Hasbro makes Tweenies toys

Retail giants Argos and Littlewoods have been fined a record �22.5m by the UK's trading watchdog for fixing the price of toys and games.

Argos, Littlewoods, with manufacturer Hasbro, entered into agreements to fix the prices of Hasbro toys and games between 1999 and May 2001, breaching competition rules, the Office of Fair Trading said.

Argos was fined �17.3m ($27.5m) reflecting its high turnover, and Littlewoods was fined �5.4m.

Hasbro, however, was granted full leniency because it provided crucial evidence that initiated the investigation and had its potential penalty of �15.6m waived, the OFT said.

Both Argos and Littlewoods rejected the ruling and said they would appeal.

Decision rejected

John Vickers, director general of Fair Trading, said: "This case shows how leniency arrangements help uncover price-fixing agreements, which distort competition and keep prices artificially high.

"Price fixing is a serious breach of the Competition Act as the fines imposed in this case reflect."

But Argos said the OFT's ruling was "wholly unfounded and unjustified."

In a statement, Milton Keynes-based Argos accused the OFT of conducting a one-sided investigation and announced it was launching an immediate legal challenge against the decision.

Kate Swann, managing director of Argos, said: "We completely refute any suggestion that Argos has been involved in price fixing or anti-competitive behaviour."

Littlewoods, with headquarter in Liverpool, accused the OFT of failing to produce a convincing case against the company.

"Littlewoods' own investigation has clearly established that its employees have not been involved in any infringement of competition law," the company said in a statement.

Record fine

The financial penalties on Argos and Littlewoods are the largest ever fines imposed under the act, but the fines could have been more severe.

The OFT can penalise firms up to 10% of their UK turnover for a maximum of three years.

Hasbro's cooperation in this inquiry appears to have led to the trading watchdog waiving the latest fine.

But in November the manufacturer itself was fined �4.95m for entering into price-fixing agreements with 10 distributors.

Collision course

Hasbro said the OFT's decision was an acknowledgement of its "responsible approach".

It said the price fixing had involved a small number of employees working in sales and marketing two years ago, and they had subsequently left the company.

But Argos retaliated with a statement accusing the OFT of relying on "unreliable and contradictory testimonies".