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Toys Businesses

Amazon Seeks Divorce, $750M from Toys R Us 121

Posted by michael from the geoffrey-has-a-dark-side dept.
theodp writes "Responding to a Toys R Us lawsuit accusing Amazon of breaching exclusivity provisions of its $50M-a- year tenancy agreement, Amazon has countersued the giant toy retailer, asking the Court to terminate its Toysrus.com partnership and award it damages of more than $750M, arguing that Toysrus.com's failure to effectively choose top toys and baby products and to keep products in stock leaves Amazon with no other choice but to enable more sellers to sell these products."
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Amazon Seeks Divorce, $750M from Toys R Us More

Amazon Seeks Divorce, $750M from Toys R Us

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  • Why can't they learn to play nice and share? (Score:5, Funny)

    by Anonymous Coward on Saturday June 26, 2004 @05:43PM (#9539310)
    Why can't they learn to play nice and share?

  • divorce.. (Score:5, Insightful)

    by manavendra ( 688020 ) on Saturday June 26, 2004 @05:44PM (#9539318) Homepage Journal
    plenty of people across the world will tell you, the only people to benefit from divorce are the lawyers..but i guess, if the bedfellows can't see each other eye to eye, then there is no choice but to go different ways

    how much does amazon claim it lost because of this partnership though? $750 M sounds a bit too high to me, even for this "exclusivity" partnership..

    • Re:divorce.. (Score:5, Insightful)

      by Pieroxy ( 222434 ) on Saturday June 26, 2004 @06:15PM (#9539436) Homepage
      The issue is that Amazon broke the contract first. I guess Amazon is teh s0x0r in that case...

      The fact that a party doesn't respect his piece of the contract is no reason to not respect yours. It is a reason to break the contract, but until it's broken, you got to respect it...

      Looks like Amazon will have a hard time proving that TRU didn't respect his piece...
      • Yea, Amazon's position is rediculously lame. Toys R Us didn't pick good toys? Yea, they been around so very long and they can't pick good toys to Amazon's standards.

        amazon's about to get waxed.

  • No fun being on a sinking ship (Score:5, Informative)

    by erick99 ( 743982 ) * <homerun@gmail.com> on Saturday June 26, 2004 @05:47PM (#9539332)
    Toys R Us is a company that is failing against it's competition, particularly WalMart, and Amazon knows it. Amazon doesn't want to be on a sinking ship so they break/bend the rules and then, when Toys R Us crys "foul," Amazon says, well, uh, "they suck at choosing toys and we have lawyers too...so there." Stupidity versus greed. Good old fashioned contest with no real winners.

    Happy Trails!

    Erick

    • Re:No fun being on a sinking ship (Score:5, Insightful)

      by AEton ( 654737 ) on Saturday June 26, 2004 @05:53PM (#9539348)
      There is a winner: the consumer. The breakup of such an anticompetitive relationship is an example of the "invisible hand" of the marketplace restoring free-market capitalism to where it belongs. The end result is that prices and amount of items sold both move toward an equilibrium established by what people are willing to pay and what suppliers and stores are willing to charge.

      That's the big picture. It's nice to see a market that isn't so dominated by monopolies (yet: Wal-Mart is scary) acting in jerky but understandable ways.
      • Ah, but see, their new exclusive toy seller may be Wal-mart.

      • Re:No fun being on a sinking ship (Score:5, Interesting)

        by irc.goatse.cx troll ( 593289 ) on Saturday June 26, 2004 @06:36PM (#9539533) Journal
        "There is a winner: the consumer. The breakup of such an anticompetitive relationship is an example of the "invisible hand" of the marketplace restoring free-market capitalism to where it belongs."

        I somewhat disagree, amazons anticompetitive behavior is great for the consumer. I was searching for a movie (Waking Life) and due to a deal with borders, I was able to reserve a copy of the movie at any of the local borders stores (with addresses listed, along with how far away it is).

        These kind of features are what makes amazon successful, sure we'd be better off with an open system so prices stay competitive, but until someone (pricewatch? pricegrabber? froogle?) steps up and opens up a system that actually has the whole process bundled in one easy to use page, don't expect amazon to stop dominating any time soon.
    • You have told a nice story. It makes sense; it's logical. It's also full of shit. It's a complete invention that you made up to tell a story that fits your world view. Unfortunately, your world view is not the real world.

