Key takeaways
Dominant firms face limits on market tactics
Using commercial pressure to block rivals can breach competition law.
Vertical agreements may not always be exempt
Even informal deals can be unlawful if market share exceeds thresholds.
IP threats must be accurate and justified
Vague or exaggerated claims can lead to legal and reputational risks.
Introduction
The High Court’s decision in Cabo Concepts Ltd & Anor -v- MGA Entertainment (UK) Ltd & Anor [2025] EWHC 1451 (Ch) marks a significant development in UK competition and intellectual property law. The case, heard before Mrs Justice Bacon, concerned allegations that MGA, the maker of the globally successful LOL Surprise! dolls, abused its dominant position to stifle the launch of a rival product, Worldeez, developed by start-up Cabo Concepts.
The ruling underscores the growing scrutiny of aggressive market tactics in fast-moving retail sectors—particularly those driven by trends, collectibles, and rapid product cycles.
Key facts and legal issues
Cabo launched Worldeez in 2017, a collectible toy with a globe-shaped capsule and surprise unboxing experience. MGA, alleging that Worldeez was a “knock-off” of LOL Surprise! (which has a similar capsule and unboxing experience) threatened major UK toy retailers with withdrawal of LOL Surprise! stock if they supported Worldeez.
Cabo claimed this conduct:
Constituted an abuse of dominance under Chapter II CA 1998 and Article 102 TFEU;
Involved unlawful vertical agreements under Chapter I CA 1998 and Article 101 TFEU;
Included unjustified threats of patent infringement under s. 70 of the Patents Act 1977.
A textbook example of Abuse of Dominance
The court found that MGA was dominant in the UK market for surprise collectible toys targeted at girls aged 6–9, with a sophisticated unwrapping experience. MGA’s market share exceeded 50% during the relevant period, and its LOL Surprise! line was deemed a “must-stock” product for retailers. Mrs Justice Bacon held that MGA’s threats to withdraw supply from retailers who stocked Worldeez, combined with vague and aggressive IP threats, constituted a clear abuse of dominance. The conduct was exclusionary, coercive, and aimed at eliminating a promising competitor.
Vertical Agreements and the VBER
Cabo also alleged that MGA entered into unlawful agreements with retailers (e.g., The Entertainer, Smyths, TRU) not to stock Worldeez. While the court agreed that such agreements were made and had an anti-competitive object, it held that they were exempt under the Vertical Agreements Block Exemption Regulation (VABEO), as MGA’s market share in the preceding year (2016) was below 30%. Therefore, VABEO can shield vertical agreements from liability, even where their object is exclusionary. However, businesses should be cautious—if market share thresholds are exceeded or the agreement includes hardcore restrictions, the exemption may not apply.
IP Strategy
MGA’s communications with retailers included repeated references to a “patent pending” and threats of legal action. However, no patent had been granted at the time, and the court found these to be unjustified threats under s. 70 of the Patents Act 1977. This aspect of the judgment reinforces the importance of precision and restraint in enforcing IP rights. Vague or exaggerated threats—especially when used to deter commercial relationships—can backfire legally and reputationally
Conclusion
Despite finding liability, the court ultimately rejected Cabo’s claim for damages. It held that Cabo failed to prove, on the balance of probabilities, that it would have traded profitably but for MGA’s conduct. The business lacked operational control, capital, and a viable cost structure.
Given the market tactics that are involved in fast-moving retail sectors—particularly those driven by trends, collectibles, and rapid product cycles, an understanding of the risks for dominant firms using commercial leverage to exclude rivals, the limits of vertical agreement exemptions, and the dangers of aggressive IP enforcement is essential. Even informal threats or pressure can constitute abuse if they distort market access for rivals. The case is also a reminder that success in litigation requires not just proof of wrongdoing, as courts will, where there are allegations of Competition Law infringements, scrutinise business models, financial projections, and market viability when assessing causation and damages.
For further information for parties affected by these issues, please contact our experienced retail and leisure team.
