence of the event is more likely than not. However, the principle is that the more serious the allegation, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities. Hence the civil standard provides for flexibility as to the cogency of the evidence required to satisfy the court of the facts. Thus in Re H Lord Nicholls said: "

"core boys", "games and creative" and "growth drivers"

"Match key competitors, including Index Selective selling price increases Selective price cutting on high-profile products" (Day 3, pp. 38). Mr. Duddy went on to explain: "

"Q Now Mr. Duddy has told us that a policy of moving to market pricing does not mean a policy of moving to RRPs; do you agree with that? A Yes, I do" (Day 3, p. 84) Mrs. Thompson also emphasised that the policy of market pricing only meant going to RRPs if that meant matching competitors who were already at RRPs. Asked about paragraph 9 of Thompson I, she said: "

"The move to near RRP or RRP would be driven purely and simply by us matching our competitors' prices."

"Q. And secondly [the policy reflected in that document] bears no relationship whatsoever to RRPs; they are irrelevant, it is not mentioned in this document. A. RRPs are not relevant. Q. Yes. It is completely irrelevant, this question of RRPs, to this policy that you were planning in August 1998. A. Only to the extent that we would price to the market, and hence if the market was at RRP, we would price to RRP."

"Continue with our pricing policy of not pre-empting Index but ensuring we have hero prices, entry prices, across all groups" (paragraph 25). A later Argos document, sent to Mrs. Thompson on 28 January 2000 and headed "

"'DO'S' – possible to discuss our views on pricing strategy, positioning of our products in the market, price elasticity and the information and evidence to support this. 'DON'TS' – do not indicate that we require any particular retail price or that we would make any supply or discount structure contingent on particular retail price – we cannot legally introduce such requirements."

"The presentation was mainly about the development of a 'Listing Initiative' under which retailers were offered rebates of 5% by Hasbro for listing certain products in their catalogues which would otherwise be 'de-listed'. Discussion also took place about a pricing initiative under which Hasbro would try to get retailers to list at RRPs. Account managers were briefed to undertake audits of toy retailers and if they found that prices were not at RRPs they were to have conversations with them to try and persuade them to adopt RRPs. We were led to believe that these strategies had been looked at by our legal department and were OK. It is this meeting which I described at lines 23-25 of my interview with Mr. Lawrie."

"DB: When rejoined Hasbro in 1998 attended presentation led by Mike Brighty and Jonathan Evans and was led to believe that the pricing strategy has been looked at by our legal department and was OK. BL: When did pricing strategy move into becoming a price-fixing type arrangement? DB: Shortly after initial discussions in 1999. BL: When did discussion move from margin discussions to discussion to agree prices? DB: Conversations on adopting RRPs set by Hasbro took place in 1999."

"12. Argos and Littlewoods were key to the success of the pricing initiative since they were the market leaders – if they could be persuaded to maintain prices at RRP then other retailers would follow suit. We found it easy to get other retailers to adopt RRPs – what they did depended on whether Argos adopted RRPs… … 14. …In pursuance of the pricing initiative, I was party to a large number of conversations with retailers, including Littlewoods, at about this time. These discussions centred more on margin than on RRP. In these conversations, I would suggest to retailers that they should price at the Hasbro RRPs… Retailers would say that they were interested in pricing at Hasbro's RRPs, but couldn't because of Argos. What they meant was that, given Argos' pre-eminent position in the market, they couldn't afford to price at RRP unless Argos did the same. My reply to retailers was that exactly the same discussions were taking place with Argos so for the first time the whole industry would be involved. … 16. I did not deal with Argos directly. However, as a result of the discussions that Mike Brighty of Hasbro had with Sue Porritt of Argos, I came to understand that Argos had indicated that they too would go out at Hasbro RRPs. Within Hasbro there was constant internal dialogue at all times about these discussions. I was aware of exactly what was being discussed with Argos, since Mike Brighty (who dealt with Hasbro) sat next to me. We would have a meeting each Monday morning to discuss the previous week's events and then we would discuss this with the whole team in the afternoon. These internal meetings discussed general business issues and were not solely account specific. 17. Mike Brighty and I had had discussions with the higher management of our customers, such as I describe above. However, it was Ian Thomson (the Littlewoods Account Manger) and Neil Wilson (the Argos Account Manager) who carried out the day-to-day discussions with Index and Argos. As I said in my interview with Mr. Lawrie, "

"Mike McCulloch told Sue Porritt that Hasbro were proposing that all retailers should sell at a given price and they would only be paid rebates if they agreed to sell at the relevant RRP. Sue came into my office and said something like "

"8. I was aware that in late 1998 and early 1999, Mike McCulloch, Hasbro's Head of UK Sales and Marketing, had spoken to Maria Thompson at Argos, and possibly other buyers there such as Sue Porritt. In these discussions, they identified a need to increase margins on Hasbro products. Argos said that it would welcome any influence that Hasbro could exert to increase margins, by getting nearer to RRPs and by other means. I understood that Mike McCulloch said that Hasbro could help stabilise RRPs (i.e. persuade other retailers to go out at RRPs), and that Argos was willing to go along with this in principle and price at RRPs, but would react if it was undercut and would never give any guarantees on pricing. 9. In response to this pressure from Argos and other retailers to improve profitability and margins, Hasbro's senior management at director level (i.e. Mike McCulloch as well as David Bottomley and Mike Brighty, both Sales Directors) developed a strategy to raise margins on Hasbro products. The discussions with Argos were key to coming up with this strategy. There were a number of strategies laid down to increase margins, including pricing and listings initiatives, introducing clearance merchandise, an FOB programme and reducing cost prices. The first part of the strategy was a pricing initiative to increase retailer margins on Hasbro products by matching RRPs across the toy industry. I set out in more detail below how this worked in practice. The second part of the strategy was a listing initiative which ran concurrently with the pricing initiative and which involved payment of a rebate to retailers in return for listing certain products that might have otherwise have been de-listed. It was considered first by Hasbro Sales Directors to make the granting of a rebate also conditional on adhering to RRP, but it was realised that this would be illegal after consulting Hasbro's Legal Department. 10. Argos (and other retailers) were asked by Hasbro whether they were happy to match Hasbro's RRPs. Argos said it was prepared to match RRPs as long as it was not undercut by its competitors. 11. Although Hasbro management had developed this strategy, account managers such as Ian Thomson and myself then carried out the day-to-day practicalities of ensuring that it worked. 12. As to the level of detail that went into the discussions between Hasbro and Argos as described above I am not in a position to say, as I did not attend these meetings…"

"MM: We put plan together to put profit into retail sector. Had discussions with Argos, but they were unwilling to take on the plan because they were concerned about other retailers undermining them. Initiative was discussed with other retailers. Other retailers were always going to follow prices of Argos and Index. So other retailers felt whatever Argos and Index did was crucial to strategy. BL: Who did you speak to at Argos? MM: Maria Thompson and their head of toy buying at the time, Sue Porritt, who is no longer there. BL: Was anything agreed? MM: No not really. Two things came out of it: tying rebates to distribution and that Argos were critical to initiative to giving more profit to retailers. Told Argos that rest of retailers were price followers. … MM: The bought in margin initiative was taken up by Argos and Index, and we seemed to lose track of things. RP of Argos crucial to market. BL: How many retailers were involved? MM: [The] crucial ones were Argos and Index. When they published their catalogues other retailers could see that they were pricing at suggested price points. BL: Who in Hasbro spoke to who at Argos, Index and other retailers? MM: Me. I spoke to Argos and Index in general terms about the initiative, but no specific agreement about retail pricing. … BL: So you never talked to Argos and Index about an arrangement. MM: No. [I was] careful never to discuss retail pricing with them on advice of [our] legal dept"

"58. Index concerns about our plans for improving profitability on Hasbro merchandise surfaced towards the end of the presentation when we considered my Excel spreadsheet analysis. The spreadsheets showed that Index would need to price at the new .99p price points in order to make the necessary profit margins. 59. John McMahon and Lesley Paisley saw that the products in our Core Games and Action Man would have to be retailed at a certain price point in order to maintain that margin and expressed grave concerns over whether this could be done. 60. These grave concerns were how Hasbro could make other retailers do the same thing. 61. The issue over pricing was that Argos as direct competitor would be a direct threat to any action taken by Index and could compromise them severely if they undercut the pricing. This would mean that Index would lose credibility as a catalogue retailer and as a result of that lose market share. These might not have been the precise words that John McMahon used but the implication was the same. 62. It was at this point that Mike McCulloch intimated to John McMahon that he had been having discussions with the major opposition (Argos) and they were of the same opinion i.e. that they could not agree to the new pricing structure for fear of being undercut. It did need the agreement of both parties in order for the plan to work, but that if Index would agree to go along with it then Mike McCulloch, using this knowledge, was confident that he could persuade them to do the same. 63. John McMahon said that he would play ball and go along with the plan but if they (Argos) reneged on the deal and did not stick to the retail prices in their 1999 Autumn Winter Catalogue and he (Index) did, he would be seriously disadvantaged. If this happened as a result he would do some serious price cutting in the next Index catalogue launch. 64. There was a great sense of satisfaction amongst Mike McCulloch, David Bottomley and myself after this meeting that we had a last been able to present a plan that would improve the profitability of the customers that we dealt with. Mike McCulloch said that he would have to go and see Argos to get their buy in. I am not sure if he intended to take Mike Brighty as well. 65. I was told shortly afterwards that Argos had agreed to go ahead. (I can't remember who passed on the details to me at that time but it would probably have been David Bottomley but I can't be entirely sure.) I do remember being asked to pass on the information to Index and I would have spoken directly to Alan Burgess as a result. Alan simply acknowledged this. 66. I don't know whether Mike McCulloch or David Bottomley spoke to their contacts at Index about the Argos decision. Mike McCulloch's contact would have been John McMahon and David Bottomley's, Lesley Paisley 67. At that time I spoke to Alan Burgess to tell him that we had had an agreement from Argos that the Core Brand recommended retail prices would be adhered to."

"There are many parts of the conversation that I do not recollect and there are some that remain quite clear" (Day 1, p. 102). Mr. Thomson accepted that Mr. McCulloch did not say to Mr. McMahon in mandatory terms "

"A. The words "play ball" may not have been used, but I would go along with that there was a clear indication that he was willing to participate, as long as he knew that the opposition were going to do the same. Q. Let us be absolutely crystal clear about this, because this is an important issue, and Mr. McMahon will want to explain what his position is. What do you mean by clear indication? What words did Mr. McMahon use? A. As I said, it was along the lines of, "

"Argos was concerned about undercutting by any retailer and because they competed directly with Index they would be very concerned with how Index was pricing products. Argos would know, for example, what Index's Srping/ Summer prices were (because they were published in its catalogue) but they would not know what their intentions were with respect to Autumn/ Winter and that is where we came in." (paragraph 28) In those circumstances even if, as the appellants submit and we accept, a certain move to RRPs took place in S/ S 1999, that would by no means preclude the existence of agreements or concerted practices for the A/W 1999 catalogues onwards. The Hasbro/ Argos meeting held on 17 February 1999 A meeting between Hasbro and Argos was held on 17 February 1999 attended by Alistair Richards and Simon Gardner for Hasbro, and Terence Duddy and Maria Thompson for Argos. The evidence we have about this meeting is contained is three documents: a Hasbro internal document headed "

"Argos Meeting – 17/2/99 Issues 1. BIM eroding 5.5% 1998 Cover – Dialogue opened to stabilise RRPs (initially Core Games, Action Man) - Build in additional rebate earning"

"…2. Games Rebate The specific issue of being forced to range Battleships & Connect 4 was raised. ARE advised that we can have an individual conversation around specific issues. Andrew will you take this up with Mike Brighty. 3. Pricing Strategy vs Rebate Pricing MT indicated that we will react heavily to being undercut should it happen. Hasbro will not put money on the table to support this but will look at other methods of support. I will follow this up with Mike Brighty. …"

"Though you and Maria made clear that product availability and particularly profitability needs extra focus by Hasbro. I know that plans are in place but Simon and I will keep a personal watch on these areas, and will expect to show you progress the next time we meet."

"Hasbro's retail pricing strategy to increase trade bought-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!"

"15. From January to March 1999, Argos had gone through a selection process with me and Mike Brighty to decide which products were going into the catalogue. Argos then told me what products they were proposing to put in their catalogue. In March 1999, Argos and Index had made the final selection of the products that they would carry in the A/W 1999 catalogue. In my interview, I said, as regards the A/W 1999 catalogue, 'Our role was to establish common products in both catalogues and set RRPs.' I was referring to the pricing initiative. I now wish to clarify what I meant by establishing common products and setting RRPs. 16. 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 reduce the price to drive sales. By and large, when I presented Argos with Hasbro's proposed RRPs they said they were happy to follow them, although they did not give any guarantees and were subject to change. Occasionally their price would differ from the indication they had previously given. 17. At the same time, other account managers would go through the same process with their retailers. Once Argos had told me what their pricing intentions were, I passed on that information to other account managers within Hasbro to flag-up the products where the RRP was looking unlikely to be matched. It was then up to them to tell their accounts, and I do not know how they presented this information. However, I know that they did tell their accounts. … 19. Having determined Argos' pricing intentions and passed these on to the other account managers within Hasbro, I received information from those account managers regarding the intentions of other retailers to go with RRPs. I then reverted to Argos and said, without being specific, that it was my belief that the future retail price of a product would or would not be at the RRP. I told Argos which products this related to. I never mentioned the name of the retailer who was involved or quantified exactly the price that retailer would go out at. I simply said to Argos that it was my belief from what retailers told us that this or that product would or would not be at the RRP. 20. I mainly had these conversations with Andrew Needham at Argos, as he was the buyer of boys' toys (including Action Man) and games, and sometimes with Sue Porritt, who was his boss. To a lesser extent I also dealt with Vanessa Clarkson, who was the Argos buyer for girls' toys, creative play and pre-school toys. These were the Argos buyers I would have the discussions with as described here. My involvement with Maria Thompson, who was more senior, was minimal. 21. In the interview I said, 'We never knew for sure if they would definitely commit to those prices, but had a 'gentleman's agreement' that they would… It was implied that RRPs would be adhered to. But, we were not allowed to carry out any sanctions if RRPs were not adhered to.' I described the process which I have set out above as a 'gentleman's agreement'. To clarify, what I meant was as follows. As I explain above, Argos had told me what their pricing intentions were and that they were intending to price at Hasbro's RRPs. However, they never formally guaranteed that they would go out at those prices. There were not documents that set out these arrangements. If Argos chose not to charge RRPs there was nothing we could do, as we knew it was illegal to, for example, offer incentives to Argos to adhere to RRPs. That is why we only knew what the actual price would be (and whether Argos had kept to the price they had indicated to me) when we looked at the prices in Argos' catalogue. 22. Argos were fully aware that the pricing initiative involved Hasbro talking to other retailers. 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. 23. 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. 24. In these circumstances, once I had spoken to Argos, I contacted the account manager in Hasbro who dealt with the retailer in question. He or she in turn called the buyer of the retailer who had the lower price. The account manager sought to find out why the price was lower and to persuade the retailer to go back to the RRP. Often the lower price turned out to be a temporary promotion, for instance to clear out stock, or a simple mistake, as most retailers were eager to charge RRPs. I then informed Argos whether we were able to do anything and either provided the reassurance they sought or said that we could do nothing. Argos knew that this was the process that was going on. 25. …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. 26. In my interview with the OFT I explained that 'We would identify any undercutting and try to persuade the retailer to raise the[ir] price to the RRPs. The account managers would contact their customers.' This is the process that I have described in the preceding paragraphs. 27. The pricing initiative as explained above involved all retailers, not only Argos and Index. However, these two were a primary concern to Hasbro as they were the price setters in the toy market. When they had published their catalogues the other retailers would generally follow suit. Therefore it was necessary for Ian Thomson (the Account Manager for Littlewoods) and myself to have more of a dialogue with our respective accounts and be more involved. As I said in my interview with the OFT, 'Argos and Index were the price setters/ leaders in the market. So needed to get them on board for our pricing strategy/ trading terms strategy to work'. 28. Argos was concerned about undercutting by any retailer and because they competed directly with Index they would be very concerned with how Index was pricing products. Argos would know, for example, what Index's Spring/ Summer prices were (because they were published in its catalogue) but they would not know what their intentions were with respect to Autumn/ Winter and that is where we came in. 29. I had internal meetings with Ian Thomson when we would discuss Argos' and Index's pricing intentions. As a result, I was able to provide Argos with reassurance as to probable future market pricing, i.e. that an RRP was likely or unlikely. This is what I meant in my interview with the OFT when I said 'Our role was to establish common products in both catalogues and set RRPs'. I was referring to Ian Thomson and myself and by 'both catalogues', I meant the Argos and Index catalogues. Similarly retailer or any reatialer'ham. ragraph 36 of his witness statement that he never entered inot conversations me) when w30. I understand that Andrew Needham says in paragraph 36 of his witness statement that he never entered into conversations with Hasbro regarding Index and pricing. That is correct to the extent that I cannot recall being specific about Index in my conversations with Andrew Needham. As I said above, I would not be specific to Argos about any retailer or any retailer's price. Similarly, Andrew Needham would not specifically ask about Index. However, we would talk about the future anticipated market price and we were both aware that the Index price would be crucial to the outcome of the market price of any particular product. 31. I also note that Andrew Needham, at paragraph 24 of his witness statement, comments on the 'constant dialogue' between Hasbro and Argos on low margins and what could be done about them, for example, by movement on cost prices. However, as I said above, my conversations with Andrew Needham were not usually about cost prices. They dealt more with retail prices, as well as other strategies to increase margins such as clearance merchandise and FOB supply. 32. Andrew Needham also states that he was not aware of any Hasbro 'pricing initiative' or 'retail pricing initiative' and that as far as he was aware, there was no initiative to make Argos and other retailers adhere to RRPs. Although he is correct in his view that Hasbro had no strategy to force retailers to adhere to RRPs, 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 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. 33. When Andrew Needham uses the word 'adhere' to describe the initiative, he could be read as suggesting that there was some form of binding agreement. As I have explained, there were no sanctions that Hasbro employed if Argos decided not to price at RRPs as we were told by Hasbro's Legal Department that this would be illegal. Moreover sanctions would not necessarily have been appropriate as there was a general desire to increase margins, a desire to co-operate within the industry and for there to be less undercutting of prices. 34. In July 1999, the Argos A/W 1999 catalogue was published. We were able to see from the catalogue that Argos had priced Core Games and the Action Man range more or less at Hasbro's RRPs. We were therefore reassured that the initiative was working and that, although they had offered no guarantees, Argos had priced at the levels that it had indicated to me in the vast majority of cases (i.e. in line with Hasbro's RRPs)."