      Do a tiny bit of research on Toys R Us stock price over the last 5 years. Yes, it went up during the dot com days and then fell back down, but other than that it has been remarkably steady. Clearly, it is no 'sinking ship.' Actually, it is the best brand in toy retailing and the ca

      • Re:No fun being on a sinking ship (Score:5, Informative)

        by man_ls ( 248470 ) on Saturday June 26, 2004 @07:07PM (#9539672)
        It has to be a sinking ship because 5 TRU locations I was aware of previously are all boarded up abandon wrecks now.

        I don't know of a single brick and mortar TRU location nearby any more.

        • Re:No fun being on a sinking ship (Score:1, Informative)

          by Anonymous Coward
          I read several years back how TRU was to consolidate their stores all into one, the other 2 being Kids R Us (mainly a clothing store for youngin's) and Babies R Us (Well a store all about baby supplies).

          It was a restructuring deal that was going on at the time but i honestly never saw it come to fruition. In a shopping district close to me they had all 3 stores located within a 5 mile radius of each other. Both ToysRU and KidsRU closed down and boarded up. But BabiesRU is still selling the baby goods and n
        • Your personal experience is not relivant to the overall situation. Personal anecdotes are not relivant to the overall situation and you ought to know that. That you percieve Toys R Us shutting down is not relivant to their national status.

    • Re:No fun being on a sinking ship (Score:2, Informative)

      by Anonymous Coward
      It won't be long before Amazon is losing ground against mega retailers online (Wal-Mart).

      Why in the world would Amazon purposely get rid of friends when facing the prospect of going head to head with Wal-Mart online. If I were Amazon I'd wanna be making deals with all kinds of brick & mortar retailers.
    • I'm going to have to agree. I worked for a company that handled the phone based orders about four years ago. They were constantly out of stock on their product.
    • Even if they had no competition I wouldn't go to Toys R Us. The last time I was there, there were no prices posted.

      I don't care if there are scanners located throughout the store. I want to know how much something costs when I look at it.

  • Since when does exclusive not mean exclusive? (Score:5, Insightful)

    by jmichaelg ( 148257 ) on Saturday June 26, 2004 @05:51PM (#9539344) Journal
    Amazon takes $200 Million over 4 years from Toysrus in exchange for exclusively listing Toysrus' stock and then decides that Toysrus isn't keeping up its end of the deal? Based on the what's in the articles, which may not be correct, if Amazon is upset that Toysrus isn't stocking enough goods, it's Amazon's tough luck. Amazon should have exercised due diligence and made sure that Toysrus was going to be able to stock goods and Toysrus' purchasing department knew what to stock before accepting the deal.

    A deal is a deal - at least it used to be back when we knew the definition of "is."

    • Re:Since when does exclusive not mean exclusive? (Score:5, Informative)

      by synx ( 29979 ) on Saturday June 26, 2004 @06:08PM (#9539411)
      What did the contract say exactly? "Exclusive" can mean several things. Apparently the deal was to maintain exclusivity in SKU, not product line. I guess Amazon's defense is that they didn't have someone else sell the same SKU, but was in the same category.

    • Exclusivity is only part of the issue (Score:4, Insightful)

      by Starrider ( 73590 ) on Saturday June 26, 2004 @06:11PM (#9539421)
      Exclusive is just one part of the contract. If Toys-R-US is required to maintain stock and avoid out of stock percentages above a certain figure, they violated the contract first. The linked article states that Toys-R-Us kept out of stock levels at above 10% on many popular toys.

      Since I haven't seen the contract, I don't know for sure, but this is what it is sounding like.
      • That was during "peak periods" i.e., Christmas.

        It's no secret that hot toys sell out at Xmas.

        Toys'R'Us (bricks) maintained one of the highest in-stock percentages through the season. In contrast, Walmart was out of up to 25% of key items, iirc.

        Sometimes you can't even choose to maintain higher inventories--suppliers have none to give.

