Fight between Estrela and Hasbro predicts destruction of Monopoly and other toys

In the Game of Life, a classic board game, contestants use a roulette wheel and advance with their respective pegs through different stages of adult life, such as first job, college, marriage and children, earning money with each round. The game ends when the last player goes bankrupt or becomes a millionaire.

Brazilian Estrela and American Hasbro are in court in a dispute very similar to the board game. Depending on the next bids already foreseen in the current round, the national manufacturer is without the rights to commercialize a series of products, delivers to the foreign competitor the local market it has developed, pays a million dollar fine and loses what it has already manufactured. Toys will be destroyed.

At the center of the divergence are products such as the aforementioned Jogo da Vida and others that made – and still make – the joy of millions of Brazilians in childhood, such as Banco Imobiliário, Cara a Cara, Comandos em Ação, Detetive and Genius. Currently, they are produced by Estrela, but, by court order, must be taken over in Brazil by Hasbro.

Estrela has until this Tuesday (16) to comply with the decision of the 1st Chamber of Private Law of the TJ-SP (São Paulo Court of Justice) and return the industrial property records of 18 Hasbro toys. The Brazilian manufacturer will also have to pay BRL 64 million in royalties, in a collection that has dragged on since 2007, according to the ruling to which the report had access.

The TJ-SP ruling corroborates a 2019 decision, by the 36th Civil Court of the Central Court of São Paulo, in favor of Hasbro.

According to the court decision, everything that has been produced since the publication of the judgment, on November 3, until now, must be collected and destroyed – a treatment similar to that given to pirated products. Therefore, in theory, they cannot be donated either.

The court’s decision also affects products developed by the Brazilian. The Super Massa modeling clay, created by Estrela in the 1940s, cannot be sold in packaging similar to Hasbro’s Play-Doh, launched in the 1950s.

The two companies have been partners since the 1970s, when Hasbro closed an agreement with Estrela for the Brazilian company to launch its products in Brazil, with adaptations to the local market. Thus, The Game of Life became Game of Life, Simon became Genius, GI Joe was renamed, first Falcon and then Commandos in Action. The same happened with several other adapted products.

In 2007, Estrela reportedly stopped paying royalties to Hasbro. The American, in turn, decided to set foot in Brazil at the same time and brought in a commercial representation.

Today, Hasbro faces an unusual situation, when competing with itself in the country: its Monoply, created in 1935, for example, disputes space with Banco Imobiliário, launched by Estrela in Brazil in 1944. brands that, according to the court, are yours, while Estrela claims to be hers, because they were adapted and present differences in relation to the original product.

Sought, the companies declined to comment. Estrela only stated, through its press office, that it will appeal. However, according to people heard by the report, there is an interpretation that she would need to comply with the sentence, even if she decides to take the case to higher courts.

Founded in 1923, Hasbro is among the top three toy makers in the world, along with Lego and Mattel. It operates in 35 countries and in 2020 had revenues of US$ 5.47 billion (R$ 29.6 billion). It owns the right to market names that became successful movies and cartoons, such as Transformers, Peppa Pig, Power Rangers, My Little Pony and PJ Masks.

In all, it owns about 1.5 thousand brands. In 1984, Hasbro bought the Milton Bradley Company, created by the American tycoon of the same name, who launched some of the most famous board games in the world, such as The Game of Life.

Estrela, founded in 1937, was for decades the largest toy factory in Brazil. It began to face problems in the 1990s, when imported products, coming especially from China, began to flood the national market at prices much lower than those charged by the national company. The company, which had shares on the stock exchange, went public in 2015. Its annual revenue is around R$ 140 million. Last year, it had a loss of R$ 16 million.

Under the agreement signed with Hasbro, Estrela should register the brands it created for the products with the INPI (National Institute of Industrial Property) and, at the end of the contract, transfer the rights to the partner. The last contract signed between them is for 2003, being extended based on amendments. In 2007, Estrela would have stopped paying royalties for the use of the brands, but continued to produce and sell the products.

In the TJ-SP ruling, Hasbro’s defense, made by Lee, Brock, Camargo Advogados, says that Estrela was in bad faith, since the company would have transferred the brands to Brinquemolde, of which it is the main shareholder. . It would be a way to defraud the performance of the contract and prevent Hasbro from receiving royalties.

Estrela, in turn, defends that it owns the brands it developed and that the contract was unilaterally terminated by Hasbro. The Brazilian’s defense is made by Sergio Bermudes Advogados and Wald, Antunes, Vita and Blattner Advogados.

The sentence does not specify what the toys Estrela has already sold to retail look like—and there is a point still pending. Lawyers heard by sheet consider that, depending on the progress of the dispute, Hasbro could also have the right to collect these products, leaving the merchant the prerogative of asking Estrela for compensation.

If TJ-SP’s decision to collect and destroy the toys is in fact extended to retailers, it will take the sector by surprise as it prepares for two of the best selling moments, Black Friday (on the 26th) and Christmas .

“These are two great companies, with wonderful products, I hope the issue is resolved in the best possible way,” he told sheet Ondamar Ferreira, general manager of Armarinhos Fernando, one of the largest toy retailers in the city of São Paulo. The executive stated that he was not aware of the disagreement between the two suppliers.

According to Ferreira, imported products represent around 70% of the volume of toys sold by Armarinhos Fernando. “The variety of imported products is much greater than that of the national ones”, says the executive, counting that, with the rise of the dollar, there will be a readjustment of up to 9% on the price of toys.

“We work with a tight margin and we are going to squeeze it even more this Christmas”, he says, who expects sales up to 6% higher compared to 2019, already discounted for inflation. Among the imported toys with the greatest demand are remote-controlled carts and darts. “The best-selling dolls, on the other hand, are mostly made in Brazil”, he says.

Synésio Batista da Costa, president of Abrinq (Brazilian Association of Toy Manufacturers), declined to comment on the case involving Hasbro and Estrela. Regarding expectations for the end of 2021, the official says that the market share of national toys should reach 75% this year, against 50% in 2019, before the pandemic.

“The national industry was favored, given the import problems and the rise of the dollar,” he stated. Costa recognizes, however, that domestic manufacturers were also harmed by the increase in the price of resins used as raw material for toys. The invoicing of the toy sector, he says, should advance 11% this year over 2020 and reach R$ 8.82 billion.