"15. As I said to the OFT at the oral hearing, I discussed retail prices with Hasbro. Discussions about retail prices with Hasbro would be inevitable as it sets the RRPs, its stated margin to Argos was the difference between the cost price and the RRP and the RRPs appear on most of the documents emanating from Hasbro (for example, the Hasbro listings proposal presentation, the Hasbro business plan for Argos, the Hasbro Trading Terms presentation). However I wish to emphasise that these discussions were not a set process. We did not sit down and discuss individual RRPs in any routine way. 16. If Neil Wilson did ask me whether I was 'happy' or 'comfortable' with an RRP, I may have said yes but we did not have a discussion about whether Argos would be pricing at the RRP for each of the Core Games and Action Man products that were being listed. He did not go through each product, line by line, and ask me whether I was happy with each RRP. Neil Wilson sometimes asked me whether Hasbro's RRPs were set at the correct level. Hasbro, as did other toy manufacturers, sought our view on certain RRPs at the toy previews and toy fairs that I mentioned above. We also sometimes had general discussions about where we both thought the market price for a Hasbro product was likely to settle (i.e. what the future anticipated price for the product was likely to be during the life of the Argos catalogue). This discussion helped both of us. It provided Hasbro with some insight into where its products were going to settle in the market (as compared with other manufacturer's products). It helped me to ensure that the prices I set for Argos at catalogue launch were near what I anticipated the market price would be. 17. But it is important to recognise that, so far as I was concerned, these discussions were in no sense part of a plan to elicit my price intentions for Core Games and Action Man, let alone part of a plan to price normally at RRP on condition that Index did the same. This was simply not the case. Moreover, when Neil Wilson (at paragraph 19 of his statement) says 'I then reverted to Argos' as to his belief that a product would or would not be at the RRP, this was also not part of any plan or any systematic exchange. I certainly did not have the impression that Hasbro was eliciting my price intentions, with a view to passing these on to third parties and then reverting back to me with third party pricing intentions. Hasbro communications with other retailers 18. The OFT states that I was aware that Hasbro was communicating with other retailers with a view to moving to RRPs (for example at paragraph 277 of the new decision relying on paragraph 32 of Neil Wilson's statement). I believe that there is a degree of confusion here. I feel that the OFT has misinterpreted this fact. I do not believe there is any real contradiction between my statement and Neil Wilson's statement on this. 19. I said in my first statement (paragraph 24) that, as far as I am aware, 'there was no initiative to make Argos and other retailers adhere to recommended retail prices. Neil Wilson agrees with me at paragraph 32 of his statement ('he is correct in his view that Hasbro had no strategy to force retailers to adhere to RRPs'). When Neil Wilson says 'Andrew Needham was certainly aware that Hasbro was communicating with retailers with a view to increasing margins by moving towards RRPs' I regard this statement as a statement of the obvious. Hasbro would always tell Argos that if we priced at the RRP we would make more margin. I would not expect Hasbro to be any different with any other retailer. But I was not aware of any formal Hasbro initiative. 20. As to the issue of me phoning Neil Wilson if I saw a competitor pricing at way below the RRP, I agree with Neil Wilson at paragraphs 23 and 32 of his witness statement when he says that I called him to discuss lower prices offered by other retailers. But I do not agree with his interpretation of the purpose of the phone call. The purpose of the call was to try to ascertain whether the lower price was a result of a short or long term price promotion, not to ask Hasbro to get the other retailer to price at the RRP. I did not expect that Hasbro could do anything about our competitors' retail prices. If it was established that a lower price was due to a long term price promotion, Argos would need to react. Argos would seek financial assistance from Hasbro (for example, on cost price) – in other words, Argos would seek equivalent terms. But financial assistance from Hasbro was very rarely obtained. In any event, I believe that this whole issue is unrelated to the OFT's case that Argos agreed only to price at or near RRPs if Index would do the same. It is something that was happening way before Spring 1999 when the alleged price-fixing agreement is said to have come into existence."

"68. Index would have had copies of the Excel Spreadsheets that I used to show the Retails, Volumes and Profit analysis from the Business Plan presentation that would have enabled them to price mark the relevant products for the launch of the 1999 Autumn Winter Catalogue. 69. There was a great degree of nervousness within Hasbro as to whether the prices would be adhered to because although there were verbal guarantees from Index and Argos, we would not know for sure until the respective Argos and Index catalogues were published. 70. The catalogues came out from Argos and Index around the same time in July 1999 (usually the 3 rd week) and Neil Wilson and I checked the prices to see if the plan had worked. 71. It was a success – as we saw that the same retail price points for Core Games and Action Man had been applied in each catalogue. 72. Prior to the publication of the 2 catalogues I do now know if there was any other dialogue taking place with our other major accounts. After the publication of the Index and Argos catalogues at a sales meeting the rest of the account team were told that they could now convey to their accounts that the plan to improve profitability with Hasbro had started to work. … 75. 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 because Argos and Index who the price leaders had demonstrated that the new strategy was working. … 77. The Business Planning Department was given the responsibility by senior management (the Sales Directors or Mike McCulloch) to monitor Retail Pricing. We had always monitored Retail pricing to understand what our customer's margins were in order to see their profitability when selling Hasbro merchandise. This was used as an analytical tool when presenting Business Plans. 78. The emphasis on price monitoring now was to ensure that our other customers would fall in line so that Argos and Index would be confident that our plan was working throughout the UK. This would reduce the risk of them going back to price cutting in the following catalogues. 79. Retail audits were carried out by the Sales Team and the Business Planning Department on a monthly basis, and price anomalies were highlighted at our regular Sales Meetings. If a retailer's price on Core Brands was lower than the Argos/ Index price the relevant Account Manager was told to go back by either Mike Brighty or David Bottomley and tell the account to put the price up. We were left in no doubt by Mike Brighty or David Bottomley that this had to be done or else our customers would have no faith in our initiative to improve profit margins through our new terms. 80. If a price point was below the Argos/ Index core brand retails it was to be pointed out to the customer that they were reducing their profitability and affecting their margins. They could not complain to us if at the end of the year they had achieved a less than satisfactory margin when we were trying to improve the profitability of all of our customers. 81. I do not know how this was passed on to individual customers but it was suggested at the meetings that the threat of withholding rebates would be sufficient to make them put the price back up. Although this was suggested I am not aware of any rebates that were in fact withheld as it was deemed that the threat would be sufficient enough. 82. There was an incident regarding retail pricing at almost every monthly sales meeting that a relevant account handler would be instructed to go and sort out with his or her contacts within the customer base. Tesco and John Lewis Partnership is a couple of examples that I can think of. 83. Once we had established that Index and Argos held the prices in Autumn Winter 1999 the Sales Team were asked to continue this for Spring Summer 2000 by the Sales Directors. 84. During my various meetings with Index, mainly with Alan Burgess as it was his ranges that were in the Core Brands, I would comment on how successful the strategy had been for Autumn Winter 1999 and we should continue it for Spring Summer 2000. 85. I am aware that Neil Wilson was conducting a similar exercise with Argos and he would tell me that he was confident that Argos would stick to the plan. 86. In my discussions with Index I would tell them that Argos was still going to carry on with the policy of sticking to the Core Brand pricing. I was told that Argos would back the plan by Neil Wilson and I would tell him that (Alan Burgess) Index was intending to do the same. 87. From my discussions with Alan Burgess regarding commitment to the plan there was never any instruction not to pass on information to Argos. I would tell Alan that I would be having discussions with the Argos account handler (Neil Wilson) in order to confirm that they (Argos) would still honour the price commitments of Core Games and Action Man. 88. My understanding was that the agreement to stick to the Core Brand pricing was still being monitored internally in Index by their senior management whom I took to be Lesley Paisley and John McMahon. 89. Continuing the initiative into Spring Summer 2000 was still met with caution internally at Hasbro and externally at Index. It had worked in Autumn Winter where most of the Toy business was done (75 to 80% of a year's turnover) and it was always the time where price mattered most. The temptation to cut price was still there because the lower the price the more footfall you would attract in store leading to increased market share. 90. To lose market share was unacceptable for Index and therefore it was considered to be a big risk for Index in case Argos undercut them. 91. I reported this back to David Bottomley and other senior management (Mike Brighty, Mike McCulloch) through corridor conversations and at Sales Meetings. Neil Wilson was also saying similar things about Argos's caution that Index would stick to the plan. 92. All I could do was reassure Alan Burgess that we were confident that the Strategy would hold for Spring Summer 2000 as well and that Argos would not undercut them. 93. At our various sales meetings we (the Sales Team) were left with no doubts from the Sales Directors that the new strategy had to be continued and failure was not an option. Neil and I were under intense pressure internally to make this a success as we were always told that Index and Argos were crucial to the plan. I had to make sure that they maintained the Retail Price points. Most vocal in this regard was Mike Brighty as he was the Sales Director responsible for Argos as part of his overall portfolio. 94. The conversations continued between Neil Wilson and myself from end July 1999 to the launch of the Spring Summer catalogues in the 3 rd week of January 2000. 95. Once we had established that the plan was being adhered to in Autumn Winter 1999 Neil and I would still have conversations regarding Spring Summer 2000. This was done mainly to reassure both Neil and I and our accounts that they would continue with the plan. 96. Even though I was given the understanding from Alan Burgess that he intended to go with the Retails I could not be sure this happened until the catalogue was published. 97. The 2000 Spring Summer Catalogues for Index and Argos came out in January of that year (2 nd or 3 rd week of the month). Once again the prices were maintained across Core Games and Action Man. Internally [it] was seen that the plan to improve profitability with our customers on Hasbro product had succeeded. Prices on the Core Brands at other accounts continued to be monitored and if there were anomalies they were raised at Sales Meetings. 98. In August of 1999 when Index were finalising their listings for Spring Summer 2000 catalogue, the Sales Team were still talking about carrying the plan forward. Neil Wilson and I were confident that both of our accounts would continue to back the Hasbro strategy as our Buyers were gaining confidence from the evidence that was in print. The emphasis was more on Action Man as the range had changed for 2000 and Alan Burgess had indicated that he would be following our price points. Neil Wilson had had similar conversations with Argos. 99. For the launch of the Spring Summer 2000 catalogue I had indicated to Alan Burgess at Index that Argos would carry on with their commitment to maintain price points. The Argos and Index catalogues came out in January 2000 and once again the price points on Core Games and Action Man had been maintained."

"That is correct, but that there was no guarantee that anyone was going to follow suit in the strategy that we laid out. That was one of the issues that we had all along, that no-one would agree to stick to any prices because both were afraid that either would undercut each other in order to gain market share." (Day 1, p. 59) It was put to Mr. Thomson that he had asked Index buyers what they thought of the RRPs, and that they had replied to the effect "

"Q. Let me put it this way: an answer to a candid question may be very different to someone committing to you that they would adhere to RRPs or follow? A. We already had a commitment, though, in the previous catalogues on Core Games and Action Man and we had seen the evidence over the previous two or three catalogues that in actual fact our pricing policy had worked and that these prices were adhered to. Q. That is quite a different thing. Again, you say you had a commitment in your previous two or three catalogues. Is that what you mean by that the price initiative we discussed earlier had worked? A. Yes, it had worked, and it was agreed that it had worked by both parties, which is the reason why we extended the range of products. Q. You said earlier, at no time did anyone guarantee that they would go out on your prices because you never know until the catalogue came out whether they would? A. When somebody said they agreed to the price, I would never in the back of my mind consider that a complete agreement. We would never be confident that this would be the case until the catalogue came out. When somebody gave a verbal agreement to say, yes, we will go along with you, we will go out at those prices, I would go away thinking, that is fine, we have the agreement but we will never be sure until the catalogue comes out." (Day 1, pp. 145-146) In paragraph 13 of his witness statement Mr. Burgess states that once the new Argos policy took effect, although "suppliers' account managers would still suggest to us that recommended retail prices would be observed", Littlewoods now knew that this was more likely to be true because they could look at the catalogues. Mr. Thomson agreed that that was broadly consistent with his evidence (pp. 173-174) and that there was never any "threat"

"A. I would not have asked for a price, but we were talking about the range, particularly Action Man at that time, we were talking about the deal after we had made the presentation and we talked about going out at the RRPs. There was an agreement to do it, when we were trying to promote, and that was improved profitability. There was never a guarantee that it would be adhered to and we never knew effectively that it would be adhered to until the catalogue came out later, after the selection process had been gone through"

"A. Yes, there was reassurance that needed to be given during most of the conversations, which we tried to do by saying 'Yes, I've had talks with my opposite number and this plan is going ahead, I am as confident as I can be that this will take place'. But there was never any certainty really until the catalogues were published that these prices did come out and were the same." (pp. 178-179) And later: "

"13. As the new Argos policy described above at paragraph 5 took effect, however, all retailers gained confidence that prices could be set at the suppliers' RRP. This confidence grew as we viewed the Argos catalogues which evidenced the new policy of adhering to RRPs. Suppliers' account managers would still suggest to us that recommended retail prices would be observed by Argos. However, we knew now that this was more likely to turn out to be true. Since 2000 discussions with suppliers on the likelihood of Argos going for recommended prices on any type of goods has reduced significantly. This is because the pattern of Argos' pricing on toys has become established, and retailers now generally adhere to RRPs. 14. I would have had many discussions over the seasons with Ian Thomson on cost and retail pricing. I do not however recall particular conversations or the precise words that might have been used. Ian Thomson is just one out of about 60 suppliers with whom I deal and I spend a great deal of time talking to an enormous variety of people. I nevertheless set out below my recollection of the nature of the discussions I had with Ian Thomson. 15. Ian Thomson never threatened me in any way. He never said 'Alan, you must go out [at] these prices because if you don't it is going to be a real problem for you'. The means that Ian Thomson applied in favour of our following recommended retail prices involved encouragement only. 16. Similarly I do not remember Ian Thomson ever asking me to recommend to our price setting meeting that we adopt Hasbro's recommended retail prices. 17. I do not remember any specific instances, but during the selection period a number of conversations would have taken place when Ian Thomson would have asked for my views on retail prices. He might, for example, have said something like 'do you see any problem with these recommended prices on this range?' I might have responded by saying that they looked okay except perhaps for one or two where I thought, for instance, the product would sell at a higher or lower price. I would not have had that sort of conversation many times. It would have happened following the change in Argos' policy in 1998 and 1999. By 2000 the market had largely settled down to following recommended retail prices, but with some limited price cutting for tactical reasons. It is possible that Ian Thomson was trying to obtain my opinion on the recommended retail prices to form a view in his own mind as to whether I was likely to follow them. To that extent he might have been quizzing me about my intentions. 18. I note that Ian Thomson himself has said to the OFT that he did not have discussions with retailers about RRPs because retailers were generally following Hasbro RRPs from Autumn/ Winter 2000-2201. This would be about right. 19. I do remember vaguely Ian Thomson advising me that he thought Argos might accept his retail prices. I do not remember the words he used. I do not recall him saying that he had an agreement that Argos would follow RRPs if Littlewoods would. I think he was trying to give me the impression that if I went out at RRPs I would not be undercut by Argos. 20. Ian Thomson never said to me that he was going to pass on any of my opinions on the recommended retail prices to Argos or anyone else. I do not think that at the time I ever really addressed my mind to whether he intended to pass on this information to Argos. 21. I can therefore confirm that I certainly did not make any comments on Ian Thomson's recommended retail prices with the intention of my views being passed on to Argos. There was no agreement between myself and Ian Thomson that I would give him my views on the recommended retail prices if he would let me know what the views of Argos were. I never agreed with Ian Thomson that I would adopt, for the purposes of my proposal to the price setting meeting, his recommended retail prices."

"Retail pricing initiative has worked – maintaining Action Man and Games price points at suggested levels in Argos/ Index Catalogues and across the rest of our Distribution base. … Core Brands Rebate is a positive new element to drive Action Man distribution – Mothercare, Tesco, Argos and also to link into retail pricing."