        I'd like to see the contract (if some has a link to it, pls post it). But I'm skeptical when someone countersues after breaking a contract and their basis is most simply

        • Re:Exclusivity is only part of the issue (Score:5, Insightful)

          by Starrider ( 73590 ) on Saturday June 26, 2004 @07:09PM (#9539682)
          If the contract explicitly states "partner is in breach of contract when they reach out of stock levels above X%" (again, speculation) then it is not simply bad business decisions. If you promise to meet a quota and fail to deliver, you are in breach of contract.

          Don't sign a contract for which you can't meet your obligations. It doesn't matter WHY you are failing to meet your obligations if you guarantee in a contract that says you are.

          If I take money from you and I contractualy guarantee you I will always have Furbies, I better meet that promise.

          Again, this depends on the language of the contract. As sympathetic as your argument may seem, it is irrelevent if Toys-R-Us didn't meet its obligations.
        • Look, I could understand if I went to one TRU and they were out of the latest Shiny Toy(tm), because then, I could always try Wal-Mart or whatever. But it's not like Amazon was solely getting the toys from a single TRU location. Ostensibly, they had access to the goods at the warehouses or shipping centers or whatnot.

          Now, does that or should that make it easier for Amazon to win? Beats me. It's just something to consider.

          Kierthos
          • Good point. But some additional research shows it actually works differently. The inventory is actually held at Amazon!

            Toysrus.com sells merchandise to the public via the Internet at www.toysrus.com, www.babiesrus.com, www.imaginarium.com, www.sportsrus.com, and www.personalizedbyrus.com. We opened our on-line doors to the public in 1998. In order to provide better customer service and order fulfillment, we entered into a strategic alliance with Amazon.com, Inc. and launched a co-branded toy store in 2

    • Re:Since when does exclusive not mean exclusive? (Score:4, Interesting)

      by bezuwork's friend ( 589226 ) on Saturday June 26, 2004 @06:26PM (#9539491)
      A deal is a deal - at least it used to be back when we knew the definition of "is."

      The first question is whether Toys-R-Us violated any contract terms by it's behavior such as not having toys in stock or whatever. If so, Amazon may have a good position.

      Even without a direct contract violation, the courts have a concept of "best efforts" which might apply. To my knowledge, the concept of best efforts was first used in a Lucy Lady Duff-Gordon case where the exclusive US licensee was required to use it's best efforts to make profits. Since Toys-R-Us had an exclusive right to sell toys on Amazon, maybe the same doctrine would apply.

      • Reasonable start.

        However, it's also true that Toys'R'Us probably would rather sell more toys than fewer. They probably tried their "best." And selling more toys is not necessarily good business if you have to take too much inventory risk to do it, anyway.

        It doesn't have to be the best qualified person's best efforts. Just theirs, even if they are not the most qualified. It's kind of like the right to counsel in that respect.

  • Anyone wanna bet (Score:5, Interesting)

    by proverbialcow ( 177020 ) on Saturday June 26, 2004 @05:53PM (#9539349) Journal
    ...that the "other" company is Target? It makes sense; T'r'U can't keep high-demand toys in stock, so Amazon lets Target sells toys in violation of its exclusivity agreement.

    Hell, with the $3.6 BILLION Target's getting for marshall Fields, I wouldn't be surprised if Target bought Amazon.

    • Re:Anyone wanna bet (Score:5, Insightful)

      by kfg ( 145172 ) on Saturday June 26, 2004 @06:14PM (#9539430)
      And by relying on multiple vendors Amazon gives the appearance of being able to always keep toys in stock.

      Here's the thing though, Target can't keep toys in stock either, nor can Wal-Mart. No single vendor can. Amazon had every reason to realize this up front. Amazon can't keep all of its own product in stock. The issue is that Amazon was payed for an exclusive relationship, which has nothing to do with keeping things in stock for Amazon's benefit. Amazon's benefit is in receiving the $50 mil a year without having to sell a damned thing from Toys (the symbol formerly knows as "R") Us.

      Amazon has decided that it was a bad deal after the fact, they've learned the perils of vendor lock in, but they want to keep the money anyway and break the deal to deal with it, what's more, when their vendor objects to this they ask for even more money for "compensation" for themselves having violated the contract.

