Amazon and Toys "R" Us Ordered to Play Nicely Together

A state judge on Thursday ordered Toys "R" Us and Amazon.com to discuss how the online retailer can satisfy complaints by Toys "R" Us that competing products are being posted on Amazon's Web site. The judge also said she would fine Amazon $1,000 for each product to which Toys "R" Us stakes exclusive rights that Amazon fails to remove. The court action came a day after Toys "R" Us announced it is considering selling its global toy business to reduce operating and capital expenses.

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A state judge on Thursday ordered Toys “R” Us and Amazon.com to discuss how the online retailer can satisfy complaints by Toys “R” Us that competing products are being posted on Amazon’s Web site. Superior Court Judge Margaret M. McVeigh also said she would fine Amazon $1,000 for each product to which Toys “R” Us stakes exclusive rights that Amazon fails to remove. The action came after Toys “R” Us claimed that Amazon breached an order made last month by McVeigh. The judge allowed the Web site operator to launch a service that opens its Web site to an unlimited number of sellers, but she barred Amazon from letting others sell toys, games or baby products for which Toys “R” Us seeks exclusivity. Toys “R” Us claimed this week that Amazon violated that order, and one from June, citing how its hired computer consultant was able to list a half-dozen items that were exclusive to Toys “R” Us by posting them in the sporting goods category. McVeigh, however, declined to impose sanctions against Amazon. “I am not satisfied this was a blatant breach of my order,” she told the seven lawyers arrayed before her. But she did order Amazon to pay legal fees for the Toys “R” Us motion, asserting that the motion “raised good issues,” including whether Amazon’s technology will be ready to prevent competing products from being posted when the toys, games and baby products categories begin operating next month. “Your geniuses need to address that,” McVeigh said. She also warned Toys “R” Us that she would not issue sanctions if only a couple items slipped through. The court action came a day after Toys “R” Us announced it is considering selling its global toy business to reduce operating and capital expenses. The company also is considering a spinoff of its fast-growing Babies “R” Us division. Meanwhile, the lawsuit that sparked the series of court orders continues. Wayne, N.J.-based Toys “R” Us sued on May 21, claiming that Amazon violated their contract. The nation’s No. 2 toy seller contends it has paid $200 million over four years to be the exclusive provider of toys, games and baby products on the Amazon site. Seattle, Wash.-based Amazon countersued on June 25, seeking to dissolve their partnership, citing a “chronic failure” by Toys “R” Us to adhere to their contract, including by keeping items in stock. McVeigh said last month that Toys “R” Us is likely to prevail. She also has noted that both companies face risks: Toys “R” Us stopped selling through its own Web site when it signed on with Amazon in August 2000, and Amazon wants to have its “graphical user interface” technology in place for the critical holiday season. Both Amazon.com and Toys “R” Us seek monetary damages and a judgment that the other is violating the agreement. Amazon is suggesting it should be awarded at least $750 million as compensation for lost shipping revenue and other costs. In afternoon trading Thursday, Toys “R” Us shares were down 76 cents, or 4.7 percent, to $15.39 on the New York Stock Exchange, while Amazon.com shares were down 13 cents, or 0.36 percent, to $36.43. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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