Toys ‘R’ Us Prevails in Divorce

Toys “R” Us is leaving

The children’s toy retailing giant said today that a Chancery Court in New Jersey ruled in its favor as part of a lawsuit against The ruling effectively ends a 10-year, co-branded marketing marriage between the retailing heavies.

In the end, the dispute — and the divorce — came down to exclusivity, whether was giving it to Toys “R” Us on its Web platform.

The Wayne, N.J., Toys “R” Us filed suit against in 2004, claiming that the two had an exclusive selling arrangement, and questioned’s dalliances with other toy retailers.

In addition to selling items from on its site, also sells toys in its children’s section from other third-party toy sellers, such as and toys from The Discovery Channel.

According to court documents, the August 2000 agreement called for to sell Toys “R” Us products through co-branded stores on

The deal included distribution, warehouse storage and logistics, customer service, hosting, custom software development and systems development and maintenance on the platform, plus a tab level for “Toys and Games and Baby Products.”

The lawsuit contended that Toys “R” Us grew frustrated with the selling arrangement with, for which it paid about $200 million, and questioned whether exclusivity was part of the deal.

The lawsuit claimed their deal meant “is the only authorized seller of Toy and Game and Baby Products on the platform through 2010.”

It accused of straying into alliances with other retailers who sell toys and gadgets after Toys “R” Us paid for exclusivity on the platform.

At the time of the lawsuit, Toys “R” Us counted more than 4,000 products in exclusive categories that were offered through competitive retailers on the platform.

No fair, said the toy retailer, and started the corporate equivalent of divorce proceedings, saying it’s not interested in paying for exclusivity that it’s not receiving.

Patty Smith, a spokeswoman for, said the company strongly disagrees with the judge’s ruling in the case. She said is in the process of reviewing the ruling and its options at this point.

“Regardless of the decision, we’re committed to ensuring a great selection of toys at great prices for our customers,” she added.

As to whether would appeal the decision, Smith said the company was still reviewing the decision and its options. does not expect to update guidance that it has already provided about earnings outlooks.

The ruling is effective within 90 days. When asked if would launch its own Web site, a spokeswoman for Toys “R” Us said the timeframe for a re-launch was not set. But the company’s statement today gave every indication that the groundwork is under way.

“We have been preparing for today’s decision and expect to provide seamless online access for our customers,” said John Sullivan, senior vice president of Toys “R” Us.

“Tighter integration of our online business with our brick-and-mortar locations will enhance customer service by creating a more unified Web and retail shopping experience.” had essentially argued that it was offering other toys that were not offered by Toys “R” Us, as well as its Baby subsidiary “” Both sides argued over who was keeping proper data to ensure that inventory was properly covered.

Following a countersuit by and counterclaims on both sides, the judge ruled that Toys “R” Us was entitled to some exclusivity in the deal and wasn’t getting it.

David J. Schwartz, general counsel for Toys “R” Us, said in a statement that the goal of the suit was to protect the Toys “R” Us brand, “while continuing to provide a positive shopping experience for our online customers. This ruling allows us to do that.”

News Around the Web