      Having made a bad deal is not grounds for breaking a contract. Thousands of companies have been forced into bankruptcy by the courts enforcing bad deals. It happens to building contractors all the time. You submitted the bid Sparky. Now you have to live up to it. It isn't the contractee's fault that you cut your margins unrealisticly.

      SCO obviously has enough legal crack to share.

      BAD Amazon. No cassava meal donut.

      KFG

      • Re:Anyone wanna bet (Score:5, Informative)

        by LostCluster ( 625375 ) * on Saturday June 26, 2004 @06:46PM (#9539572)
        The Toys 'R Us-Amazon partnership started after the 1999 holiday season failure of ToysRUs.com because the .com operation accepted every order attempted and simply sent backorder notices... meaning many parents got caught with orders that wouldn't be filled until after Dec. 25, and as result the company had to rush out gift cards so that parents could pick up something at the retail stores to avoid making a mess of their whole brand in the process.
        • Yes, another reason why Amazon had every reason to know what they were getting into.

          I'll give Amazon this though, they do seem to know how to run a store. I've ordered a number of back ordered items from them, and even a couple of "front ordered" items, and they properly tell me up front that the item is not currently in stock, when I might expect it if they know, and that they don't know if they don't.

          I wish they were a hair less legally repulsive.

          KFG
        • Regarding the 1999 Christmas, actually, the goods were in the warehouse, and the web site was on wobbly legs, but usually held up. However, the fulfillment arm couldn't pick, pack and ship fast enough to keep up with the incoming orders.

          I had a few friends that took good paying temp jobs picking and packing toys for them, and then (remember, 1999) put "eCommerce experience" on their resume.

          --H

    • Re:Anyone wanna bet (Score:3, Interesting)

      by balbeir ( 557475 )
      One of the differences between Target and Toysrus seems to be their shipping rates. I recently tried to order something from Toysrus that cost about $70 and they tried to charge $90 for shipping. Pretty ridiculous. Target shipped the same thing for about $20.
      Looks like someone is not getting the concept of an online store at Toysrus.

    • Re:Anyone wanna bet (Score:4, Interesting)

      by stilwebm ( 129567 ) on Saturday June 26, 2004 @06:57PM (#9539628)
      Hell, with the $3.6 BILLION Target's getting for marshall Fields, I wouldn't be surprised if Target bought Amazon.

      Given Amazon's market capitalization of $20.98 Billion, I think that's a pretty silly idea. Target, for comparison, has a market cap of $40.60 Billion. It's kind of amusing, though, to see Target's P/E of 21.15 compared with Amazon's P/E of 143.49.

      http://finance.yahoo.com/q?s=TGT,AMZN&d=s [yahoo.com]
      • Market capitalization is just one piece of the puzzle. Taking a look at Amazon's financials [hoovers.com], they've got about $2.1 billion in assests, $3.2 billion in outstanding liability and another $1 billion in shareholder equity. From where I stand, that's still $2.1 billion in the hole.

        Also, that $3.6 billion for Marshall Fields is cash. For fifty+ profitable brick-and-mortar stores. Target didn't jettison MF because they were losing money on the chain; they sold it because they weren't making money as fast as th

  • Exclusivity Deals (Score:4, Funny)

    by victor_the_cleaner ( 723411 ) on Saturday June 26, 2004 @05:56PM (#9539360)
    Exclusivity deals are such a joke. I remember in the boom days sites like Excite would work all kinds of exclusive deals, always bending the rules a little bit.

    Excite Dealmakers:

    "E-Trade: You are our exclusive provider of finanical information, we'll brand the finance section with E-Trade logos, you'll provide content, blah blah"

    "Ameritrade: You are our exclusive provider of 'personal' financial information (sorry E-Trade but 'personal finance' is different that 'finance'). we'll brand the section with Ameritrade logos, you'll provide content, blah blah"

    Excite must have been using their Bill Clinton dictionary, "It depends on what your definition of exclusive is"

  • Not sure who to root for (Score:5, Interesting)

    by mgkimsal2 ( 200677 ) on Saturday June 26, 2004 @05:57PM (#9539364) Homepage
    I'm not a big Amazon fan, but it seems that if they had an agreement to allow Toysrus to sell certain items exclusively, then violate that agreement, they're in the wrong.

