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FTC Fines Toys "R" Us for Violating Settlement Agreement

By Jenna Greene

Toys "R" Us has not been playing nicely with others. So says the Federal Trade Commission, which fined the company $1.3 million for violating a 1998 order governing its dealings with its suppliers.

In the underlying case, the FTC found that Toys "R" Us used its dominant position as a toy distributor to extract agreements from toy manufacturers to stop selling the same toys to warehouse clubs like Costco.

The 1998 agreement barred Toys ?R? Us from asking its suppliers to limit the toys they sell to discounters or requesting that they refuse to sell to them altogether. It also barred Toys ?R? Us from asking any supplier about its sales to any toy discounter.

According to the FTC, Toys ?R? Us (through its Babies ?R? Us subsidiary) violated the order by complaining to manufacturers including Peg Perego, Graco and Medela about discounting their baby products.

At various times between 1999 and 2010, according to the FTC, the company objected to the discounts other retailers were providing to consumers, requested information from several of the companies about how they were supplying products to discounters, and failed to keep records of communications with its suppliers.

?This case reaffirms the importance of complying with all aspects of a commission order,? said Richard Feinstein, director of the Bureau of Competition, in a news release. ?Although we did not find evidence that Toys ?R? Us entered into agreements with the suppliers that violated the order, the penalty here underscores the importance of parties complying fully with all of their order obligations.?

Toys? R? Us was represented by D. Bruce Hoffman, who heads Hunton & Williams? global competition practice. He declined comment.

Full post as published by The BLT: The Blog of Legal Times on March 29, 2011 (boomark / email).