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Amazon Seeks Divorce, $750M from Toys R Us

Posted by michael on 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."

44 of 121 comments (clear)

  1. Why can't they learn to play nice and share? by Anonymous Coward · · Score: 5, Funny

    Why can't they learn to play nice and share?

    1. Re:Why can't they learn to play nice and share? by Joey+Patterson · · Score: 5, Funny

      Kindergarten may have taught them to "do unto others as you would have them do unto you," but that kind of thinking just doesn't work in the courtroom.

      Somebody's going to have to sit in the time-out chair.

  2. divorce.. by manavendra · · Score: 4, Insightful

    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..

    --
    http://efil.blogspot.com/
    1. Re:divorce.. by Pieroxy · · Score: 4, Insightful

      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...

      --
      Write boring code, not shiny code!
    2. Re:divorce.. by Iffy+Bonzoolie · · Score: 2, Insightful

      Or, people who divorce could actually try to settle things amicably without lawyers. There are books on how to do your own divorce, and as long as both sides are somewhat rational (which is generally the problem, I think), they can agree on a settlement themselves.

      -If

      --
      Run a pencil-and-paper RPG campaign with your far-off friends: Gametable!
  3. No fun being on a sinking ship by erick99 · · Score: 5, Informative
    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

    --
    http://www.busyweather.com/
    1. Re:No fun being on a sinking ship by AEton · · Score: 5, Insightful

      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.
    2. Re:No fun being on a sinking ship by irc.goatse.cx+troll · · Score: 4, Interesting

      "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.

      --
      Pain lasts, kid. Its how you know you're alive. Sometimes I think this growing up thing is just pain management-TheMaxx
    3. Re:No fun being on a sinking ship by mumblestheclown · · Score: 2, Informative
      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 category leader there, having beaten the living snot out of Kaybee Toys, Kiddie City, and others over the years.

      To call Toys-R-Us stupid is just you telling a story that does not exist; or, at least, the facts don't seem to bear it out.

      You may be right about the amazon greed bit though; they did not seem to consider that a mutual exclusivity contract can cut both ways..

    4. Re:No fun being on a sinking ship by Anonymous Coward · · Score: 2, Informative

      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.

    5. Re:No fun being on a sinking ship by man_ls · · Score: 4, Informative

      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.

    6. Re:No fun being on a sinking ship by bdptcob · · Score: 2, Informative

      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.

  4. Since when does exclusive not mean exclusive? by jmichaelg · · Score: 5, Insightful
    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."

    1. Re:Since when does exclusive not mean exclusive? by synx · · Score: 4, Informative

      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.

    2. Re:Since when does exclusive not mean exclusive? by bezuwork's+friend · · Score: 3, Interesting
      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.

  5. Anyone wanna bet by proverbialcow · · Score: 4, Interesting

    ...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.

    --
    The only surefire protection against Microsoft infections is abstinence. - The Onion
    1. Re:Anyone wanna bet by kfg · · Score: 5, Insightful

      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

    2. Re:Anyone wanna bet by LostCluster · · Score: 4, Informative

      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.

    3. Re:Anyone wanna bet by balbeir · · Score: 3, Interesting

      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.

    4. Re:Anyone wanna bet by stilwebm · · Score: 3, Interesting

      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

  6. Re:What is this? by chaffed · · Score: 4, Funny

    When it involves toys? Yes very much so.

    Think geek has a great selection but when I need the latest barbi... Xbox game I want toys R us to be there.

    --
    What could possibly go wrong?
  7. Exclusivity Deals by victor_the_cleaner · · Score: 4, Funny

    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"

  8. Not sure who to root for by mgkimsal2 · · Score: 4, Interesting

    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?

    --
    creation science book
    1. Re:Not sure who to root for by agbert · · Score: 2, Interesting
      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...

    2. Re:Not sure who to root for by waswaldo · · Score: 2, Informative

      '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; incorporating an in-memory cache for thousands of items on hundreds of servers. We reviewed and rejected TimesTen - ours was better. The shopping cart (Hi Chad!) was the *most* advanced in the world enabling many different types of discounts and bundles. Our Content Management system used Portal concepts (moving portlets around the page, columns to organize dynamic info) way before Portals were well understood.

      My name is David Medinets, google away if you doubt me.

      --
      Java, ColdFusion, Oracle
  9. Tomorrow’s Headline by poofyhairguy82 · · Score: 5, Funny
    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."

    --

    Open Source Sushi

  10. Who gets custody? by pyrrhonist · · Score: 5, Funny

    Who gets custody of Kids 'R Us and Babies 'R Us?

    --
    Show me on the doll where his noodly appendage touched you.
  11. I thought it was gonna be... by Anonymous Coward · · Score: 5, Funny

    Amazon decided that Toys' "My First Camera" violated their patent on one-click technology.

  12. Amazon dug their own hole by ObsessiveMathsFreak · · Score: 2, Interesting

    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.

    --
    May the Maths Be with you!
    1. Re:Amazon dug their own hole by jokach · · Score: 5, Insightful

      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.

  13. NOO! by Anonymous Coward · · Score: 2, Funny

    Would someone please think of the children?!

  14. Exclusivity is only part of the issue by Starrider · · Score: 4, Insightful

    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.

    1. Re:Exclusivity is only part of the issue by PleaseDontBeTaken · · Score: 3, Interesting

      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 "bad business judgment." Bad business judgment should not be adjudicated.

      --
      --
    2. Re:Exclusivity is only part of the issue by Starrider · · Score: 5, Insightful

      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.

  15. Curses! This could be terrible! by 91degrees · · Score: 4, Insightful

    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?

  16. The only one who profits from this... by HarbV7.0 · · Score: 2, Interesting

    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...

  17. With toys like the Nimbus 2000... by hadesan · · Score: 5, Funny

    Wasn't (isn't) there still a run on this toy... Read the reviews... At Amazon's Toyrus section - the Nimbus Broom

    1. Re:With toys like the Nimbus 2000... by hadesan · · Score: 2, Informative

      Links to the old reviews captured at mlcsmith and another set of old reviews and finally a trial test at the toy factory

  18. Toys-R-Us by Daimaou · · Score: 4, Funny

    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.

  19. Re:What is this? by Babbster · · Score: 2, Interesting
    Not only do we like toys, but we like videogames (possibly could be considered toy but really another category). My company gave me a $50 Amazon gift certificate, and I picked up a couple GBA games through the Amazon/Toys'R'Us connection.

    Of course, since that's the only time I've ordered from Amazon, I don't really have a dog in this hunt. I will therefore root for chaos!

  20. Dot-Com Divorce is *so* y2k by Jonathan+Quince · · Score: 2, Funny

    It looks like we're back to the era of Internet company shenanigans.

    --
    Microsoft Windows is, fittingly, the official Desktop OS of Olig
  21. Actually...yes it should by CdnZero · · Score: 2, Insightful

    ...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, bye bye".

    I would expect that this kind of information is in the contract somewhere though. Then it becomes a case of proving Toys R Us has failed to live up to its obligations set out re: stocking levels and product sales.

  22. The truth continues... by Crash+Culligan · · Score: 4, Insightful
    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...

    --
    You cannot truly appreciate Dilbert until you read it in the original Klingon.
  23. Idea by PsiPsiStar · · Score: 3, Interesting

    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.

    --

    ___
    It's the end of my comment as I know it and I feel fine.