    If Amazon's charges are true, then ToysRUs.com can't seem to operate ANYTHING. Back in 99/2000 (or 2000/2001?) they failed miserably at xmas two years consecutively. Both times relying on rather crappy ColdFusion (I had a friend with inside contacts to the web dev team at that time, and they just did not know how to scale a site - relying on CF wasn't a big help either).

    So, they get rid of their net headaches, and can focus just on the business of management and fulfillment, and couldn't seem to do that right either (again, if Amaazon's charges are true).

    Who do you root for here?
    • I was burned in xmas 99 by TRU, and was happy they moved under the Amazon hood. Recently I was burned again ordering toys from Amazon for an out of season birthday. I've always been happy with Amazon's up front way of doing busines and am impressed with their ability to bring some brick and morter to the net. I'm not suprised by Amazon's argument, but I am suprised that Amazon didn't bring suit for breach before TRU re exclusivity.


      -Andrew...

    • 'crappy ColdFusion'? Oh my god, whoever feed you that line was blowing hot air. Please name a technology available in early 1998 that could scale to 10,000 concurrent users which a team of four people could implement in four months. Right, there wasn't any! While CF had a lot of issues, it was *not* the cause of the Amazon deal. It was solely due to warehousing issues.

      You may have 'a friend with inside contacts', but I was the Team Lead who wrote much of the TRU website. The CF code base was cutting edge;
      • why then, if it was so great, did it fail so spectacularily ? why couldn't you code the line "sorry we are out of stock" ? why wouldn't you implement honest customer information ("we have a backlog of 12.000 and there's not a chance in hell you'll get Big Jim Ninja Turtle Robot before Christmas 2007"). ?

        Warehousing issues ... pfft. You probably thought of the customer as "the one who's going to be ripped off". Oh, and how they were! Once.

  • Tomorrow’s Headline (Score:5, Funny)

    by poofyhairguy82 ( 635386 ) on Saturday June 26, 2004 @05:57PM (#9539365) Journal
    Brittney Spears marries newly divorced Amazon.com.

    Sources say the wedding was a 4 and a half star event, See all 146 customer reviews.

    Hollywood insiders criticize the move, saying that the couple is "SOOOO 90's."

  • Who gets custody? (Score:5, Funny)

    by pyrrhonist ( 701154 ) on Saturday June 26, 2004 @05:57PM (#9539367)
    Who gets custody of Kids 'R Us and Babies 'R Us?

  • I thought it was gonna be... (Score:5, Funny)

    by Anonymous Coward on Saturday June 26, 2004 @05:58PM (#9539371)
    Amazon decided that Toys' "My First Camera" violated their patent on one-click technology.

  • Obligatory Family Guy quote: (Score:1, Funny)

    by Anonymous Coward
    Yes, that's right Mr Giraffe. Get all the marmalade.
  • Amazon tied itself toone supplier of toys, and , surprise, surprise, that supplier didn't perform. Now that they want to end the agreemnet they find their in trouble, as Toys R Us is turning out to be benifiting from this rlationship to the detrement of Amazon.

    This should be a lesson to all startups not to make a pact with the devil just to increase your profile.

    • Re:Amazon dug their own hole (Score:5, Insightful)

      by jokach ( 462761 ) on Saturday June 26, 2004 @06:10PM (#9539420) Homepage
      But wouldn't you think that Toys R Us had a certain obligation to Amazon to perform? I mean, keeping popular items in stock and being innovative in its offerings to Amazon shouldn't have to be written into an agreement, should it?

      I know personally that the selection at Toys R Us is lacking at holiday time (last 2 years), this 'divorce' doesn't surpise me in any way.
      • ...shouldn't have to be written into an agreement, should it?

        I would say that it should indeed. Things run out of stock and not every product offered will fly off of the shelf. Therefore, to disolve the contract there needs to be meaningful criteria set out in the contract to do this. Cummon, its not like we are talking about Garage Toys Inc and Joe Webshingle Co! These are huge companies with lots o cash tied up in this agreement. Amazon can't just arbitrarily say "I don't like the job you are doing,

  • NOO! (Score:2, Funny)

    by Anonymous Coward
    Would someone please think of the children?!

