Games masters

Hasbro’s run-in with the OFT proves that life is not all fun and games for the company’s in-house legal team and its advisers. Husnara Begum reports

Upon entering Hasbro Europe’s west London HQ, I pass Mr Potato Head, Action Man and a colourful My Little Pony display. The company’s legal director Delli Mireskandari says that Hasbro – also the maker of classic games such as Monopoly, Twister and Cluedo – is a fun place to work. Her recent assignments have included a promotional project with pop group Liberty X. Fun indeed.

But it is not all child’s play for Mireskandari and Hasbro’s senior vice-president and legal counsel Nigel Hutton. A typical day for the duo can throw up all manner of legal issues, ranging from employment issues to acquisitions.

Recently, Hutton and Mireskandari steered Hasbro through the high-profile price-fixing investigation by the Office of Fair Trading (OFT), which started with a dawn raid at the company’s headquarters in May 2001. The OFT accused retailers Littlewoods and Argos of entering into anticompetitive agreements with Hasbro between 1999 and May 2001. Hasbro, the UK’s largest toy company, was granted 100 per cent leniency on its £15.5m fine because it provided crucial evidence that initiated the investigation and cooperated fully with the OFT. In November 2002, however, it was fined £4.95m for entering into price-fixing agreements with 10 distributors that prevented them from selling Hasbro toys below list price. In February 2003 the OFT ruled against Argos and Littlewoods, imposing record fines on the retailers. Argos was fined £17.28m and Littlewoods £5.37m – the biggest fines imposed since the OFT was given greater powers under the Competition Act 1998. Both retailers are challenging the OFT’s decision.

“One of the lessons we learned from the OFT investigation was that despite having a competition law compliance policy that worked very well, we as a department still need to ensure that people are constantly reminded of it,” says Hutton. “As a result of the OFT investigation we’ve done a lot more to reinforce our competition law policy by organising more training.”

Although Hutton has some competition law experience, the significance of the investigation meant that Hasbro sought assistance externally, specifically from Denton Wilde Sapte partners Polly Weitzman and Jonathan Tatten. Hutton says that he was pleased with the quality of Denton’s advice. However, as the OFT carried out the investigation under the new powers it gained under the Comp-etition Act 1998, both Dentons and Hasbro’s in-house legal team were “feeling around in the dark”, explains Hutton. “Given that it was an unknown quantity at the time, I think together with Dentons we manoeuvred our way around the new legislation very well,” he adds.

Hutton heads a six-strong legal team, with four lawyers based in London and one each in France and Switzerland. Together, the team is responsible for advising Hasbro on legal issues arising in Europe, Latin America and Asia Pacific. The company has a separate legal function based in the US, covering North America.

When Hutton joined Hasbro 10 years ago the company did not have an international legal function and only had a contract lawyer based in London. Since then he has expanded the team to ensure that it can handle the main categories of work the company generates.

The team’s remit covers most areas, including intellectual property (IP) and licensing. Hutton and Mireskandari handle everything else, including employment matters, product liability, product recall, corporate and commercial work. But major litigation and transactional work is typically outsourced.

Commenting on the size of the team, Hutton says: “It depends on how quickly the company grows in the future – and I think there’s still room for it to grow. But like most companies at the moment, cost control is a big issue. Consequently, I’m not planning on growing the team at the moment and if we need more resource we will use outside resources.”

In addition to Dentons, Hasbro has relationships with Freshfields and Wragge & Co, which advise the company on acquisitions and disposals, and IP litigation respectively. Where possible, Hutton advocates instructing provincial firms in order to control external legal expenditure, hence the relationship with Wragges. “I’m trying to buy cost-effective legal services. So one of the concepts I’m looking at is to use provincial law firms which have a lower cost base,” says Hutton. “I almost take it for granted that the big provincial firms can provide the same quality of advice, but at a lower charge-out rate.”

Mireskandari supports Hutton’s phil-osophy, although she argues that provincial firms are lacking in one department. “One of the problems I’ve noticed is that we don’t get as many legal updates or seminars from them, which is important for an in-house department,” she says. “I wouldn’t necessarily want to travel to Birmingham or Watford for a seminar,” she adds.

Hasbro also uses niche employment firm Fox Williams for employment law and human resources advice. Recently, the company formed a relationship with Manches in a move to slash its external legal spend. “We’re experimenting with a couple of local provincial firms so we’ll still have to wait to see if it works,” says Mireskandari.

US-based Hasbro Inc was founded in 1923 by two brothers, Henry and Helal Hassenfeld. The company, originally named Hassenfeld Brothers, first sold textile remnants, but soon moved into school supplies such as pencils. Today, Hasbro’s annual worldwide turnover exceeds $3bn (£1.79bn).

Historically, Hasbro has grown through acquisition and has relied heavily on IP from film distributors, selling toys off the back of blockbusters such as Star Wars. But according to Hutton, the company’s new strategy is to concentrate on core brands. “The idea is to put much more research and development and marketing efforts behind our own core brands. The break-even point is lower on these products because we’re not paying licence fees (to the film distributors),” explains Hutton.

In the future, Hutton also expects to spend more time dealing with issues arising out of Sarbanes-Oxley, which imposes additional audit-compliance obligations on US companies and a higher duty of care on in-house counsel. “In-house counsel now fulfil more of a watchdog role,” says Hutton. Confirmation that life at Hasbro might be fun, but it’s not just one long party.

Nigel Hutton
Senior vice-president and legal counsel
Hasbro Europe

Statistics
Organisation Hasbro Europe
Sector Manufacturing (games and toys)
Employees 7,200 worldwide
Legal capability Four lawyers based in the UK, one in France and one in Switzerland
Senior vice-president and legal counsel Nigel Hutton
Legal director Delli Mireskandari
Turnover $3bn (£1.79bn)
Main law firms Denton Wilde Sapte, Fox Williams, Freshfields Bruckhaus Deringer, Manches and Wragge & Co