"Segment the Terms –v- defined category requirements in line with retail buying structures, e.g. Boys Toys, Games. Build significantly improved BIM across the portfolio, in line with the new segmentation"

"41. These brands fell into three categories: ' Core Boys ', covering Action Man, Star Wars, Transformers, Micro Machines and Batman; 'Games and Creative' , covering Core Games and creative play products; and 'Growth Drivers' , covering Tweenies, Pokemon, PlaySkool, Mr. Potato Head, Barney, Nerf, Feature Dolls, Art Attack and Puzz 3D. 42. These brands chosen were all key brands. We wanted to give retailers additional incentives to stock them, by giving the retailers more margin/ extra profitability. We decided to extend both the listing and pricing initiative to these brands. 43. As regards the listing initiative, retailers were offered additional rebates, up to 5 per cent, the precise amount depending on what product listings Hasbro's account managers agreed with their accounts. The amount of the rebate was flexible, depending on what was agreed with each account and the turnover achieved in respect of the key brands listed. 44. We communicated our message to Argos by saying that the pricing and listing initiatives were working and that we proposed to extend them to other brands. We asked them how they felt about this. A meeting took place in December 1999 between Sue Porritt, Mike Brighty and myself to review business in 1999 and to open the trading terms 2000 discussion. I made an internal contact report of this meeting, as was usually done by Hasbro for meetings with customers. I noted in my report that it was recognised that margins were going in the right direction. Sue Porritt was very positive regarding the new terms and that the initiatives that had applied to Action Man and Core Games in 1999 would be extended to other categories. It was recognised in the meeting that it was crucial that we maintained retail price stability as far as possible across our key brands so that the initiatives could succeed. Sue Porritt felt it was great that Hasbro could help maintain retail price stability, but said that Argos would react if it was undercut in order to remain competitive. By 'retail price stability', I meant retailers going out at the same price, i.e. Hasbro's RRP. 45. Following this meeting, and in line with the strategy to extend the listing initiative to these key brands as outlined in Hasbro's initial Strategy Document, I put together a proposal to put to Argos with incentives to stock these key brands. This proposal did not include all of the brands identified in the strategy document because I knew that Argos would not consider listing some of these. I targeted certain key products and discussed with Argos the possibility of it listing these and getting the rebates for doing so. 46. However, the extension of Hasbro's strategy went further than simply extending the listings initiative. By March 2000, Argos had chosen which of these key products it was going to list in its A/W 2000 catalogue. In line with the process that had been followed for the A/W 1999 catalogue (as I describe above), I received an indication from Argos that, all things being equal, it would adopt the RRP for certain of the products they were listing. Argos also indicated to me when they were not likely to price at the RRP in respect of certain other of the products, the implication being that they were intending to price at the prevailing market rate. 47. I passed this information to the other account managers in Hasbro. They had received indications of their account's pricing intentions and informed me of them. I then informed Argos that, based on the indications received from accounts generally, the price for those products was likely or unlikely to be at the RRP, although there were no guarantees. 48. My contacts at Argos during this period were Andrew Needham, Vanessa Clarkson, to a lesser degree, and Sue Porritt. 49. Hasbro's overall strategy was all about increasing the retailer's margins, on the one hand by offering incentives to them to list key brands and, on the other hand, to encourage movement of their prices to RRPs. The move towards RRPs did not always mean an increase in retailer price. Sometimes, despite a move to RRPs, the retail price would decrease as a result of Hasbro reducing its cost prices. This was especially the case in respect of Core Games. There were other strategies to increase retailer margins such as supplying clearance merchandise and FOB merchandise"

" Overall Reaction SP was very positive about the new terms and the impact they will have on Argos business. It is crucial that we can maintain retail price stability across our key brands so that the plan can succeed. We plan to increase domestic margin from 6.3% to 13.8%."

"101. I had started to talk about expanding the range to Alan Burgess and he was interested but worried that it would attract too much attention and that it would appear that Index and Argos were talking to each other about retail prices. I indicated to Alan Burgess that we could look at a limited range of product that would cover certain items in most of our Brands. 102. Neil Wilson and I came up with a range of products from our other brands and then went to our respective accounts to talk about it. 103. The ranges covered 3 POKeMON products, 2 Micro Machines products, 2 Hand Held Electronic Games products, 1 Girls product, 4 Get Set products, 2 Design and Draw products, and 8 Tweenies products. 104. In choosing these ranges we had pulled together a list of products that had been subject to price promotion and included new ranges like POKeMON that would also suffer. New high profile product had been subject to severe price cutting in the past, which lead to complaints from the industry to us about the poor margins. 105. The purpose of going to Index and Argos was to encourage them that we could extend the ranges and that we had been successful in gaining commitment from either party during the last 2 catalogues. As the range was now extended above Core Games and Action Man this involved discussions with other Buyers at Index. 106. My discussions were directly with the Buyers responsible for the respective product ranges and I would normally spend a day in their offices in Liverpool. I would occasionally see Lesley Paisley if she came in to say hello and I remember that at some stage I told her about our plans to extend the range. She would say that it sounded good and would leave it to me to sort out. 107. Alan Burgess now looked after Boys Toys and Electronic Toys (I am not 100% sure that the Electronic Toys covered Hasbro products) and following on from the success of the 2 previous catalogues was keen to listen to my proposal. The product ranges I discussed with Alan Burgess were POKeMON and Micro Machines (possibly Hand Held Electronic Games, but not sure). Alan Burgess was concerned that if he agreed he would be increasing the risk of being undermined by Argos because he was not convinced that they would agree to any more lines being included. 108. I explained that the Argos account handler (Neil Wilson) was having similar discussions to gain agreement with Argos to accept the same proposal. I would let him know if the outcome would change. There was no doubt that Alan Burgess 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. 109. In my dealings with Index I treated Alan Burgess as the Senior Buyer. He did the biggest share of Hasbro business and had been Toy Buyer for some time at Index. He also indicated that he would discuss my proposal with the other Buyers in order to give them the background to our arrangements."

"Neil and I have spoken to our respective contacts at Argos and Index and put together a proposal regarding the maintenance of certain retails within our portfolio. This is a step in the right direction and it is fair to say that both Accounts are keen to improve margins but at the same time are taking a cautious approach in case either party reneges on a price agreement… While it is acknowledged that certain areas of the business will be price conscious we have attempted to increase some of the Spring Summer retails and get agreement on other products to go out at our recommended prices. It goes without saying that Action Man and Games prices will be maintained as per earlier agreements."

"Following on from various conversations regarding Price Points and opportunities to make more margin I am able to confirm a list of products and prices that Argos have committed to. Games and Action Man prices will continue to be adhered to and the retails are on your range sheets provided by me as part of the selection proposal process. Listed below are the products and prices. POKeMON Battle Figures 2 Pk 4.99 Pokeball Blaster 3 Pk 6.99 Interactive Pikachu 23.99 Micro Machines Transforming Team Truck 29.99 Rally Race Track 19.99 Hand Held Electronic Monopoly 29.99 Bop It 19.99 Girls Baby all Gone Get Set Chocolate Factory 19.99 Egyptian Mystery 29.99 Mastering Mosaics 19.99 Gardens Galore 19.99 (Not listed in Argos) Design & Draw Spirograph 14.99 Super Sticker Factory 17.99 Tweenies All Standard Plush 14.99 All Story Time Product 24.99 Cuddle and Squeeze Doodles 24.99 If you have any questions regarding the above please come back to me and I will do my best to answer them."

"Ian … This is a great initiative that you and Neil have instigated!!!!!!!!! However, a word to the wise, never ever put anything in writing, its highly illegal and it could bite you right in the arse!!!! suggest you phone Lesley and tell her to trash? Talk to Dave. Mike." - Mr. Thomson's evidence According to Mr. Thomson: "117. My email to Lesley Paisley, Alan Burgess, Alan Cowley, Katherine Runciman and Phil Riley on 18 th May 2000 was sent to confirm that agreement had been reached with Argos (through Neil Wilson) and that they would price at the levels set out in the email. This was also to give them the confidence to go ahead and set the prices for these lines in the forthcoming Autumn Winter 2000 catalogue. The contents of my email should not have come as any surprise because as I have explained we had previously discussed the initiatives involved. 118. I copied David Bottomley, Mike Brighty and Mike McCulloch in order to confirm that we had reached a joint agreement with Argos and Index. My Coordinator Kerron Clare was copied in as well for an information point of view. 119. Before I sent out the email to Lesley and the Team at Index I discussed with Neil Wilson on how we should pass on the information to the rest of the Hasbro sales team. He agreed that I should construct an email and send it out to all concerned."

'Whilst it is acknowledged that certain areas of the business will be price conscious, we have attempted to increase some of the spring/summer retails and get agreement on other products to go out at out recommended prices. It goes without saying that Action Man and games price will be maintained as per our earlier agreements.'

"24. The initiative was extended to other products once we could see that the initiative was working and was successful. It was driven as much by retailers as by Hasbro. The products that were chosen were key brands that Hasbro wanted retailers to list. Hasbro then put to the retailers, including Argos and Index, the possibility of making more margin on these additional products by moving to RRPs. 25. I understand that Neil Wilson spoke to the buyers at Argos in this regard and Ian Thomson spoke to the buyers at Index and we were led to understand from their report back on their discussions that Argos and Index would price at the RRPs for these products in addition to the earlier understanding, which had been confirmed to Action Man and Core Games. 26. I have been shown a copy of an internal Hasbro email date 18 May 2000 from Ian Thomson and Neil Wilson entitled 'Argos – Index Retail Pricing Initiative' . This was circulated to a number of people at Hasbro including myself. The email was sent around the office at the time that prices were being set for the A/W 2000 catalogue and Argos and Littlewoods were making their final listing decisions. 27. The opening remarks in the email (' Neil and I have spoken to our respective contacts at Argos and Index and put together a proposal regarding the maintenance of certain retails within our portfolio' ) were a reflection of the understanding relating to pricing at or near RRP that I have described above. 28. The reference to 'proposal' is to the presentations that were given by Hasbro to retailers over a period of a few months prior to this email in which discussions about matching RRPs took place and which resulted in Hasbro's belief that the prices set out in that email would be adopted. All retailers, including Argos and Littlewoods, were aware that Hasbro was instigating price discussions with all retailers because of the way we presented the initiative to them. It is incorrect to suggest that Neil and Ian were acting unilaterally in putting together this proposal: it was based on detailed discussions and conversations that they had had with Argos and Littlewoods about pricing at RRPs. Each was aware that similar discussions were taking place with the other and that a big effort was being made to get all retailers to price at RRP. 29. In the email, Ian Thomson refers to the cautious approach adopted by Argos and Littlewoods which reflected the concern that each held that the other would not price at RRPs. For example, in around December 1999, Lesley Paisley said to me that she was prepared to do this but that she thought Argos would let Hasbro and the industry down. 30. I have also been shown a copy of an email from Ian Thomson to Lesley Paisley and others at Index (and copied to me) dated 18 May 2002 and sent an hour or two after the internal email of that date which I refer to in the previous paragraphs. Ian Thomson sent this email simply to record how Hasbro were conducting the pricing initiative. 31. Where Ian Thomson says he was able to 'confirm a list of products and prices that Argos have committed to' he could obviously give no guarantee that Argos would price at RRPs. What Ian Thomson was saying was that a colleague of his, Neil Wilson, had had conversations with Argos and, as a result of those conversations, this is what we believe are the prices that Argos are going out at. 32. It would be incorrect to say that Ian Thomson was simply taking a risk based on what he hoped Argos might do: Hasbro was not in the business of risk taking. He was saying what he believed to be the reality based on the discussions he and colleagues had had with the industry. 33. When Ian Thomson said in his email that both Littlewoods and Argos were cautious lest the other 'reneges on a price agreement', he was referring to the concern of both those parties that each would be prepared to price at RRPs, but only so long as the other did so. Obviously, we could not guarantee anything and depended on their co-operation. Until we actually saw the A/W 1999 catalogues we could not be sure that Argos and Littlewoods would in fact price at RRPs as they had led us to believe they would do provided the other also did so, but once that became available, we could see that the understanding based on the conversations and discussions with retailers was working. 34. At paragraphs 26 and 27 of her witness statement, Lesley Paisley states that she remembers being surprised at receiving the email of 18 May. Because of her senior position within Littlewoods, she would not ordinarily have been copied in on an email from Ian Thomson. He would usually only contact Littlewoods buyers. However, she was aware that discussions about RRPs had taken place because I had spoken to her about them. … 36. The Index and Argos A/W 2000 catalogues were released to the public in July 2000. We could see form the catalogues that Argos and Index continued to price at Hasbro's RRPs for Core Games and the Action Man range in line with the pricing initiative and the understanding that I describe above. However, we could also see that they were now generally pricing at the Hasbro RRPs for the additional products in line with the extension of the initiative"

"I didn't see this email as improper. I saw it as a list of retail prices that Hasbro was recommending to us. I don't remember if Ian Thomson asked me to delete it."

"26. I do recall receiving the email from Ian Thomson on 18 th May 2000. I remember being surprised to receive such an email. I was surprised that he even suggested that Argos was committed to these prices. It was inconceivable to me that Argos would have committed to Hasbro on retail prices on any product let alone all these products. Moreover, I don't understand how he could suggest that Argos would continue to observe RRPs on Action Man and games. I do not recall being telephoned by Ian Thomson and asked to delete it. I do not know why he would have asked me to delete it but not the other recipients. It is possible that this email is related to the intervention of Mike McCulloch in the meeting with Hasbro on 2 nd May, but I certainly made no connection between these two events at the time."

"SH: Do you remember this email and what does it mean to you: AB: I don't particularly remember it, and whether I believe it or not is another matter. To me it just seems like Hasbro giving us their RRPs. SH: Who put the markings on it? AB: I don't know. I think all those categories are mine, yes, yes they are. I may have asked my assistant to check if we were going with these prices. It looks like they've been checked as being the same as our prices. SH: Would you have been asked by Hasbro to commit to these prices? AB: No. They haven't asked me to commit to any prices and I wouldn't commit even if I had been asked. SH: Do you seek price information of your competitors from Hasbro? AB: No. We seek to find out what our competitors are doing. We get their listings but not information about what their prices will be. SH: So you get information on their listings. You wouldn't be surprised then if similar information about your products was passed to your competitors? AB: Yes, I would expect that."

"It is difficult for me to recall the situation on 18 May 2000 and I do not remember this email or the circumstances in which it was sent. It is an unusual email and I do not recall ever receiving one like it. If it had been significant I would have remembered. It looks as if it was ticked by me or my assistant, presumably checking it against our own prices. I was asked about this by the OFT. I gave my reply in similar terms and I stand by that. It is certainly not evidence of any agreement on my part to adopt RRP, or any extension of any such agreement to a wider range of products." (paragraph 24) In cross-examination Mr. Burgess accepted that he had printed out Mr. Thomson's email; that the markings on it were probably those of his assistant; that the email was received close to final pricing, at a time when it is "crucial" that the information in the catalogue is correct; and that the likelihood is that Mr. Burgess' assistant could have gone through it to "identify if there is anything particularly important that I need to look at" (Day 4, pp. 130-132). Mr. Burgess said that in his interview with the OFT he had made a mistake when he identified the prices in question as being Hasbro's RRPs (p. 134), but he maintained that he had no recollection of the email, so he could not comment further. He denied that the document had been used to check against Littlewoods' own prices (p.134). Mr. Burgess accepted that Mr. Thomson had tried to influence him to go out at RRPs on some items in the portfolio but he did not recognise any discussion in which he had expressed nervousness about doing so (p.137), and he did not recall discussing specific products (p.138), nor did he recall Mr. Thomson saying that Neil Wilson was having similar discussions with Argos (p. 139), nor Mr. Thomson telling him that he would come back to Mr. Burgess after he had spoken to Neil Wilson about Argos (p.139). Mr. Burgess was not saying that such discussions never happened, but he was saying that he did not recall them (pp. 139-140). - Mr. Cowley's evidence In his interview with the OFT Mr. Cowley said "

"I have seen the email of 18 May 2000 sent by Ian Thomson to Lesley Paisley, Alan Burgess, Katherine Runciman, Phil Riley and myself. At the time I did not attach any importance to the email. It refers, in the first line, to various conversations regarding price points and opportunities to make more margin. Discussions about margins and price points are common issues for discussion with suppliers. I am not aware of what conversations Ian Thompson was referring to. I presume the conversations relate to the Autumn/ Winter 2000 catalogue. I have no recollection concerning conversations with Ian Thomson at the time. The last three items on the list concern products I bought from Hasbro. I actually went out at the prices on the Tweenies items (the last three in the list) that are mentioned in the email but I certainly didn't ask for this email or this information. I am absolutely clear that there was no understanding between myself and Ian Thomson that I would adhere to his recommended retail prices or that I would give him views on those recommended retail prices that would be passed back to Argos." (paragraph 14) Three of the products shown on the email of 18 May 2000 were Mr. Cowley's responsibility (All Standard Plush, All Story Time and Cuddle and Squeeze Doodles). In cross-examination, he agreed that it was extremely uncommon and highly unusual to be told what prices a competitor was going to be charging (Day 4, p.23), but he did not attach much importance to the email since it only concerned three of his products (p.24). He did not believe what Mr. Thomson was saying, and resisted the suggestion that what had happened was what he expected to have happened (pp. 25-26). He took the email to mean that those are the prices that Hasbro expected Argos to be going out at (p.28). The prices shown were the prevailing prices in the market (p.28). - Mr. Riley Mr. Riley did not remember receiving the email but he had deleted it. It did not concern any of his own lines (Riley, paragraph 21). He accepted in cross-examination that games, which are mentioned in the email, fell within his responsibility, but he would not believe what Hasbro was trying to tell him about Argos' expected RRPs. The email was "strange and irrelevant" (Day 4, pp. 75-79). - Retail prices The evidence is that Littlewoods priced at the prices shown in the email of 18 May 2000 on all products save two. The two exceptions are Interactive Pikachu, which was the subject of further contact following an email of 25 May 2000, discussed below, and Gardens Galore, which was the subject of Mr. Thomson's earlier email of 4 May 2000. That appears to us to confirm that Littlewoods did take into account the information set out in the email, as modified by further information in respect of Interactive Pikachu and Gardens Galore. The Decision at paragraph 77 states that a further product, Super Sticker Factory, was priced by both Argos and Littlewoods at £17.99, the price shown in the email, whereas the RRP was £19.99. The information before the Tribunal, however, is that the RRP was £17.99, so nothing turns on that point. As far as Argos is concerned, 13 out of 17 products were priced at the price shown in the email of 18 May 2000. Of the four exceptions, Interactive Pikachu was priced at £23.75 by both Argos and Littlewoods following the further contact set out below. Pokeball Blaster was priced at £6.95, not £6.99, but on the appellant's argument that is the same price. That leaves only two products: Transforming Team Truck (£28.99 not £29.99) and Rally Race Truck (£18.99 not £19.99). In our judgment the above shows a high degree of correlation between the price indications which Mr. Wilson says, in his unchallenged evidence, that he was given by Mr. Needham, and the prices which Argos actually charged. It is also striking, in our judgment, that 34 of the 35 common products on Action Man and Core Games, which are also referred to in the email of 18 May 2000, were priced identically by both companies. Findings of the Tribunal on the extension of the pricing initiative and the emails of 18 May 2000 The unchallenged evidence of Mr. Wilson is that the Argos products and prices which are referred to in the email of 18 May 2000 were not randomly selected but were the subject of detailed discussion. Mr. Wilson had selected a number of key brands, and had put together a proposal that Argos should list the brands in question, in return for the core rebate. Once Argos had selected the products, Argos indicated to Mr. Wilson on which products it would price at RRP, and on whether there were products where they were not going to do so. Mr. Wilson then discussed the matter with other Hasbro account managers, including Mr. Thomson, and then passed back to Mr. Needham Hasbro's indications, in the light of its discussions with other retailers, as to whether or not particular products would be at RRP (Wilson, paragraphs 45 to 47). The products listed in the email represented the result of this process. Despite Mr. Needham's evidence that he did not tell Mr. Wilson Argos' prices, and that Mr. Wilson "simply assumed" that Argos would go out at RRPs, we have no reason to doubt Mr. Wilson's unchallenged evidence that he ascertained from Mr. Needham the products which Argos was prepared to sell at RRPs, and reported back to Mr. Needham if other retailers were unlikely to follow RRPs on those products (Wilson, paragraphs 46 and 47). Mr. Thomson followed a similar process with Littlewoods, during what he describes as "months of talks"

"Argos have confirmed that Interactive Pikachu will be at 23.75 not 23.99 for A/W. Please advise Index accordingly."

