Toysrus.com sued Amazon.com in May 2004. It alleged that Amazon.com had violated an agreement signed in 2000 stipulating that Toysrus.com would be the only authorised seller of toy, game and baby products on the Amazon.com platform – a deal for which Toysrus.com is reported to have agreed to pay $200 million.
The lawsuit accused Amazon.com of breaching the exclusivity part of the deal and in June 2004 Toysrus.com won an injunction, later lifted, prohibiting Amazon.com from allowing other sellers to use the site for the sale of toys, games and baby products.
Amazon.com filed its own lawsuit, asking the court to end the agreement and to award it $750 million in damages. According to press reports, it accused Toysrus.com of a "chronic failure" to comply with the contract terms by failing to have sufficient products in stock, and in failing to choose the top-selling toys.
But the Chancery Court in New Jersey found in favour of Toysrus.com earlier this week.
“Amazon [Amazon.com and Amazon.com.kids] says their intent and understanding of [the critical provision] was to have an Agreement that allowed third party sales of exclusive products. The language as drafted whether intentional or inartful gave Amazon the words to play the game their way,” said Judge Margaret Mary McVeigh.
In contrast, said the judge, Toysrus.com saw exclusivity at the heart of the agreement.
“At all times, in every action they took, TRUCC [Toys ‘R’ Us Inc and its subsidiaries] was the 'toy partner'. Amazon knew from day one, this was how TRUCC saw the agreement. Amazon does not want an exclusive partner. Amazon’s conduct since 2004 has been a breach of that exclusivity,” she ruled.
David J. Schwartz, General Counsel for Toys "R" Us, Inc, welcomed the ruling.
"Our goal 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," he said.
Patty Smith, a spokeswoman for Amazon.com, told InternetNews.com that the company was reviewing its options, adding, “Regardless of the decision, we're committed to ensuring a great selection of toys at great prices for our customers."
