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."

Comments

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

[Anonymous Coward]

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

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

[Joey Patterson]

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.

divorce..

[manavendra]

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..

[Pieroxy]

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...

No fun being on a sinking ship

[erick99]

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

[AEton]

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.

Re:No fun being on a sinking ship

[irc.goatse.cx troll]

"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.

Re:No fun being on a sinking ship

[man_ls]

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.

Since when does exclusive not mean exclusive?

[jmichaelg]

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?

[synx]

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.

Anyone wanna bet

[proverbialcow]

...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

[kfg]

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

[LostCluster]

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.

Re:What is this?

[chaffed]

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.

Exclusivity Deals

[victor_the_cleaner]

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

[mgkimsal2]

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?

Tomorrow’s Headline

[poofyhairguy82]

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?

[pyrrhonist]

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

I thought it was gonna be...

[Anonymous Coward]

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

Re:Amazon dug their own hole

[jokach]

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.

Exclusivity is only part of the issue

[Starrider]

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.

Re:Exclusivity is only part of the issue

[Starrider]

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.

Curses! This could be terrible!

[91degrees]

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?

With toys like the Nimbus 2000...

[hadesan]

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

Toys-R-Us

[Daimaou]

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.

The truth continues...

[Crash Culligan]

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...