"The purpose of this email was to inform Ian Thomson that Argos had indicated to me that they were now not prepared to out at the RRP. I said in the email "

"On the 25 th of May 2000 I received an email marked urgent from Neil Wilson asking me to advise Index that Argos were going to sell Interactive Pikachu at £23.75 not £23.99 as they had previously agreed. Interactive Pikachu was a toy in the POKeMON range. I phoned Alan Burgess to make him aware of the issue and that he could change his pricing if he wanted to. He thanked me for passing on the information but did not commit on how he was going to act, he was going to think about it. The Autumn/Winter catalogue came out and my recollection was that the pricing was adhered to in both catalogues."

"Argos had priced the Interactive Pikachu at £23.99 in its Spring/Summer 2000 catalogue, which was the RRP. Index's Spring/Summer 2000 price for the product was £23.75. For the Autumn/Winter 2000 catalogue Argos had decided to react to Index's lower price. I do not remember a conversation specifically, but I believe I was asked by Neil Wilson at Hasbro to hold firm on the £23.99 RRP. I said that I would have to react to the lower pricing and Argos went down to £23.75 to match the Index price. I would not have even said to Neil Wilson that Argos was going to react to Index's lower pricing, had I known that the information was going to be passed to another retailer. Argos did not discuss its prices with suppliers and I had no idea that Hasbro was passing on prices to Index. I find it quite staggering that this systematic reporting went on within Hasbro."

"Henry, we can't reduce the price to everyone else when Argos and Index are in print at £14.99. They can't change their prices as already discussed as this will compromise their business. 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. If you need to discuss further then I suggest we arrange a meeting to discuss and we will need to include Charles. Regards, Ian"

"Ian, please check urgently with Charles as I believe Argos have been able to re price the deadline was yesterday. I would say in future to brand that we require a great deal better communication of price decreases as 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. Please all of you get together. Regards David B"

"David, I have asked Alan Cowley to change the price and the reaction has been explosive to say the least, especially after my last telephone call 2 weeks ago to make sure that he maintained £14.99 when he threw the phone down on me in another fit of rage. I / We have been accused of being nothing but a bunch of F?????g incompetents and totally unprofessional. First we set the price at £16.99 then we set the price at £14.99 and now we are at £12.99. Hardly surprising that he reacted badly and has said that he will not list a single Tweenies or Preschool product in A/W next year. In future can we make sure that this does not happen again. I have an excellent relationship with the Index team, except Alan Cowley (and I have being trying to build one with him) and I don't need him to shout about Hasbro incompetence to the rest of his colleagues. Regards, Ian"

"Ian, Reference our conversation pre Christmas regarding Hasbro's late decision to reduce the price of the Tweenies soft toys featured in the Index SS01 catalogue. Fortunately for both of us we were in fact able to amend the selling prices at the last minute due to an unexpected delay in catalogue production. This however literally meant 'holding up the presses', entailing an additional cost of £4000 which will be debited to your account shortly I will not elaborate on the consequences if we had not been able to do so, resulting in our being undercut by Argos and other High St outlets, especially when you had earlier been so insistent that we went out at the same price! Regards, Alan Cowley"

"138. There was an incident involving a price reduction with Tweenies that had an effect on Index. Tweenies was being looked after by Henry Foulds (Preschool Marketing Manger at Hasbro) at that time and he sent an email in late November 2000 telling us that he was reducing the Retail Price point of the Standard Tweenies Plush items to £12.99. This followed previous intentions to move the price point up to £16.99, which was later changed to £14.99. 139. My response was that it was too late to do this as Index and Argos (I assumed) would have probably finalised their prices for Spring/Summer 2001 and it would be too late to change them. I was also very aware that Alan Cowley would be extremely upset if he was in print at £14.99 when the other major accounts like Woolworth's and Toys "

"A. We had gone out to speak to Index, and I had spoken to Alan Cowley about positioning Tweenies at a retail price point of £14.99. Following on from that meeting, this is when the prices started to change. I knew that going back to Index to talk to Alan about this would not have been a pleasant discussion and at the same time, because we knew that the prices had been set, to go back again and start to rearrange things, it was going to be very difficult… … Q. …I think this is one instance when you insisted to Alan Cowley or used some such words and he threw the phone down on you? A. There may have been two instances with Alan Cowley regarding prices, but with Alan, because I was not sure he would do it, I said "

"AC- Shortly before we went to print on the Spring/Summer catalogue Hasbro informed me that they had reduced the price on this product. I was concerned that if we were not able to reduce the price in our catalogue that we wouldn't be competitive on this line with Argos TRU and other retailers. Hasbro lowered the RRP from £14.99 to £12.99. The margin to us was the same as Hasbro had lowered the list price by the same amount. This would give us the same margin as before and I felt that this was a realistic selling price for us. SH- Was Hasbro insisting you went out at those prices? AC- No. Hasbro told me that this would be the probable price on the high street. They never insisted, insisted is the wrong word. They wouldn't be able to force us to go at that price. They suggested this price, not insisted. The meaning of the word "insistent" in PJS 020 is that they had been convinced that £14.99 would have been the probable retail price on the high street. SH- So what's the position with recommended prices? AC- Hasbro isn't one of my bigger accounts. I just do pre-school with Hasbro. Most manufacturers recommend prices, we look at these, and sometimes we'll go out at that price. The pre-school market is competitive. Suppliers recommend prices but we usually take it with a pinch of salt and think others will go below it so we often go below it. SH- Has Hasbro ever asked you what prices you will retail at? AC- I've not been asked what prices we will go out at. I'd say it was none of their business. We'll go out at a price which we think the market can bear."

"I do remember one further occasion when Ian Thomson claimed to know what the Argos selling price would be. This was in December 2000 when Hasbro suddenly, and belatedly as far as the production of the catalogues was concerned, reduced their cost prices so that the suggested selling price fell from £14.99 to £12.99 on Tweenies. That in itself presented no problem for retailers, and was even a potential benefit. However, I was extremely angry because I initially thought that it was too late to change the prices in our Spring/Summer 2001 catalogue. If Hasbro had quoted this price to me earlier then I would have decided to follow the RRP. However, I was now faced with a situation whereby on a well known branded product, because of what I thought was poor management by Hasbro, Littlewoods risked being £2.00 above the RRP. Ian Thomson told me that Argos would have time to reduce their retail price and suggested that we did the same. Given the new cost price I would now be undercut by Argos and by other high street retailers if I remained at £14.99. In the event, at the last moment I managed to change the catalogue price to £12.99. I charged Hasbro £4,000 for the trouble of making this very late change. I attach at Annex "

"Charles I had discussed with Sharon Clark at GUS re Retail Prices as I wanted to offer suggestions for RRP's in order to keep GUS and Littlewoods on a level playing field. I explained that in the past we have tried to ensure that Littlewoods and GUS were going out at the right price. She agreed this is something she was keen to do this year, ensuring prices are as close as possible to the high street. The discussion about prices is happening W/C26/02/01. The strange part of our conversation happened is when she stated she would not be telling me her retails for the coming catalogue, she stated she has never ever done this before, thus contradicting Ian Thomsons process he used to go through each year. I am going to pick up with her on my return and attempt to obtain pricing details and persuade her to price in line with Littlewoods. On your return could you please find out from Andrew/Argos if any guidelines have been set by Argos on pricing for GUS. If we cannot ensure level pricing between GUS and Littlewoods for A/W I would suggest there will be a cause of concern on the Argos/Index agreement for A/W 2001. Can we please discuss on my return… David CC: Ian Thomson"

"147. David Snow (GUS Account Manger) told me that GUS was going to be more competitive with pricing for A/W 2001. I asked David to try and talk to Sharon Clarke at GUS Home Shopping and establish what price they were intending to go out at. I was conscious that Littlewoods Home Shopping were putting me under pressure to improve their margins but at the same time there were going to try and be only 20% above High Street retails. I wanted David to try and get GUS to price product near or around Littlewoods which was something that they had done in the past. 148. Pricing in Home Shopping has never been a major issue as Grattan and Empire tended to price between 30 to 35% above the High Street and GUS and Littlewoods between 25 to 30% above the High Street. 149. Discussion had been generalised and when looking at pricing we would talk along the lines of being near or around other competitors. If for example GUS had indicated that they wanted to sell an Action Man product for £35 I would be asked if this was in line with everyone else. I would look at my chart and see that the price point on that particular product would be between £35 and £40 and tell them that they were in the ball park but if they wanted to make more margin could increase up to £40. It is against this background that David Snow sent his E-Mail to Charles Cooper and I was not copied in on it. David talked to me about the situation. 150. Sharon Clarke was an assistant Buyer at GUS; it must be noted that the GUS catalogue is a Mail Order catalogue and not a high street catalogue like Argos and Index. (GUS had been purchased by Argos.) 151. I had in the past discussed the proposed catalogue prices as mentioned above and expressed my disbelief that she had denied this to David Snow. As far as I am aware the situation never resolved itself as David Snow did not believe he could go back and talk to Sharon again. I told him just to forget it and if anything happened we would tackle any future problems if they arose. The issue never came up again after that."

"Charles please follow this up urgently, as we can not allow a £14.99 price on the dinghy. Thanks DB CC: Rachel House"

"The dinghy was part of the Action Man range. It was an F.O.B (Free-on-Board) item and therefore had a higher margin. Hasbro had designed a double page spread for the Argos catalogue for Action Man which included the dinghy. The designers, who had been contracted by Hasbro, had incorrectly entered the price for this item. As a result of this email, the error was corrected and the dinghy was priced at the RRP. I was the person who spotted that potentially we could have had a retailer undercutting RRP, which we could not allow given the arrangements which were then in place and working well." (Bottomley, paragraph 42) He was not cross-examined on that. Mr. Needham said (Needham I, paragraph 42) "

"Charles I had a call today from Jacqui Wray at Argos stating the following items are on sale in the trade at prices lower than recommended retail prices. They are as follows Walmart Jnr Monopoly £9.88 Pictionary £17.72 Payday £13.44 Twister £6.81 Asda Kart Extreme £19.98 Motorbike Extreme £14.47 I stated that Hasbro cannot control prices due to it being illegal. Regards David"

"44. I have been shown a copy of an email of 22 May 2001 from David Snow to Charles Cooper reporting on a telephone conversation that David had had with Jacqui Wray of Argos. At that time, Charles Cooper was responsible for the Argos account. Jacqui Wray had phoned David to complain that various items were on sale at Asda and Walmart at prices lower than the Hasbro RRPs. 45. I have been shown Jacqui Wray's recollection of this e-mail in her witness statement. She suggests in paragraph 9 of her statement that she called David Snow because she wanted to find out whether Asda/Walmart "had received a very low cost price from Hasbro", i.e. that Argos was being treated less favourably as compared with other retailers in relation to cost price. She states (at paragraph 10) that she did not and would never have asked David Snow to force other retailers to put their retail prices up. 46. I have to say I am very surprised by what she says and disagree with her explanation. Jacqui Wray rang Hasbro on a number of occasions complaining about retail prices. She did not call about cost prices. She knew that, as Hasbro's largest customer, Argos were getting terms as good as those given to the rest of the industry by Hasbro. She would want to know why other retailers were pricing differently from Argos. The reason she would contact Hasbro about it was because she would expect us to do something about it, i.e. persuade those other retailers to price at Hasbro's RRP."

"What existed between Hasbro and Argos and Hasbro and Littlewoods was an understanding that, because of the obvious benefit to everyone in the industry, prices would be at or near RRP. There was no absolute certainty that Argos and Littlewoods would do this and there was no sanction against a 'defaulter'. However, the obvious advantages that flowed from higher margins and the absence of a threat of undercutting by rivals were sufficient incentives to ensure that retailers stuck with the initiative. Also, the consumer benefited from lower prices for games as a result of lower cost prices. … 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 discussions on pricing. Littlewoods followed Argos's lead, but was also involved in discussions with Hasbro about pricing in the manner I described above." (Bottomley, 47-48). That evidence was not challenged by either Argos or Littlewoods. Again that is evidence of the existence of an "understanding" between Hasbro and Argos and Hasbro and Littlewoods that prices would be at or near RRPs. In our judgement, the evidence set out above, viewed in its totality, amply confirms the existence of agreements or understandings to that effect. XI SUMMARY OF FINDINGS AS TO A BILATERAL AGREEMENT OR CONCERTED PRACTICE BETWEEN HASBRO AND ARGOS The relevant law An "agreement" for the purposes of section 2 of the Act does not have to be a legally binding agreement: see the cases cited in Section VI above. We accept for working purposes that an "agreement" may arise from the expression of the parties' "joint intention to conduct themselves on the market in a particular way" ( Bayer , cited above, at paragraph 67) and that the concept "centres around the existence of a concurrence of wills" ( Bayer, at paragraph 69). An agreement can, however, exist where one party manifests its wish to achieve an anti-competitive goal, and the other party tacitly accepts that ( Bayer, at paragraph 71, on appeal at paragraph 102). Tacit acceptance may be inferred from conduct ( Bayer , on appeal at paragraph 100). An agreement, in our view, can be constituted by an "understanding" even if there is nothing to prevent either party from going back on, or disregarding, the understanding in question. A "concerted practice", on the other hand, is a form of collusion falling short of an agreement which "knowingly substitutes practical cooperation between [the parties] for the risks of competition" ( Dyestuffs, cited above, at paragraph 64). Although that does not involve "the working out of an actual plan", nonetheless: "each economic operator must determine independently the policy which he intends to adopt on the market including the choice of the persons and undertakings to which he makes offers or sells." ( Suiker Unie at paragraph 173) That in turn, "strictly precludes any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market." ( Suiker Unie at paragraph 174) In particular, a concerted practice may arise if there are reciprocal contacts between the parties which have the object or effect of removing or reducing uncertainty as to future conduct on the market ( Suiker Unie at paragraph 175). The Court of First Instance said in Cimenteries , cited above, that "reciprocal contacts" are established "where one competitor discloses its future intentions or conduct on the market to another when the latter requests it or, at the very least, accepts it…" (paragraph 1849). and that "

"the true intentions and actual conduct [of the wholesalers] could not be further removed from any intention to comply with, or align themselves upon, Bayer's policy" (paragraph 148), but was on the contrary "designed to circumvent Bayer's new policy" (paragraph 156). It is not in our view surprising that it was held in those circumstances that there was no 'agreement' between Bayer and the wholesalers since the consensual element, even by way of tacit acceptance, was lacking. That is a very different circumstance from the present case where, contrary to Bayer, the evidence shows a large degree of consensus. The Court of First Instance in Bayer also confirmed that an 'agreement' for the purposes of Article 81(1) can be constituted by tacit acceptance ( Bayer, at paragraphs 158 to 171, upheld by the Court of Justice at paragraphs 102 and 142). Under section 2 of the Act, any such agreement or concerted practice must, in addition, have as its object or effect the prevention, restriction or distortion of competition. The OFT does not, however, have to prove an effect if the object is restrictive of competition: Consten and Grundig, cited above, and many subsequent cases. Agreement In our judgment the evidence amply establishes that at least from the A/ W 1999 catalogue onwards until mid-2001 there was an "agreement" within the meaning of the Chapter I prohibition between Hasbro and Argos to the effect that Argos would sell Hasbro's Action Man and Core Games ranges at the retail prices recommended by Hasbro. That "agreement" was extended to certain other toys and games with effect from the A/W 2000 catalogues. We refer to all the evidence set out above, which we briefly summarise here. The "agreement" that we find to exist was not a formal agreement, nor was it a legally binding agreement. The agreement was a verbal agreement. It was not reduced to writing. The agreement did not result in any guarantee that Argos would follow Hasbro's RRPs, and there were some exceptions. It is not disputed that from late 1998 onwards Hasbro launched a pricing initiative with a view to persuading toy retailers to price at RRPs on Action Man and Core Games. A core rebate was also offered on those products; see generally the Stockley Park presentation of 23 October 1998, and the unchallenged evidence of Mr. Bottomley. As far as Argos is concerned, discussions on these matters took place between Mr. McCulloch and Mr. Brighty of Hasbro and, at least, Sue Porritt of Argos. In the course of those discussions Sue Porritt and Mrs. Thompson of Argos came to know that Hasbro was actively seeking to persuade all the principal retailers to price at RRPs on Action Man and Core Games as a way of injecting more margin into those products, in association with the offer of a core rebate. Sue Porritt reported to Mrs. Thompson a conversation to that effect that she had had with Mr. McCulloch. At or about the same time Sue Porritt indicated to Mike Brighty that Argos was prepared to go out at Hasbro's RRPs on Action Man and Core Games (Bottomley, paragraph 16). Hasbro set up an internal structure whereby Mr. Wilson (for the Argos account) and Mr. Thomson (for the Littlewoods account) had the responsibility of implementing an arrangement whereby both Argos and Littlewoods would price at Hasbro's RRPs (Bottomley, paragraph 17; Wilson, paragraphs 11 onwards). Mr. McCulloch spoke to Ms. Thompson and/ or Sue Porritt and said that Hasbro could stabilise RRPs (i.e. persuade other retailers to go out at RRPs). Mrs. Thompson and/ or Sue Porritt said to Mr. McCulloch that Argos was willing to go along with that in principle and price at Hasbro's RRPs but would react if it was undercut and could not give any guarantees on pricing (Wilson, paragraphs 8 and 10). At a meeting in Liverpool prior to the publication of the S/ S 1999 catalogue Mr. McCulloch said to Mr. McMahon of Littlewoods words to the effect that he had had discussions with Argos, that Argos was prepared to agree to pricing at Hasbro's RRPs, but were concerned about undercutting. Mr. McCulloch gave Mr. McMahon to understand that if Littlewoods would go to RRPs, Argos could be persuaded to do the same. Mr. McMahon indicated that he could go along with that, but would react if undercut (Thomson, paragraphs 62 to 63), Day 1, pp. 107 to 108 and 110 to 112). In our judgment it is reasonably to be inferred from the evidence that Mr. McCulloch and/or Mr. Brighty gave reassurance to Argos that if Argos went to RRPs, other retailers would follow. Argos certainly knew that Hasbro was actively seeking to persuade other retailers to do so. The first move to RRPs on Action Man and Core Games was for the S/ S 1999 catalogue. Although no agreement is alleged in respect of that catalogue, the evidence does not permit the Tribunal to rule out the possibility that relevant contacts between Hasbro and Argos had already influenced the pricing in that catalogue. In any event, neither Argos nor Littlewoods could be certain whether RRPs would still be followed in the A/W 1999 catalogue (see e.g. Wilson, paragraph 28). It is uncertain how far these matters were mentioned at a meeting between Argos and Hasbro on 17 February 1999. A document prepared by Hasbro for that meeting refers to "