  • Curses! This could be terrible! (Score:4, Insightful)

    by 91degrees ( 207121 ) on Saturday June 26, 2004 @06:14PM (#9539431) Journal
    If Amazon wins, then it could mean that Amazon will have better supplies of their stocks, and that will be terrible because..

    erm... I mean, if Toys R Us wins, then it could mean that Amazon will keep running out of stuff, and thre will be no option for the toy buying public but to go to one of the many other online retailers

    No. Sorry... Why do I care?
  • The only one who profits from this is Law Suits are us. Just like a real divorce! Who gets the Barbie Cottage in the Hamptons? The only thing I got to keep in my divorce were the computers and the dreamcast...

  • With toys like the Nimbus 2000... (Score:5, Funny)

    by hadesan ( 664029 ) on Saturday June 26, 2004 @06:24PM (#9539486)
    Wasn't (isn't) there still a run on this toy... Read the reviews... At Amazon's Toyrus section - the Nimbus Broom [amazon.com]
  • This reminds me of the scary time in 1972 when Barbie filed for Divorce from Ken. Good thing they got it to work out.

  • Toys-R-Us (Score:5, Funny)

    by Daimaou ( 97573 ) on Saturday June 26, 2004 @06:50PM (#9539589)
    I can understand Amazon's complaint. Every time I have set foot in a Toys-R-Us retail store to buy something for one of my kids, I have left empty-handed because they didn't have what I was looking for in stock. Of course, if you wanted a Polly Potty with life-like urine, then you were in luck.

    I guess that's just how they choose to do business.
  • let's see, i dont' like how the contract is going, so pay me 750m for me to break it... uh.. excuse me?

  • It looks like we're back to the era of Internet company shenanigans [satirewire.com].

  • WTF? (Score:2, Offtopic)

    by acidrain69 ( 632468 )
    When did /. turn into business knews? Why do we care about this?

    • Re:WTF? (Score:1, Funny)

      by Anonymous Coward
      Because SCO's stock might get a bounce on Monday from the idea that "exclusivity" can be added to the list of concepts that former business partners can be sued over.
    • Perhaps you should remove the union link from your sig, I do not think they neeed the support of someone that do not know the difference between news and knews.

      • It was a typo thank you. I tried to stop the page load, but I was too late. I did notice it, and I know the difference. It was a case of the hands wanting to type one thing, and the brain wanting another.

  • The truth continues... (Score:4, Insightful)

    by Crash Culligan ( 227354 ) on Saturday June 26, 2004 @10:12PM (#9540349) Journal
    It seemed to be true in the 80s, it was proven true in the 90s, and it doesn't show any sign at all of slowing down. Companies don't like teaming up with other companies, they like preying on other companies' customers.

    Think of the corporate landscape as an enormous singles bar, with an all-night wedding chapel on one side and an all-night divorce lawyer on the other. Companies frequently get together, pop on over to the wedding chapel to start a harmonious relationship, then after they've tried making it work for a while they pop on over to the divorce lawyer because they had no idea what a gold-digging tramp/slut/cheapskate/moron the other one was. Then they go back into the singles bar to cruise for another sugar-incorporated.

    Lather, rinse, repeat. Now, if only on the honeymoon they didn't screw their customers...

  • Idea (Score:4, Interesting)

    by PsiPsiStar ( 95676 ) on Saturday June 26, 2004 @11:32PM (#9540605)
    Just a thought- sometimes lawsuits aren't done to collect money. This is retaliatory, I assume. Possibly, Amazon wants Toys R Us stock to fall. Such a fall delays investor profit taking, if only temporarily. Not sure how it affects a company's credit, ability to leverage it's transactions, etc. An insanly large (as in this case) lawsuit can be used to do damage even if it falls through later. If stock price falls enough, management might be replaced.
  • geoffrey vs. jeffrey :)

  • Amazon is the SCO of retail.

    Amazon is the Wal-Mart of the future.

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