Disney Humiliates Mattel

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Disney (DIS) will begin to inspect toys based on characters that it licenses to large companies like Mattel (MAT). Disney does not make the toys. It does not sell them. But, to protect its brand, it does not want other manufacturers to sell unsafe products that carry its name via licensing deals.

“It sends the message that we are looking over their shoulders,” said Andy Mooney, the chairman of Disney’s consumer products division writes The New York Times.

Given the large numbers of factories that make these toys and the tens of thousands of outlets that carry the products, the Disney move may simply be symbolic and a good PR ploy. But, it send a message to toy companies, especially Mattel, that it no longer trusts them and that they present a danger to Disney’s image.

It adds to the humiliation of Mattel which has clearly done a very poor job of policing its consumers. The company has also been accused of reporting safety products to the federal government. Mattel’s CEO is being hauled before Congress and will likely be pilloried by representatives who will see the hearings as a stage to demonstrate how concerned they are about child safety.

Mattel’s shares are now at $21, down from $29 earlier this year. Watch them fall farther as its critics pile on. The company’s holiday sales will be a train wreck.

Douglas A. McIntyre