"It goes without saying that Action Man and Games prices will be maintained as per earlier agreements"

"It is the OFT's view that Hasbro's pricing initiative led directly to an overall infringing agreement and/or concerted practice between Hasbro, Argos and Littlewoods…" (paragraph 95) "

"The agreement was that the prices would be stuck to as per our recommended retail prices…" "

"It goes without saying that Action Man and Games prices will be maintained as per earlier agreements"

"I knew that we were not meant to do this, and [that] we were sailing close to the wind. Advised this in 1999. Told not to put anything in writing but thought that it was OK to do so verbally"

"657. It is true that cases such as Suiker Unie, cited above, concern situations where one competitor reveals directly to another his future pricing intentions. However, in our view it does not make any difference that in this case the reciprocal contact took place through the intermediary of Umbro without direct contact between JJB and Sports Soccer. Suiker Unie and subsequent cases state that what is strictly precluded is "any direct or indirect contact" between economic operators the object or effect of which is either to influence future market conduct or to disclose future intentions. In our view, the above facts establish at the least the indirect disclosure by one competitor (JJB) through a supplier (Umbro) of its future intentions to another competitor (Sports Soccer), the effect of which was to influence the conduct of the latter on the market. That is then followed by the disclosure to JJB of Sports Soccer's future pricing intentions, again indirectly through the intermediary of Umbro. 658. We have expressly found that Mr. Ronnie did go back to JJB to inform them of Sports Soccer's pricing intentions. However, we do not accept that the analysis would be substantially different even if Mr. Ronnie had not done so. Cimenteries (at paragraphs 1849 and 1852) and Tate & Lyle (at paragraphs 54 to 60), cited above, show that even the unilateral disclosure of future pricing intentions can constitute a concerted practice if the effect of disclosure is in fact to reduce uncertainty in the marketplace. 659. Thus, for example, if one retailer A privately discloses to a supplier B its future pricing intentions in circumstances where it is reasonably foreseeable that B might make use of that information to influence market conditions, and B then passes that pricing information on to a competing retailer C, then in our view A, B and C are all to be regarded on those facts as parties to a concerted practice having as its object or effect the prevention, restriction or distortion of competition. The prohibition on direct or indirect contact between competitors on prices has been infringed. 660. As regards A, the position might in our view be different only if it could be shown that retailer A revealed its future pricing intentions to its supplier B for some legitimate purpose not related in any way to competition, and could not reasonably have foreseen that such information would be used by B in a way capable of affecting market conditions. It seems to us that such disclosure by a retailer to a supplier will rarely be legitimate, otherwise resale price maintenance could be reintroduced by the back door." (See also paragraphs 710 to 714 of the same judgment) In our judgment, a similar analysis applies in the present case. Dealing first with Littlewoods, the evidence already set out shows that Littlewoods was regularly given by Hasbro advance information about Argos' pricing intentions. Thus the evidence shows, for example (i) Mr. McCulloch told Mr. McMahon at the Liverpool meeting of his discussions with Argos, to the effect that Argos was prepared to go to RRPs on Action Man and Core Games if it was reassured about not being undercut. (ii) Mr. Thomson subsequently went back to Mr. Burgess and informed him that a deal had been struck whereby Argos agreed to raise its prices to RRPs. (iii) In his discussions with Mr. Burgess during 1999, Mr. Thomson frequently reassured the latter that Argos was proposing to price at Hasbro's RRPs, and that Littlewoods would not be undercut if it did the same. (iv) Mr. Cowley's conversation with Mr. McMahon in late 1999 indicates that the latter was still aware of his conversations with Mr. McCulloch about Argos' pricing intentions and took those conversations into account in saying to Mr. Cowley that he should price the Tweenies doll at Hasbro's RRP. (v) Similar discussions took place between Mr. Thomson and Mr. Burgess in relation to the S/S 2000 catalogue. (vi) Littlewoods through Mr. Burgess in his conversations with Mr. Thomson informed the latter of Littlewoods' intention to price at RRPs. (vii) Mr. Burgess at all material times knew, because Mr. Wilson told him, that parallel discussions were going on with Argos, and that Mr. Thomson was passing back to Mr. Wilson the gist of his conversations with Mr. Burgess. (viii) Littlewoods priced at or near RRPs on Action Man and Core Games for the A/W 1999 and S/S 2000 catalogues, and in our judgment cannot have failed to take the foregoing into account in reaching its pricing decisions (see also Case T1/89 Rhone Poulenc v Commission [1991] ECR II- 867, paragraphs 122 and 123). The Act came into force on 1 March 2000. In our judgment, the foregoing shows that, as of that date, there was an established concerted practice which involved the disclosure to Littlewoods, via the intermediary of Hasbro, of Argos' pricing intentions, the object and effect of which was to influence the conduct on the market of Littlewoods, Argos's principal competitor in catalogue retailing. In our view such a concerted practice constituted indirect contact between economic operators (Argos and Littlewoods) the object and effect of which was either to influence future conduct on the market, or to disclose future pricing intentions, within the principles of Suiker Unie and other cases cited above. The facts in our judgment are even more explicit when it comes to the A/W 2000 catalogue. The evidence shows that Mr. Thomson had extensive discussions with Mr. Burgess and the other Littlewoods buyers on extending the pricing arrangement to other products. Littlewoods was then expressly informed, in the email of 18 May 2000, of "the prices that Argos has committed to" in respect of a list of further products. That email also shows Littlewoods being expressly informed that the prices of Action Man and Core Games will be "adhered to" which in the context can only mean that Argos intended to continue to price at RRPs on those products. Again, that in our judgment amounts to indirect contact between economic operators, the object or effect of which was to influence conduct on the market or reveal future pricing intentions. In fact Littlewoods priced at RRPs on the products in question. The contacts over Interactive Pikachu about 25 May 2000 are further evidence of that concerted practice. As to the S/S 2001 catalogue, the concerted practice continued, to all intents and purposes in the same way as before. The continued existence of that practice is shown in particular by Mr. Thomson's conversation with Mr. Cowley about Tweenies dolls at the end of 2000, the email of 28 December 2000, and the emails of 23 February 2001 and 3 April 2001. Turning to Argos, the evidence is that in 1998 and 1999 Mr. McCulloch had conversations with Sue Porritt and Mrs. Thompson. In the course of these conversations Argos was informed of Hasbro's retail pricing strategy to the effect that Hasbro was making a coordinated effort to persuade all retailers to price at RRPs on Action Man and Core Games. At some point Sue Porritt informed Hasbro (Mr. McCulloch or Mr. Brighty) that Argos was in principle prepared to price at RRPs on Action Man and Core Games, which information was passed within Hasbro to Mr. Thomson, who duly passed the information on to Mr. Burgess at Littlewoods. It is in that context that from 1999 onwards contacts took place between Mr. Wilson and Mr. Needham in which the former would ascertain the latter's pricing intentions on Action Man and Core Games. Mr. Wilson would then discuss the matter with Mr. Thomson in the light of Mr. Thomson's knowledge of Littlewood's pricing intentions. Mr. Wilson would then go back to Mr. Needham and indicate to him what he thought the retail prices of particular products would be. It is not disputed that Mr. Needham knew that Hasbro was having similar conversations with other retailers. We assume in Argos' favour that Mr. Wilson did not expressly say "these are Littlewoods' prices"

"2. – (1) … agreements between undertakings, decisions by associations of undertakings or concerted practices which— (a) may affect trade within the United Kingdom, and (b) have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom, are prohibited … (2) Subsection (1) applies, in particular, to agreements, decisions or practices which— (a) directly or indirectly fix purchase or selling prices or any other trading conditions; … (8) The prohibition imposed by subsection (1) is referred to in this Act as "the Chapter I prohibition."

"3.–(1) The Tribunal must determine the appeal on the merits by reference to the grounds of appeal set out in the notice of appeal. (2) The Tribunal may confirm or set aside the decision which is the subject of the appeal, or any part of it, and may– (a) remit the matter to the OFT, (b) impose or revoke, or vary the amount of, a penalty, (c) grant or cancel an individual exemption or vary any conditions or obligations imposed in relation to the exemption by the OFT, (d) give such directions, or take such other steps, as the OFT could itself have given or taken, or (e) make any other decision which the OFT could itself have made. (3) Any decision of the Tribunal on an appeal has the same effect, and may be enforced in the same manner, as a decision of the OFT. (4) If the Tribunal confirms the decision which is the subject of the appeal it may nevertheless set aside any finding of fact on which the decision was based."

" A Agreement between Hasbro, Argos and Littlewoods 366 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. B Agreement between Hasbro and Argos 367 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. C Agreement between Hasbro and Littlewoods 368 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."

" 1) Infant and pre-school - infant -pre-school 2) Boys' Toys -Action figures -Vehicles -Outdoor action sport 3) Girls' Toys -Large dolls -Mini dolls -Collectables 4) Games and puzzles -Family games -Children's games -Adult games -Travel games -Puzzles 5) Creative toys 6) Construction 7) Plush 8) Ride-ons 9) Electronic learning aids 10) Hand-held electronic games "

" 'Core Boys', covering Action Man, Star Wars, Transformers, Micro Machines and Batman; 'Games and Creative', covering Core Games and creative play products; and 'Growth Drivers', covering Tweenie, Pokemon, PlaySkool. Mr. Potato Head, Barney, Nerf, Feature Dolls, Art Attack and Puzz 3D."

"I would like to confirm that Gardens Galore has been reduced in [list] price to £13.67 and will retail at £19.99. The product has not been selected by your major opposition so it will be an excellent margin opportunity."

"Neil and I have spoken to our respective contacts at Argos and Index and put together a proposal regarding the maintenance of certain retails within our portfolio. This is a step in the right direction and it is fair to say that both Accounts are keen to improve margins but at the same time are taking a cautious approach in case either party reneges on a price agreement. … It goes without saying that Action Man and Games prices will be maintained as per earlier agreements."

"Both accounts have agreed to the above price points so this information should be translated to other accounts. The proof in the pudding will be when both Catalogues are published, but Neil and I are confident that they will play ball."

"Following on from various conversations regarding Price Points and opportunities to make more margin I am able to confirm a list of products and prices that Argos have committed to. Games and Action Man prices will continue to be adhered to and the retails are on your range sheets provided by me as part of the selection proposal process. Listed below are the products and prices. POKeMON Battle Figures 2 Pk 4.99 Pokeball Blaster 3 Pk 6.99 Interactive Pikachu 23.99 Micro Machines Transforming Team Truck 29.99 Rally Race Track 19.99 Hand Held Electronic Monopoly 29.99 Bop It 19.99 Girls Baby all Gone Get Set Chocolate Factory 19.99 Egyptian Mystery 29.99 Mastering Mosaics 19.99 Gardens Galore 19.99 (Not listed in Argos) Design & Draw Spirograph 14.99 Super Sticker Factory 17.99 Tweenies All Standard Plush 14.99 All Story Time Product 24.99 Cuddle and Squeeze Doodles 24.99 If you have any questions regarding the above please come back to me and I will do my best to answer them."

"…an example of how information was passed to me by Argos and then passed on internally within Hasbro to be disseminated to other accounts"

"The object of the agreement or understanding was to agree prices, and in the overwhelming majority of cases, it succeeded."

"The whole point of making Argos and Index toe the line on Retails was to set precedent that the rest of the trade would follow."

"Reference our conversation pre Christmas regarding Hasbro's late decision to reduce price of the Tweenies soft toys featured in the Index SS01 catalogue. Fortunately for both of us we were in fact able to amend the selling prices at the last minute due to an unexpected delay in catalogue production. This however literally meant 'holding up the presses', entailing an additional cost of £4000 which will be debited to your account shortly. I will not elaborate on the consequences if we had been unable to do so, resulting in our being undercut by Argos and other High St outlets, especially when you had earlier been so insistent that we went out at the same price."

"Index are keen to price the Ferris Wheel at the Argos S/S price of £49.99 in their A/W 2001 catalogue. Can you ensure that Argos will match the price and if you know of any retail price difference will you try and get them to comply."

"Re: ARGOS ACCOUNT UPDATE Charles, please follow this up urgently, as we can not allow a £14.99 price on the dinghy. thanks DB"

"… As a result of this email, the error was corrected and the dinghy was priced at the RRP. I was the person who spotted that potentially we could have had a retailer undercutting RRP, which we could not allow given the arrangements which were then in place and working well."

"I had a call today from Jacqui Wray at Argos stating that the following items are on sale in the trade at prices lower than recommended retail prices … I stated that Hasbro cannot control retails prices due to it being illegal."

"The witness statements of David Bottomley, Neil Wilson and Ian Thomson clearly show that Argos and Littlewoods took part in the pricing initiative (to price agreed products at or near Hasbro's RRP) on the understanding with Hasbro that Hasbro would get the other retailer to do the same." (paragraph 97) "

"On the basis of the evidence taken as a whole, it is the OFT's view that there was collusion between Hasbro, Argos and Littlewoods which pursued a common objective regarding the price of certain Hasbro toys and games. Each was aware of the others' involvement and the nature of its intentions regarding its conduct in the relevant markets. The OFT concludes that this conduct constituted an overall agreement and/or concerted practice between these three undertakings."

"173. The criteria of coordination and cooperation laid down by the case-law of the Court, which in no way require the working out of an actual plan, must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that each economic operator must determine independently the policy which he intends to adopt on the common market including the choice of the persons and undertakings to which he makes offers or sells. 174. Although it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market. 175. The documents quoted show that the applicants contacted each other and that they in fact pursued the aim of removing in advance any uncertainty as to the future conduct of their competitors."

"66. The case-law shows that, where a decision on the part of a manufacturer constitutes unilateral conduct of the undertaking, that decision escapes the prohibition in Article 81(1) of the Treaty (Case 107/82 AEG v Commission [1983] ECR 3151 , paragraph 38; Joined Cases 25/84 and 26/84 Ford and Ford Europe v Commission [1985] ECR 2725 , paragraph 21; Case T-43/92 Dunlop Slazenger v Commission [1994] ECR II-441 , paragraph 56). 67. It is also clear from the case-law in that in order for there to be an agreement within the meaning of Article 81(1) of the Treaty it is sufficient that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661 , paragraph 112; Joined Cases 209/78 to 215/78 Van Landewyck and Others v Commission [1980] ECR 3125 , paragraph 86; Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711 , paragraph 256). 68. As regards the form in which that common intention is expressed, it is sufficient for a stipulation to be the expression of the parties' intention to behave on the market in accordance with its terms (see, in particular, ACF Chemiefarma , paragraph 112, and Van Landewyck , paragraph 86), without its having to constitute a valid and binding contract under national law ( Sandoz , paragraph 13). 69. It follows that the concept of an agreement within the meaning of Article 81(1) of the Treaty as interpreted by the case-law, centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties' intention. 70. In certain circumstances, measures adopted or imposed in an apparently unilateral manner by a manufacturer in the context of his continuing relations with his distributors have been regarded as constituting an agreement within the meaning of Article 85(1) of the Treaty (Joined Cases 32/78, 36/78 to 82/78 BMW Belgium and Others vs Commission [1979] ECR 2435 , paragraphs 72 and 73; Sandoz, paragraphs 7 to 12; Case C-70/93 BMW v ALD [1995] ECR I-3439 , paragraphs 16 and 17). 71. That case-law shows that a distinction should be drawn between cases in which an undertaking has adopted a genuinely unilateral measure, and thus without the express or implied participation of another undertaking, and those in which the unilateral character of the measure is merely apparent. Whilst the former do not fall within Article 85(1) of the Treaty, the latter must be regarded as revealing an agreement between undertakings and may therefore fall within the scope of that article. That is the case, in particular, with practices and measures in restraint of competition which, though apparently adopted unilaterally by the manufacturer in the context of its contractual relations with its dealers, nevertheless receive at least the tacit acquiescence of those dealers. 72. It is also clear from that case-law that the Commission cannot hold that apparently unilateral conduct on the part of a manufacturer, adopted in the context of the contractual relations which he maintains with his dealers, in reality forms the basis of an agreement between undertakings within the meaning of Article 85(1) of the Treaty if it does not establish the existence of an acquiescence by the manufacturer ( BMW Belgium , paragraphs 28 to 30; AEG, paragraph 38; Ford and Ford Europe , paragraph 21; Metro II, paragraphs 72 and 73; Sandoz, paragraphs 7 to 12; BMW v ALD, paragraphs 16 and 17)."

