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Mattel Acts Like Bratz


Real innovation, not whiny infighting, will save American business.

After the closing bell, Mattel (MAT) was awarded $100 million dollars in its lawsuit against MGA Entertainment. Mattel had been seeking as much as $1.8 billion in damages against MGA, maker of the Bratz doll line; Mattel argued that Bratz had been developed by Carter Bryant while he was still an employee at Mattel (Mattel dropped its lawsuit against Bryant last year).

The company and its CEO, Isaac Larian, have to cough up $90 million; the company's Hong Kong branch has to pay $10 million. However, MGA doesn't have to pay punitive damages, and the judge said the company didn't act willfully when it hired Bryant. The news is a blow for Mattel, of course - but it underscores something much more significant.

I write about the deteriorating competitive nature of American businesses all the time. Of course, we're seeing it played out in all its ugly glory in the auto industry, which may get a $50 billion loan to make it to the next line of vehicles. We're also seeing it play out at Boeing (BA), which is whining like a baby after botching that $40 billion tanker deal. Other businesses are asking for do-overs and special breaks as well; many will get them.

Mattel makes for a great case study in corporate compliancy and hubris. Designer Carter Bryant toils at the company and conceives of a line of dolls radically different from anything the company had ever offered the public. These ethnic dolls, with their hip clothes and urban edge, didn't fly at the house of Barbie.

Carter Bryant hooks up with Isaac Larian in 2000. The latter takes Carter's designs home, where his daughter promptly falls in love with them.

At the same time, Mattel was struggling with its recent acquisition of The Learning Company, purchased for $3.5 billion dollars. I recently interviewed the founder of The Learning Company, and he acknowledged the fortuitous timing of the company's sale, which was a disaster from day one.

By 2000, Mattel was losing $1.5 million a day on The Learning Company, and decided that its CEO, Jill Barad, had to go. She was jettisoned in February 2000 with a going-away package of $50 million dollars (heck, adjusted for inflation, that almost covers the MGA penalty - which will most likely be lowered on appeal).
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