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Amazon Seeks Divorce, $750M from Toys R Us
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."
A deal is a deal - at least it used to be back when we knew the definition of "is."
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.
We recently had heard in the office over one of the Yellow Machine that's made by Anthology Solutions.
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.
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
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.