"100. Concerning the appellants' arguments that the Court of First Instance should have acknowledged that the manifestation of Bayer's intention to restrict parallel imports could constitute the basis of an agreement prohibited by Article 85(1) of the Treaty, it is true that the existence of an agreement within the meaning of that provision can be deduced from the conduct of the parties concerned. 101. However, such an agreement cannot be based on what is only the expression of a unilateral policy of one of the contracting parties, which can be put into effect without the assistance of others. To hold that an agreement prohibited by Article 85(1) of the Treaty may be established simply on the basis of the expression of a unilateral policy aimed at preventing parallel imports would have the effect of confusing the scope of that provision with that of Article 86 of the Treaty. 102. For an agreement within the meaning of Article 85(1) of the Treaty to be capable of being regarded as having been concluded by tacit acceptance, it is necessary that the manifestation of the wish of one of the contracting parties to achieve an anti-competitive goal constitute an invitation to the other party, whether express or implied, to fulfil that goal jointly, and that applies all the more where, as in this case, such an agreement is not at first sight in the interests of the other party, namely the wholesalers."

"282 However the before mentioned letter shows clearly that the German producers to which it referred … never at any time kept their dissatisfaction to themselves but told RT about it. 283 If an economic operator accepts the complaints made to him by another operator in connexion with the competition to which the products manufactured by the former operator expose the latter, the conduct of the operators concerned amounts to a concerted practice."

"98. As we have already stated in our interim judgment of 8 August 2001, we agree that the Director's concession that these proceedings are "criminal", for the purposes of Article 6 of the European Convention on Human Rights, is properly made: see Case C-235/92P Montecatini v Commission [1999] ECR I-4539, paragraphs 175 and 176. That is particularly so since penalties under the Act are intended to be severe and to have a deterrent effect: see the Director's statutory Guidance as to the appropriate amount of the penalty, (OFT 423, March 2000) issued under section 38(1) of the Act. 99. The fact that these proceedings may be classified as "criminal" for the purposes of the ECHR gives Napp the protection of Article 6, and in particular the right to "a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law" (Article 6(1)), to the presumption of innocence (Article 6(2)), and to the minimum rights envisaged by Article 6(3) including the right "to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him" (Article 6(3)(d)). 100. In our view it follows from Article 6(2) that the burden of proof rests throughout on the Director to prove the infringements alleged. 101. However, as the Court of Appeal held in Han, cited above, to which we referred in our judgment of 8 August 2001, the fact that Article 6 applies does not of itself lead to the conclusion that these proceedings must be subject to the procedures and rules that apply to the investigation and trial of offences classified as criminal offences for the purposes of domestic law: see Potter LJ at paragraph 84, and Mance LJ at paragraph 88 of that judgment. 102. Neither the ECHR itself nor the European Court of Human Rights has laid down a particular standard of proof that must be applied in proceedings to which Articles 6(2) or (3) apply, and still less that the standard should be that of "proof beyond reasonable doubt", which is not a concept to be found in the domestic systems of many of the signatory States (see Sir Richard Buxton, cited above, at pp. 338 and 339). 103. In our view it follows that neither Article 6, nor the Human Rights Act 1998, in themselves oblige us to apply the criminal standard of proof as established in domestic law in cases where the Director seeks to impose a financial penalty in respect of alleged infringements of the Chapter I or Chapter II prohibitions under the Act. 104. In our view the standard of proof to be applied under the Act is to be decided in accordance with the normal rules of the United Kingdom domestic legal systems. Neither party has cited to us any decided domestic cases which suggest that, in circumstances such as these, the criminal standard should be applied, nor invited us to apply by analogy certain civil situations where traditionally the criminal standard of proof is required (e.g. committal proceedings). 105. Infringements of the Chapter I and Chapter II prohibitions imposed by sections 2 and 18 of the Act are not classified as criminal offences in domestic law, in contrast, for example, to the criminal offences created under sections 42 to 44. Under section 38(8), penalties are recoverable by the Director as a civil debt. Directions are enforceable by civil proceedings under section 34. In our view the structure of the Act points to the conclusion that under domestic law the standard of proof we must apply in deciding whether infringements of the Chapter I or Chapter II prohibitions are proved is the civil standard, commonly known as the preponderance or balance of probabilities, notwithstanding that the civil penalties imposed may be intended by the Director to have a deterrent effect. 106. We add that in many cases under the Act the factual issues before this Tribunal will often relate to such matters as determining the relevant market, whether dominance exists, and assessing whether conduct characterised as an "abuse" is economically justified. Issues of that kind involve a more or less complex assessment of mainly economic data and perhaps conflicting expert evidence. It seems to us more likely that Parliament would have intended us to apply the civil standard of proof to issues of this kind, rather than the time-honoured criminal standard of "proof beyond reasonable doubt". 107. In our view it follows from the speech of Lord Nicholls (with whom Lord Goff and Lord Mustill agreed) in Re H , cited above, at pp. 586 to 587, that under the law of England and Wales there are only two standards of proof, the criminal standard and the civil standard; there is no 'intermediate' standard. The position is the same in the law of Scotland and Northern Ireland. Within the civil standard, however, the more serious the allegation, the more cogent should be the evidence before the court concludes that the allegation is established on the preponderance of probability: see Lord Nicholls' speech in Re H , citing notably In re Dellow's Will Trusts [1964] 1 WLR 451, 455 and Hornal v Neuberger Products Ltd [1957] 1 QB 247, 266. 108. Since cases under the Act involving penalties are serious matters, it follows from Re H that strong and convincing evidence will be required before infringements of the Chapter I and Chapter II prohibitions can be found to be proved, even to the civil standard. Indeed, whether we are, in technical terms, applying a civil standard on the basis of strong and convincing evidence, or a criminal standard of beyond reasonable doubt, we think in practice the result is likely to be the same. We find it difficult to imagine, for example, this Tribunal upholding a penalty if there were a reasonable doubt in our minds, or if we were anything less than sure that the Decision was soundly based. 109. In those circumstances the conclusion we reach is that, formally speaking, the standard of proof in proceedings under the Act involving penalties is the civil standard of proof, but that standard is to be applied bearing in mind that infringements of the Act are serious matters attracting severe financial penalties. It is for the Director to satisfy us in each case, on the basis of strong and compelling evidence, taking account of the seriousness of what is alleged, that the infringement is duly proved, the undertaking being entitled to the presumption of innocence, and to any reasonable doubt there may be."

"188. In non-criminal proceedings facts are required to be proved on the balance of probability, that is to say that the court must be satisfied on the evidence, that the occurrence of the event is more likely than not. However, the principle is that the more serious the allegation, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probabilities. Hence the civil standard provides for flexibility as to the cogency of the evidence required to satisfy the court of the facts. Thus in Re H Lord Nicholls said: "

"core boys", "games and creative" and "growth drivers"

"The phrase 'market pricing' does not mean moving to prices on RRPs. However, RRPs tend to be established in the market, and it is difficult for retailers to price above an RRP if it has become the prevailing market price" (Day 3, p. 41). "

"Q. Why would you have specifically explained this market pricing in terms of its closeness to recommended retail pricing? A. For the reason I just gave, because many of our competitors did price products at the RRP, we would be aiming to match our competitors; so if our competitor was at an RRP, we would probably go to an RRP. Q. Yes, but as I understand market pricing, the fact that it happens to be at or near the RRP is not relevant, it is the question of what everyone else is pricing at; that is the important point. A. Yes, it is, and I was just clarifying that that could be RRP." (Day 3, p. 85) And at Day 3, p. 86: "

"Q. And secondly [the policy reflected in that document] bears no relationship whatsoever to RRPs; they are irrelevant, it is not mentioned in this document. A. RRPs are not relevant. Q. Yes. It is completely irrelevant, this question of RRPs, to this policy that you were planning in August 1998. A. Only to the extent that we would price to the market, and hence if the market was at RRP, we would price to RRP."

"Continue with our pricing policy of not pre-empting Index but ensuring we have hero prices, entry prices, across all groups" (paragraph 25). A later Argos document, sent to Mrs. Thompson on 28 January 2000 and headed "

"'DO'S' – possible to discuss our views on pricing strategy, positioning of our products in the market, price elasticity and the information and evidence to support this. 'DON'TS' – do not indicate that we require any particular retail price or that we would make any supply or discount structure contingent on particular retail price – we cannot legally introduce such requirements."

"The presentation was mainly about the development of a 'Listing Initiative' under which retailers were offered rebates of 5% by Hasbro for listing certain products in their catalogues which would otherwise be 'de-listed'. Discussion also took place about a pricing initiative under which Hasbro would try to get retailers to list at RRPs. Account managers were briefed to undertake audits of toy retailers and if they found that prices were not at RRPs they were to have conversations with them to try and persuade them to adopt RRPs. We were led to believe that these strategies had been looked at by our legal department and were OK. It is this meeting which I described at lines 23-25 of my interview with Mr. Lawrie."

"DB: When rejoined Hasbro in 1998 attended presentation led by Mike Brighty and Jonathan Evans and was led to believe that the pricing strategy has been looked at by our legal department and was OK. BL: When did pricing strategy move into becoming a price-fixing type arrangement? DB: Shortly after initial discussions in 1999. BL: When did discussion move from margin discussions to discussion to agree prices? DB: Conversations on adopting RRPs set by Hasbro took place in 1999."

"12. Argos and Littlewoods were key to the success of the pricing initiative since they were the market leaders – if they could be persuaded to maintain prices at RRP then other retailers would follow suit. We found it easy to get other retailers to adopt RRPs – what they did depended on whether Argos adopted RRPs… … 14. …In pursuance of the pricing initiative, I was party to a large number of conversations with retailers, including Littlewoods, at about this time. These discussions centred more on margin than on RRP. In these conversations, I would suggest to retailers that they should price at the Hasbro RRPs… Retailers would say that they were interested in pricing at Hasbro's RRPs, but couldn't because of Argos. What they meant was that, given Argos' pre-eminent position in the market, they couldn't afford to price at RRP unless Argos did the same. My reply to retailers was that exactly the same discussions were taking place with Argos so for the first time the whole industry would be involved. … 16. I did not deal with Argos directly. However, as a result of the discussions that Mike Brighty of Hasbro had with Sue Porritt of Argos, I came to understand that Argos had indicated that they too would go out at Hasbro RRPs. Within Hasbro there was constant internal dialogue at all times about these discussions. I was aware of exactly what was being discussed with Argos, since Mike Brighty (who dealt with Hasbro) sat next to me. We would have a meeting each Monday morning to discuss the previous week's events and then we would discuss this with the whole team in the afternoon. These internal meetings discussed general business issues and were not solely account specific. 17. Mike Brighty and I had had discussions with the higher management of our customers, such as I describe above. However, it was Ian Thomson (the Littlewoods Account Manger) and Neil Wilson (the Argos Account Manager) who carried out the day-to-day discussions with Index and Argos. As I said in my interview with Mr. Lawrie, "

"Mike McCulloch told Sue Porritt that Hasbro were proposing that all retailers should sell at a given price and they would only be paid rebates if they agreed to sell at the relevant RRP. Sue came into my office and said something like "

"8. I was aware that in late 1998 and early 1999, Mike McCulloch, Hasbro's Head of UK Sales and Marketing, had spoken to Maria Thompson at Argos, and possibly other buyers there such as Sue Porritt. In these discussions, they identified a need to increase margins on Hasbro products. Argos said that it would welcome any influence that Hasbro could exert to increase margins, by getting nearer to RRPs and by other means. I understood that Mike McCulloch said that Hasbro could help stabilise RRPs (i.e. persuade other retailers to go out at RRPs), and that Argos was willing to go along with this in principle and price at RRPs, but would react if it was undercut and would never give any guarantees on pricing. 9. In response to this pressure from Argos and other retailers to improve profitability and margins, Hasbro's senior management at director level (i.e. Mike McCulloch as well as David Bottomley and Mike Brighty, both Sales Directors) developed a strategy to raise margins on Hasbro products. The discussions with Argos were key to coming up with this strategy. There were a number of strategies laid down to increase margins, including pricing and listings initiatives, introducing clearance merchandise, an FOB programme and reducing cost prices. The first part of the strategy was a pricing initiative to increase retailer margins on Hasbro products by matching RRPs across the toy industry. I set out in more detail below how this worked in practice. The second part of the strategy was a listing initiative which ran concurrently with the pricing initiative and which involved payment of a rebate to retailers in return for listing certain products that might have otherwise have been de-listed. It was considered first by Hasbro Sales Directors to make the granting of a rebate also conditional on adhering to RRP, but it was realised that this would be illegal after consulting Hasbro's Legal Department. 10. Argos (and other retailers) were asked by Hasbro whether they were happy to match Hasbro's RRPs. Argos said it was prepared to match RRPs as long as it was not undercut by its competitors. 11. Although Hasbro management had developed this strategy, account managers such as Ian Thomson and myself then carried out the day-to-day practicalities of ensuring that it worked. 12. As to the level of detail that went into the discussions between Hasbro and Argos as described above I am not in a position to say, as I did not attend these meetings…"

"58. Index concerns about our plans for improving profitability on Hasbro merchandise surfaced towards the end of the presentation when we considered my Excel spreadsheet analysis. The spreadsheets showed that Index would need to price at the new .99p price points in order to make the necessary profit margins. 59. John McMahon and Lesley Paisley saw that the products in our Core Games and Action Man would have to be retailed at a certain price point in order to maintain that margin and expressed grave concerns over whether this could be done. 60. These grave concerns were how Hasbro could make other retailers do the same thing. 61. The issue over pricing was that Argos as direct competitor would be a direct threat to any action taken by Index and could compromise them severely if they undercut the pricing. This would mean that Index would lose credibility as a catalogue retailer and as a result of that lose market share. These might not have been the precise words that John McMahon used but the implication was the same. 62. It was at this point that Mike McCulloch intimated to John McMahon that he had been having discussions with the major opposition (Argos) and they were of the same opinion i.e. that they could not agree to the new pricing structure for fear of being undercut. It did need the agreement of both parties in order for the plan to work, but that if Index would agree to go along with it then Mike McCulloch, using this knowledge, was confident that he could persuade them to do the same. 63. John McMahon said that he would play ball and go along with the plan but if they (Argos) reneged on the deal and did not stick to the retail prices in their 1999 Autumn Winter Catalogue and he (Index) did, he would be seriously disadvantaged. If this happened as a result he would do some serious price cutting in the next Index catalogue launch. 64. There was a great sense of satisfaction amongst Mike McCulloch, David Bottomley and myself after this meeting that we had a last been able to present a plan that would improve the profitability of the customers that we dealt with. Mike McCulloch said that he would have to go and see Argos to get their buy in. I am not sure if he intended to take Mike Brighty as well. 65. I was told shortly afterwards that Argos had agreed to go ahead. (I can't remember who passed on the details to me at that time but it would probably have been David Bottomley but I can't be entirely sure.) I do remember being asked to pass on the information to Index and I would have spoken directly to Alan Burgess as a result. Alan simply acknowledged this. 66. I don't know whether Mike McCulloch or David Bottomley spoke to their contacts at Index about the Argos decision. Mike McCulloch's contact would have been John McMahon and David Bottomley's, Lesley Paisley 67. At that time I spoke to Alan Burgess to tell him that we had had an agreement from Argos that the Core Brand recommended retail prices would be adhered to."

"A. The words "play ball" may not have been used, but I would go along with that there was a clear indication that he was willing to participate, as long as he knew that the opposition were going to do the same. Q. Let us be absolutely crystal clear about this, because this is an important issue, and Mr. McMahon will want to explain what his position is. What do you mean by clear indication? What words did Mr. McMahon use? A. As I said, it was along the lines of, "

"Argos Meeting – 17/2/99 Issues 1. BIM eroding 5.5% 1998 Cover – Dialogue opened to stabilise RRPs (initially Core Games, Action Man) - Build in additional rebate earning"

"…2. Games Rebate The specific issue of being forced to range Battleships & Connect 4 was raised. ARE advised that we can have an individual conversation around specific issues. Andrew will you take this up with Mike Brighty. 3. Pricing Strategy vs Rebate Pricing MT indicated that we will react heavily to being undercut should it happen. Hasbro will not put money on the table to support this but will look at other methods of support. I will follow this up with Mike Brighty. …"

"Though you and Maria made clear that product availability and particularly profitability needs extra focus by Hasbro. I know that plans are in place but Simon and I will keep a personal watch on these areas, and will expect to show you progress the next time we meet."

"Hasbro's retail pricing strategy to increase trade bought-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!"

"15. From January to March 1999, Argos had gone through a selection process with me and Mike Brighty to decide which products were going into the catalogue. Argos then told me what products they were proposing to put in their catalogue. In March 1999, Argos and Index had made the final selection of the products that they would carry in the A/W 1999 catalogue. In my interview, I said, as regards the A/W 1999 catalogue, 'Our role was to establish common products in both catalogues and set RRPs.' I was referring to the pricing initiative. I now wish to clarify what I meant by establishing common products and setting RRPs. 16. 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 reduce the price to drive sales. By and large, when I presented Argos with Hasbro's proposed RRPs they said they were happy to follow them, although they did not give any guarantees and were subject to change. Occasionally their price would differ from the indication they had previously given. 17. At the same time, other account managers would go through the same process with their retailers. Once Argos had told me what their pricing intentions were, I passed on that information to other account managers within Hasbro to flag-up the products where the RRP was looking unlikely to be matched. It was then up to them to tell their accounts, and I do not know how they presented this information. However, I know that they did tell their accounts. … 19. Having determined Argos' pricing intentions and passed these on to the other account managers within Hasbro, I received information from those account managers regarding the intentions of other retailers to go with RRPs. I then reverted to Argos and said, without being specific, that it was my belief that the future retail price of a product would or would not be at the RRP. I told Argos which products this related to. I never mentioned the name of the retailer who was involved or quantified exactly the price that retailer would go out at. I simply said to Argos that it was my belief from what retailers told us that this or that product would or would not be at the RRP. 20. I mainly had these conversations with Andrew Needham at Argos, as he was the buyer of boys' toys (including Action Man) and games, and sometimes with Sue Porritt, who was his boss. To a lesser extent I also dealt with Vanessa Clarkson, who was the Argos buyer for girls' toys, creative play and pre-school toys. These were the Argos buyers I would have the discussions with as described here. My involvement with Maria Thompson, who was more senior, was minimal. 21. In the interview I said, 'We never knew for sure if they would definitely commit to those prices, but had a 'gentleman's agreement' that they would… It was implied that RRPs would be adhered to. But, we were not allowed to carry out any sanctions if RRPs were not adhered to.' I described the process which I have set out above as a 'gentleman's agreement'. To clarify, what I meant was as follows. As I explain above, Argos had told me what their pricing intentions were and that they were intending to price at Hasbro's RRPs. However, they never formally guaranteed that they would go out at those prices. There were not documents that set out these arrangements. If Argos chose not to charge RRPs there was nothing we could do, as we knew it was illegal to, for example, offer incentives to Argos to adhere to RRPs. That is why we only knew what the actual price would be (and whether Argos had kept to the price they had indicated to me) when we looked at the prices in Argos' catalogue. 22. Argos were fully aware that the pricing initiative involved Hasbro talking to other retailers. 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. 23. 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. 24. In these circumstances, once I had spoken to Argos, I contacted the account manager in Hasbro who dealt with the retailer in question. He or she in turn called the buyer of the retailer who had the lower price. The account manager sought to find out why the price was lower and to persuade the retailer to go back to the RRP. Often the lower price turned out to be a temporary promotion, for instance to clear out stock, or a simple mistake, as most retailers were eager to charge RRPs. I then informed Argos whether we were able to do anything and either provided the reassurance they sought or said that we could do nothing. Argos knew that this was the process that was going on. 25. …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. 26. In my interview with the OFT I explained that 'We would identify any undercutting and try to persuade the retailer to raise the[ir] price to the RRPs. The account managers would contact their customers.' This is the process that I have described in the preceding paragraphs. 27. The pricing initiative as explained above involved all retailers, not only Argos and Index. However, these two were a primary concern to Hasbro as they were the price setters in the toy market. When they had published their catalogues the other retailers would generally follow suit. Therefore it was necessary for Ian Thomson (the Account Manager for Littlewoods) and myself to have more of a dialogue with our respective accounts and be more involved. As I said in my interview with the OFT, 'Argos and Index were the price setters/ leaders in the market. So needed to get them on board for our pricing strategy/ trading terms strategy to work'. 28. Argos was concerned about undercutting by any retailer and because they competed directly with Index they would be very concerned with how Index was pricing products. Argos would know, for example, what Index's Spring/ Summer prices were (because they were published in its catalogue) but they would not know what their intentions were with respect to Autumn/ Winter and that is where we came in. 29. I had internal meetings with Ian Thomson when we would discuss Argos' and Index's pricing intentions. As a result, I was able to provide Argos with reassurance as to probable future market pricing, i.e. that an RRP was likely or unlikely. This is what I meant in my interview with the OFT when I said 'Our role was to establish common products in both catalogues and set RRPs'. I was referring to Ian Thomson and myself and by 'both catalogues', I meant the Argos and Index catalogues. Similarly retailer or any reatialer'ham. ragraph 36 of his witness statement that he never entered inot conversations me) when w30. I understand that Andrew Needham says in paragraph 36 of his witness statement that he never entered into conversations with Hasbro regarding Index and pricing. That is correct to the extent that I cannot recall being specific about Index in my conversations with Andrew Needham. As I said above, I would not be specific to Argos about any retailer or any retailer's price. Similarly, Andrew Needham would not specifically ask about Index. However, we would talk about the future anticipated market price and we were both aware that the Index price would be crucial to the outcome of the market price of any particular product. 31. I also note that Andrew Needham, at paragraph 24 of his witness statement, comments on the 'constant dialogue' between Hasbro and Argos on low margins and what could be done about them, for example, by movement on cost prices. However, as I said above, my conversations with Andrew Needham were not usually about cost prices. They dealt more with retail prices, as well as other strategies to increase margins such as clearance merchandise and FOB supply. 32. Andrew Needham also states that he was not aware of any Hasbro 'pricing initiative' or 'retail pricing initiative' and that as far as he was aware, there was no initiative to make Argos and other retailers adhere to RRPs. Although he is correct in his view that Hasbro had no strategy to force retailers to adhere to RRPs, 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 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. 33. When Andrew Needham uses the word 'adhere' to describe the initiative, he could be read as suggesting that there was some form of binding agreement. As I have explained, there were no sanctions that Hasbro employed if Argos decided not to price at RRPs as we were told by Hasbro's Legal Department that this would be illegal. Moreover sanctions would not necessarily have been appropriate as there was a general desire to increase margins, a desire to co-operate within the industry and for there to be less undercutting of prices. 34. In July 1999, the Argos A/W 1999 catalogue was published. We were able to see from the catalogue that Argos had priced Core Games and the Action Man range more or less at Hasbro's RRPs. We were therefore reassured that the initiative was working and that, although they had offered no guarantees, Argos had priced at the levels that it had indicated to me in the vast majority of cases (i.e. in line with Hasbro's RRPs)."

"15. As I said to the OFT at the oral hearing, I discussed retail prices with Hasbro. Discussions about retail prices with Hasbro would be inevitable as it sets the RRPs, its stated margin to Argos was the difference between the cost price and the RRP and the RRPs appear on most of the documents emanating from Hasbro (for example, the Hasbro listings proposal presentation, the Hasbro business plan for Argos, the Hasbro Trading Terms presentation). However I wish to emphasise that these discussions were not a set process. We did not sit down and discuss individual RRPs in any routine way. 16. If Neil Wilson did ask me whether I was 'happy' or 'comfortable' with an RRP, I may have said yes but we did not have a discussion about whether Argos would be pricing at the RRP for each of the Core Games and Action Man products that were being listed. He did not go through each product, line by line, and ask me whether I was happy with each RRP. Neil Wilson sometimes asked me whether Hasbro's RRPs were set at the correct level. Hasbro, as did other toy manufacturers, sought our view on certain RRPs at the toy previews and toy fairs that I mentioned above. We also sometimes had general discussions about where we both thought the market price for a Hasbro product was likely to settle (i.e. what the future anticipated price for the product was likely to be during the life of the Argos catalogue). This discussion helped both of us. It provided Hasbro with some insight into where its products were going to settle in the market (as compared with other manufacturer's products). It helped me to ensure that the prices I set for Argos at catalogue launch were near what I anticipated the market price would be. 17. But it is important to recognise that, so far as I was concerned, these discussions were in no sense part of a plan to elicit my price intentions for Core Games and Action Man, let alone part of a plan to price normally at RRP on condition that Index did the same. This was simply not the case. Moreover, when Neil Wilson (at paragraph 19 of his statement) says 'I then reverted to Argos' as to his belief that a product would or would not be at the RRP, this was also not part of any plan or any systematic exchange. I certainly did not have the impression that Hasbro was eliciting my price intentions, with a view to passing these on to third parties and then reverting back to me with third party pricing intentions. Hasbro communications with other retailers 18. The OFT states that I was aware that Hasbro was communicating with other retailers with a view to moving to RRPs (for example at paragraph 277 of the new decision relying on paragraph 32 of Neil Wilson's statement). I believe that there is a degree of confusion here. I feel that the OFT has misinterpreted this fact. I do not believe there is any real contradiction between my statement and Neil Wilson's statement on this. 19. I said in my first statement (paragraph 24) that, as far as I am aware, 'there was no initiative to make Argos and other retailers adhere to recommended retail prices. Neil Wilson agrees with me at paragraph 32 of his statement ('he is correct in his view that Hasbro had no strategy to force retailers to adhere to RRPs'). When Neil Wilson says 'Andrew Needham was certainly aware that Hasbro was communicating with retailers with a view to increasing margins by moving towards RRPs' I regard this statement as a statement of the obvious. Hasbro would always tell Argos that if we priced at the RRP we would make more margin. I would not expect Hasbro to be any different with any other retailer. But I was not aware of any formal Hasbro initiative. 20. As to the issue of me phoning Neil Wilson if I saw a competitor pricing at way below the RRP, I agree with Neil Wilson at paragraphs 23 and 32 of his witness statement when he says that I called him to discuss lower prices offered by other retailers. But I do not agree with his interpretation of the purpose of the phone call. The purpose of the call was to try to ascertain whether the lower price was a result of a short or long term price promotion, not to ask Hasbro to get the other retailer to price at the RRP. I did not expect that Hasbro could do anything about our competitors' retail prices. If it was established that a lower price was due to a long term price promotion, Argos would need to react. Argos would seek financial assistance from Hasbro (for example, on cost price) – in other words, Argos would seek equivalent terms. But financial assistance from Hasbro was very rarely obtained. In any event, I believe that this whole issue is unrelated to the OFT's case that Argos agreed only to price at or near RRPs if Index would do the same. It is something that was happening way before Spring 1999 when the alleged price-fixing agreement is said to have come into existence."

"68. Index would have had copies of the Excel Spreadsheets that I used to show the Retails, Volumes and Profit analysis from the Business Plan presentation that would have enabled them to price mark the relevant products for the launch of the 1999 Autumn Winter Catalogue. 69. There was a great degree of nervousness within Hasbro as to whether the prices would be adhered to because although there were verbal guarantees from Index and Argos, we would not know for sure until the respective Argos and Index catalogues were published. 70. The catalogues came out from Argos and Index around the same time in July 1999 (usually the 3 rd week) and Neil Wilson and I checked the prices to see if the plan had worked. 71. It was a success – as we saw that the same retail price points for Core Games and Action Man had been applied in each catalogue. 72. Prior to the publication of the 2 catalogues I do now know if there was any other dialogue taking place with our other major accounts. After the publication of the Index and Argos catalogues at a sales meeting the rest of the account team were told that they could now convey to their accounts that the plan to improve profitability with Hasbro had started to work. … 75. 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 because Argos and Index who the price leaders had demonstrated that the new strategy was working. … 77. The Business Planning Department was given the responsibility by senior management (the Sales Directors or Mike McCulloch) to monitor Retail Pricing. We had always monitored Retail pricing to understand what our customer's margins were in order to see their profitability when selling Hasbro merchandise. This was used as an analytical tool when presenting Business Plans. 78. The emphasis on price monitoring now was to ensure that our other customers would fall in line so that Argos and Index would be confident that our plan was working throughout the UK. This would reduce the risk of them going back to price cutting in the following catalogues. 79. Retail audits were carried out by the Sales Team and the Business Planning Department on a monthly basis, and price anomalies were highlighted at our regular Sales Meetings. If a retailer's price on Core Brands was lower than the Argos/ Index price the relevant Account Manager was told to go back by either Mike Brighty or David Bottomley and tell the account to put the price up. We were left in no doubt by Mike Brighty or David Bottomley that this had to be done or else our customers would have no faith in our initiative to improve profit margins through our new terms. 80. If a price point was below the Argos/ Index core brand retails it was to be pointed out to the customer that they were reducing their profitability and affecting their margins. They could not complain to us if at the end of the year they had achieved a less than satisfactory margin when we were trying to improve the profitability of all of our customers. 81. I do not know how this was passed on to individual customers but it was suggested at the meetings that the threat of withholding rebates would be sufficient to make them put the price back up. Although this was suggested I am not aware of any rebates that were in fact withheld as it was deemed that the threat would be sufficient enough. 82. There was an incident regarding retail pricing at almost every monthly sales meeting that a relevant account handler would be instructed to go and sort out with his or her contacts within the customer base. Tesco and John Lewis Partnership is a couple of examples that I can think of. 83. Once we had established that Index and Argos held the prices in Autumn Winter 1999 the Sales Team were asked to continue this for Spring Summer 2000 by the Sales Directors. 84. During my various meetings with Index, mainly with Alan Burgess as it was his ranges that were in the Core Brands, I would comment on how successful the strategy had been for Autumn Winter 1999 and we should continue it for Spring Summer 2000. 85. I am aware that Neil Wilson was conducting a similar exercise with Argos and he would tell me that he was confident that Argos would stick to the plan. 86. In my discussions with Index I would tell them that Argos was still going to carry on with the policy of sticking to the Core Brand pricing. I was told that Argos would back the plan by Neil Wilson and I would tell him that (Alan Burgess) Index was intending to do the same. 87. From my discussions with Alan Burgess regarding commitment to the plan there was never any instruction not to pass on information to Argos. I would tell Alan that I would be having discussions with the Argos account handler (Neil Wilson) in order to confirm that they (Argos) would still honour the price commitments of Core Games and Action Man. 88. My understanding was that the agreement to stick to the Core Brand pricing was still being monitored internally in Index by their senior management whom I took to be Lesley Paisley and John McMahon. 89. Continuing the initiative into Spring Summer 2000 was still met with caution internally at Hasbro and externally at Index. It had worked in Autumn Winter where most of the Toy business was done (75 to 80% of a year's turnover) and it was always the time where price mattered most. The temptation to cut price was still there because the lower the price the more footfall you would attract in store leading to increased market share. 90. To lose market share was unacceptable for Index and therefore it was considered to be a big risk for Index in case Argos undercut them. 91. I reported this back to David Bottomley and other senior management (Mike Brighty, Mike McCulloch) through corridor conversations and at Sales Meetings. Neil Wilson was also saying similar things about Argos's caution that Index would stick to the plan. 92. All I could do was reassure Alan Burgess that we were confident that the Strategy would hold for Spring Summer 2000 as well and that Argos would not undercut them. 93. At our various sales meetings we (the Sales Team) were left with no doubts from the Sales Directors that the new strategy had to be continued and failure was not an option. Neil and I were under intense pressure internally to make this a success as we were always told that Index and Argos were crucial to the plan. I had to make sure that they maintained the Retail Price points. Most vocal in this regard was Mike Brighty as he was the Sales Director responsible for Argos as part of his overall portfolio. 94. The conversations continued between Neil Wilson and myself from end July 1999 to the launch of the Spring Summer catalogues in the 3 rd week of January 2000. 95. Once we had established that the plan was being adhered to in Autumn Winter 1999 Neil and I would still have conversations regarding Spring Summer 2000. This was done mainly to reassure both Neil and I and our accounts that they would continue with the plan. 96. Even though I was given the understanding from Alan Burgess that he intended to go with the Retails I could not be sure this happened until the catalogue was published. 97. The 2000 Spring Summer Catalogues for Index and Argos came out in January of that year (2 nd or 3 rd week of the month). Once again the prices were maintained across Core Games and Action Man. Internally [it] was seen that the plan to improve profitability with our customers on Hasbro product had succeeded. Prices on the Core Brands at other accounts continued to be monitored and if there were anomalies they were raised at Sales Meetings. 98. In August of 1999 when Index were finalising their listings for Spring Summer 2000 catalogue, the Sales Team were still talking about carrying the plan forward. Neil Wilson and I were confident that both of our accounts would continue to back the Hasbro strategy as our Buyers were gaining confidence from the evidence that was in print. The emphasis was more on Action Man as the range had changed for 2000 and Alan Burgess had indicated that he would be following our price points. Neil Wilson had had similar conversations with Argos. 99. For the launch of the Spring Summer 2000 catalogue I had indicated to Alan Burgess at Index that Argos would carry on with their commitment to maintain price points. The Argos and Index catalogues came out in January 2000 and once again the price points on Core Games and Action Man had been maintained."

"A. I would not have asked for a price, but we were talking about the range, particularly Action Man at that time, we were talking about the deal after we had made the presentation and we talked about going out at the RRPs. There was an agreement to do it, when we were trying to promote, and that was improved profitability. There was never a guarantee that it would be adhered to and we never knew effectively that it would be adhered to until the catalogue came out later, after the selection process had been gone through"

"A. Yes, there was reassurance that needed to be given during most of the conversations, which we tried to do by saying 'Yes, I've had talks with my opposite number and this plan is going ahead, I am as confident as I can be that this will take place'. But there was never any certainty really until the catalogues were published that these prices did come out and were the same." (pp. 178-179) And later: "

"13. As the new Argos policy described above at paragraph 5 took effect, however, all retailers gained confidence that prices could be set at the suppliers' RRP. This confidence grew as we viewed the Argos catalogues which evidenced the new policy of adhering to RRPs. Suppliers' account managers would still suggest to us that recommended retail prices would be observed by Argos. However, we knew now that this was more likely to turn out to be true. Since 2000 discussions with suppliers on the likelihood of Argos going for recommended prices on any type of goods has reduced significantly. This is because the pattern of Argos' pricing on toys has become established, and retailers now generally adhere to RRPs. 14. I would have had many discussions over the seasons with Ian Thomson on cost and retail pricing. I do not however recall particular conversations or the precise words that might have been used. Ian Thomson is just one out of about 60 suppliers with whom I deal and I spend a great deal of time talking to an enormous variety of people. I nevertheless set out below my recollection of the nature of the discussions I had with Ian Thomson. 15. Ian Thomson never threatened me in any way. He never said 'Alan, you must go out [at] these prices because if you don't it is going to be a real problem for you'. The means that Ian Thomson applied in favour of our following recommended retail prices involved encouragement only. 16. Similarly I do not remember Ian Thomson ever asking me to recommend to our price setting meeting that we adopt Hasbro's recommended retail prices. 17. I do not remember any specific instances, but during the selection period a number of conversations would have taken place when Ian Thomson would have asked for my views on retail prices. He might, for example, have said something like 'do you see any problem with these recommended prices on this range?' I might have responded by saying that they looked okay except perhaps for one or two where I thought, for instance, the product would sell at a higher or lower price. I would not have had that sort of conversation many times. It would have happened following the change in Argos' policy in 1998 and 1999. By 2000 the market had largely settled down to following recommended retail prices, but with some limited price cutting for tactical reasons. It is possible that Ian Thomson was trying to obtain my opinion on the recommended retail prices to form a view in his own mind as to whether I was likely to follow them. To that extent he might have been quizzing me about my intentions. 18. I note that Ian Thomson himself has said to the OFT that he did not have discussions with retailers about RRPs because retailers were generally following Hasbro RRPs from Autumn/ Winter 2000-2201. This would be about right. 19. I do remember vaguely Ian Thomson advising me that he thought Argos might accept his retail prices. I do not remember the words he used. I do not recall him saying that he had an agreement that Argos would follow RRPs if Littlewoods would. I think he was trying to give me the impression that if I went out at RRPs I would not be undercut by Argos. 20. Ian Thomson never said to me that he was going to pass on any of my opinions on the recommended retail prices to Argos or anyone else. I do not think that at the time I ever really addressed my mind to whether he intended to pass on this information to Argos. 21. I can therefore confirm that I certainly did not make any comments on Ian Thomson's recommended retail prices with the intention of my views being passed on to Argos. There was no agreement between myself and Ian Thomson that I would give him my views on the recommended retail prices if he would let me know what the views of Argos were. I never agreed with Ian Thomson that I would adopt, for the purposes of my proposal to the price setting meeting, his recommended retail prices."

"Retail pricing initiative has worked – maintaining Action Man and Games price points at suggested levels in Argos/ Index Catalogues and across the rest of our Distribution base. … Core Brands Rebate is a positive new element to drive Action Man distribution – Mothercare, Tesco, Argos and also to link into retail pricing."

" Overall Reaction SP was very positive about the new terms and the impact they will have on Argos business. It is crucial that we can maintain retail price stability across our key brands so that the plan can succeed. We plan to increase domestic margin from 6.3% to 13.8%."

"101. I had started to talk about expanding the range to Alan Burgess and he was interested but worried that it would attract too much attention and that it would appear that Index and Argos were talking to each other about retail prices. I indicated to Alan Burgess that we could look at a limited range of product that would cover certain items in most of our Brands. 102. Neil Wilson and I came up with a range of products from our other brands and then went to our respective accounts to talk about it. 103. The ranges covered 3 POKeMON products, 2 Micro Machines products, 2 Hand Held Electronic Games products, 1 Girls product, 4 Get Set products, 2 Design and Draw products, and 8 Tweenies products. 104. In choosing these ranges we had pulled together a list of products that had been subject to price promotion and included new ranges like POKeMON that would also suffer. New high profile product had been subject to severe price cutting in the past, which lead to complaints from the industry to us about the poor margins. 105. The purpose of going to Index and Argos was to encourage them that we could extend the ranges and that we had been successful in gaining commitment from either party during the last 2 catalogues. As the range was now extended above Core Games and Action Man this involved discussions with other Buyers at Index. 106. My discussions were directly with the Buyers responsible for the respective product ranges and I would normally spend a day in their offices in Liverpool. I would occasionally see Lesley Paisley if she came in to say hello and I remember that at some stage I told her about our plans to extend the range. She would say that it sounded good and would leave it to me to sort out. 107. Alan Burgess now looked after Boys Toys and Electronic Toys (I am not 100% sure that the Electronic Toys covered Hasbro products) and following on from the success of the 2 previous catalogues was keen to listen to my proposal. The product ranges I discussed with Alan Burgess were POKeMON and Micro Machines (possibly Hand Held Electronic Games, but not sure). Alan Burgess was concerned that if he agreed he would be increasing the risk of being undermined by Argos because he was not convinced that they would agree to any more lines being included. 108. I explained that the Argos account handler (Neil Wilson) was having similar discussions to gain agreement with Argos to accept the same proposal. I would let him know if the outcome would change. There was no doubt that Alan Burgess 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. 109. In my dealings with Index I treated Alan Burgess as the Senior Buyer. He did the biggest share of Hasbro business and had been Toy Buyer for some time at Index. He also indicated that he would discuss my proposal with the other Buyers in order to give them the background to our arrangements."

"Neil and I have spoken to our respective contacts at Argos and Index and put together a proposal regarding the maintenance of certain retails within our portfolio. This is a step in the right direction and it is fair to say that both Accounts are keen to improve margins but at the same time are taking a cautious approach in case either party reneges on a price agreement… While it is acknowledged that certain areas of the business will be price conscious we have attempted to increase some of the Spring Summer retails and get agreement on other products to go out at our recommended prices. It goes without saying that Action Man and Games prices will be maintained as per earlier agreements."

"Following on from various conversations regarding Price Points and opportunities to make more margin I am able to confirm a list of products and prices that Argos have committed to. Games and Action Man prices will continue to be adhered to and the retails are on your range sheets provided by me as part of the selection proposal process. Listed below are the products and prices. POKeMON Battle Figures 2 Pk 4.99 Pokeball Blaster 3 Pk 6.99 Interactive Pikachu 23.99 Micro Machines Transforming Team Truck 29.99 Rally Race Track 19.99 Hand Held Electronic Monopoly 29.99 Bop It 19.99 Girls Baby all Gone Get Set Chocolate Factory 19.99 Egyptian Mystery 29.99 Mastering Mosaics 19.99 Gardens Galore 19.99 (Not listed in Argos) Design & Draw Spirograph 14.99 Super Sticker Factory 17.99 Tweenies All Standard Plush 14.99 All Story Time Product 24.99 Cuddle and Squeeze Doodles 24.99 If you have any questions regarding the above please come back to me and I will do my best to answer them."

"117. My email to Lesley Paisley, Alan Burgess, Alan Cowley, Katherine Runciman and Phil Riley on 18 th May 2000 was sent to confirm that agreement had been reached with Argos (through Neil Wilson) and that they would price at the levels set out in the email. This was also to give them the confidence to go ahead and set the prices for these lines in the forthcoming Autumn Winter 2000 catalogue. The contents of my email should not have come as any surprise because as I have explained we had previously discussed the initiatives involved. 118. I copied David Bottomley, Mike Brighty and Mike McCulloch in order to confirm that we had reached a joint agreement with Argos and Index. My Coordinator Kerron Clare was copied in as well for an information point of view. 119. Before I sent out the email to Lesley and the Team at Index I discussed with Neil Wilson on how we should pass on the information to the rest of the Hasbro sales team. He agreed that I should construct an email and send it out to all concerned."

'Whilst it is acknowledged that certain areas of the business will be price conscious, we have attempted to increase some of the spring/summer retails and get agreement on other products to go out at out recommended prices. It goes without saying that Action Man and games price will be maintained as per our earlier agreements.'

"I didn't see this email as improper. I saw it as a list of retail prices that Hasbro was recommending to us. I don't remember if Ian Thomson asked me to delete it."

"26. I do recall receiving the email from Ian Thomson on 18 th May 2000. I remember being surprised to receive such an email. I was surprised that he even suggested that Argos was committed to these prices. It was inconceivable to me that Argos would have committed to Hasbro on retail prices on any product let alone all these products. Moreover, I don't understand how he could suggest that Argos would continue to observe RRPs on Action Man and games. I do not recall being telephoned by Ian Thomson and asked to delete it. I do not know why he would have asked me to delete it but not the other recipients. It is possible that this email is related to the intervention of Mike McCulloch in the meeting with Hasbro on 2 nd May, but I certainly made no connection between these two events at the time."

"SH: Do you remember this email and what does it mean to you: AB: I don't particularly remember it, and whether I believe it or not is another matter. To me it just seems like Hasbro giving us their RRPs. SH: Who put the markings on it? AB: I don't know. I think all those categories are mine, yes, yes they are. I may have asked my assistant to check if we were going with these prices. It looks like they've been checked as being the same as our prices. SH: Would you have been asked by Hasbro to commit to these prices? AB: No. They haven't asked me to commit to any prices and I wouldn't commit even if I had been asked. SH: Do you seek price information of your competitors from Hasbro? AB: No. We seek to find out what our competitors are doing. We get their listings but not information about what their prices will be. SH: So you get information on their listings. You wouldn't be surprised then if similar information about your products was passed to your competitors? AB: Yes, I would expect that."

"Argos have confirmed that Interactive Pikachu will be at 23.75 not 23.99 for A/W. Please advise Index accordingly."

"The purpose of this email was to inform Ian Thomson that Argos had indicated to me that they were now not prepared to out at the RRP. I said in the email "

"On the 25 th of May 2000 I received an email marked urgent from Neil Wilson asking me to advise Index that Argos were going to sell Interactive Pikachu at £23.75 not £23.99 as they had previously agreed. Interactive Pikachu was a toy in the POKeMON range. I phoned Alan Burgess to make him aware of the issue and that he could change his pricing if he wanted to. He thanked me for passing on the information but did not commit on how he was going to act, he was going to think about it. The Autumn/Winter catalogue came out and my recollection was that the pricing was adhered to in both catalogues."

"Argos had priced the Interactive Pikachu at £23.99 in its Spring/Summer 2000 catalogue, which was the RRP. Index's Spring/Summer 2000 price for the product was £23.75. For the Autumn/Winter 2000 catalogue Argos had decided to react to Index's lower price. I do not remember a conversation specifically, but I believe I was asked by Neil Wilson at Hasbro to hold firm on the £23.99 RRP. I said that I would have to react to the lower pricing and Argos went down to £23.75 to match the Index price. I would not have even said to Neil Wilson that Argos was going to react to Index's lower pricing, had I known that the information was going to be passed to another retailer. Argos did not discuss its prices with suppliers and I had no idea that Hasbro was passing on prices to Index. I find it quite staggering that this systematic reporting went on within Hasbro."

"Henry, we can't reduce the price to everyone else when Argos and Index are in print at £14.99. They can't change their prices as already discussed as this will compromise their business. 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. If you need to discuss further then I suggest we arrange a meeting to discuss and we will need to include Charles. Regards, Ian"

"Ian, please check urgently with Charles as I believe Argos have been able to re price the deadline was yesterday. I would say in future to brand that we require a great deal better communication of price decreases as 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. Please all of you get together. Regards David B"

"David, I have asked Alan Cowley to change the price and the reaction has been explosive to say the least, especially after my last telephone call 2 weeks ago to make sure that he maintained £14.99 when he threw the phone down on me in another fit of rage. I / We have been accused of being nothing but a bunch of F?????g incompetents and totally unprofessional. First we set the price at £16.99 then we set the price at £14.99 and now we are at £12.99. Hardly surprising that he reacted badly and has said that he will not list a single Tweenies or Preschool product in A/W next year. In future can we make sure that this does not happen again. I have an excellent relationship with the Index team, except Alan Cowley (and I have being trying to build one with him) and I don't need him to shout about Hasbro incompetence to the rest of his colleagues. Regards, Ian"

"Ian, Reference our conversation pre Christmas regarding Hasbro's late decision to reduce the price of the Tweenies soft toys featured in the Index SS01 catalogue. Fortunately for both of us we were in fact able to amend the selling prices at the last minute due to an unexpected delay in catalogue production. This however literally meant 'holding up the presses', entailing an additional cost of £4000 which will be debited to your account shortly I will not elaborate on the consequences if we had not been able to do so, resulting in our being undercut by Argos and other High St outlets, especially when you had earlier been so insistent that we went out at the same price! Regards, Alan Cowley"

"138. There was an incident involving a price reduction with Tweenies that had an effect on Index. Tweenies was being looked after by Henry Foulds (Preschool Marketing Manger at Hasbro) at that time and he sent an email in late November 2000 telling us that he was reducing the Retail Price point of the Standard Tweenies Plush items to £12.99. This followed previous intentions to move the price point up to £16.99, which was later changed to £14.99. 139. My response was that it was too late to do this as Index and Argos (I assumed) would have probably finalised their prices for Spring/Summer 2001 and it would be too late to change them. I was also very aware that Alan Cowley would be extremely upset if he was in print at £14.99 when the other major accounts like Woolworth's and Toys "

"A. We had gone out to speak to Index, and I had spoken to Alan Cowley about positioning Tweenies at a retail price point of £14.99. Following on from that meeting, this is when the prices started to change. I knew that going back to Index to talk to Alan about this would not have been a pleasant discussion and at the same time, because we knew that the prices had been set, to go back again and start to rearrange things, it was going to be very difficult… … Q. …I think this is one instance when you insisted to Alan Cowley or used some such words and he threw the phone down on you? A. There may have been two instances with Alan Cowley regarding prices, but with Alan, because I was not sure he would do it, I said "

"AC- Shortly before we went to print on the Spring/Summer catalogue Hasbro informed me that they had reduced the price on this product. I was concerned that if we were not able to reduce the price in our catalogue that we wouldn't be competitive on this line with Argos TRU and other retailers. Hasbro lowered the RRP from £14.99 to £12.99. The margin to us was the same as Hasbro had lowered the list price by the same amount. This would give us the same margin as before and I felt that this was a realistic selling price for us. SH- Was Hasbro insisting you went out at those prices? AC- No. Hasbro told me that this would be the probable price on the high street. They never insisted, insisted is the wrong word. They wouldn't be able to force us to go at that price. They suggested this price, not insisted. The meaning of the word "insistent" in PJS 020 is that they had been convinced that £14.99 would have been the probable retail price on the high street. SH- So what's the position with recommended prices? AC- Hasbro isn't one of my bigger accounts. I just do pre-school with Hasbro. Most manufacturers recommend prices, we look at these, and sometimes we'll go out at that price. The pre-school market is competitive. Suppliers recommend prices but we usually take it with a pinch of salt and think others will go below it so we often go below it. SH- Has Hasbro ever asked you what prices you will retail at? AC- I've not been asked what prices we will go out at. I'd say it was none of their business. We'll go out at a price which we think the market can bear."

"I do remember one further occasion when Ian Thomson claimed to know what the Argos selling price would be. This was in December 2000 when Hasbro suddenly, and belatedly as far as the production of the catalogues was concerned, reduced their cost prices so that the suggested selling price fell from £14.99 to £12.99 on Tweenies. That in itself presented no problem for retailers, and was even a potential benefit. However, I was extremely angry because I initially thought that it was too late to change the prices in our Spring/Summer 2001 catalogue. If Hasbro had quoted this price to me earlier then I would have decided to follow the RRP. However, I was now faced with a situation whereby on a well known branded product, because of what I thought was poor management by Hasbro, Littlewoods risked being £2.00 above the RRP. Ian Thomson told me that Argos would have time to reduce their retail price and suggested that we did the same. Given the new cost price I would now be undercut by Argos and by other high street retailers if I remained at £14.99. In the event, at the last moment I managed to change the catalogue price to £12.99. I charged Hasbro £4,000 for the trouble of making this very late change. I attach at Annex "

"Charles I had discussed with Sharon Clark at GUS re Retail Prices as I wanted to offer suggestions for RRP's in order to keep GUS and Littlewoods on a level playing field. I explained that in the past we have tried to ensure that Littlewoods and GUS were going out at the right price. She agreed this is something she was keen to do this year, ensuring prices are as close as possible to the high street. The discussion about prices is happening W/C26/02/01. The strange part of our conversation happened is when she stated she would not be telling me her retails for the coming catalogue, she stated she has never ever done this before, thus contradicting Ian Thomsons process he used to go through each year. I am going to pick up with her on my return and attempt to obtain pricing details and persuade her to price in line with Littlewoods. On your return could you please find out from Andrew/Argos if any guidelines have been set by Argos on pricing for GUS. If we cannot ensure level pricing between GUS and Littlewoods for A/W I would suggest there will be a cause of concern on the Argos/Index agreement for A/W 2001. Can we please discuss on my return… David CC: Ian Thomson"

"147. David Snow (GUS Account Manger) told me that GUS was going to be more competitive with pricing for A/W 2001. I asked David to try and talk to Sharon Clarke at GUS Home Shopping and establish what price they were intending to go out at. I was conscious that Littlewoods Home Shopping were putting me under pressure to improve their margins but at the same time there were going to try and be only 20% above High Street retails. I wanted David to try and get GUS to price product near or around Littlewoods which was something that they had done in the past. 148. Pricing in Home Shopping has never been a major issue as Grattan and Empire tended to price between 30 to 35% above the High Street and GUS and Littlewoods between 25 to 30% above the High Street. 149. Discussion had been generalised and when looking at pricing we would talk along the lines of being near or around other competitors. If for example GUS had indicated that they wanted to sell an Action Man product for £35 I would be asked if this was in line with everyone else. I would look at my chart and see that the price point on that particular product would be between £35 and £40 and tell them that they were in the ball park but if they wanted to make more margin could increase up to £40. It is against this background that David Snow sent his E-Mail to Charles Cooper and I was not copied in on it. David talked to me about the situation. 150. Sharon Clarke was an assistant Buyer at GUS; it must be noted that the GUS catalogue is a Mail Order catalogue and not a high street catalogue like Argos and Index. (GUS had been purchased by Argos.) 151. I had in the past discussed the proposed catalogue prices as mentioned above and expressed my disbelief that she had denied this to David Snow. As far as I am aware the situation never resolved itself as David Snow did not believe he could go back and talk to Sharon again. I told him just to forget it and if anything happened we would tackle any future problems if they arose. The issue never came up again after that."

"Charles please follow this up urgently, as we can not allow a £14.99 price on the dinghy. Thanks DB CC: Rachel House"

"Charles I had a call today from Jacqui Wray at Argos stating the following items are on sale in the trade at prices lower than recommended retail prices. They are as follows Walmart Jnr Monopoly £9.88 Pictionary £17.72 Payday £13.44 Twister £6.81 Asda Kart Extreme £19.98 Motorbike Extreme £14.47 I stated that Hasbro cannot control prices due to it being illegal. Regards David"

"44. I have been shown a copy of an email of 22 May 2001 from David Snow to Charles Cooper reporting on a telephone conversation that David had had with Jacqui Wray of Argos. At that time, Charles Cooper was responsible for the Argos account. Jacqui Wray had phoned David to complain that various items were on sale at Asda and Walmart at prices lower than the Hasbro RRPs. 45. I have been shown Jacqui Wray's recollection of this e-mail in her witness statement. She suggests in paragraph 9 of her statement that she called David Snow because she wanted to find out whether Asda/Walmart "had received a very low cost price from Hasbro", i.e. that Argos was being treated less favourably as compared with other retailers in relation to cost price. She states (at paragraph 10) that she did not and would never have asked David Snow to force other retailers to put their retail prices up. 46. I have to say I am very surprised by what she says and disagree with her explanation. Jacqui Wray rang Hasbro on a number of occasions complaining about retail prices. She did not call about cost prices. She knew that, as Hasbro's largest customer, Argos were getting terms as good as those given to the rest of the industry by Hasbro. She would want to know why other retailers were pricing differently from Argos. The reason she would contact Hasbro about it was because she would expect us to do something about it, i.e. persuade those other retailers to price at Hasbro's RRP."

"It is the OFT's view that Hasbro's pricing initiative led directly to an overall infringing agreement and/or concerted practice between Hasbro, Argos and Littlewoods…" (paragraph 95) "

"The agreement was that the prices would be stuck to as per our recommended retail prices…" "