June 28, 2004 1:37 PM PDT

Amazon says 'game's over' to Toysrus.com

Amazon.com has asked a New Jersey Superior Court to end its 4-year-old partnership with Toysrus.com, as the two companies wage a legal battle over the terms of their longstanding pact.

The online shopping giant filed an official request to terminate the Toysrus.com partnership on Friday. It asked for damages in excess of $750 million, based on its contention that the toy retailer failed to adhere to the requirements of a deal signed in 2000. It said online toy store parent Toys "R" Us was unable to meet demand for top-selling toys, games and baby products, particularly during the busy holiday season.

In May, Toys "R" Us sued Amazon, charging it with violating the terms of the companies' partnership by allowing other vendors to market toys and baby products on its site.

Reached Monday, Toys "R" Us representatives said the Amazon counterclaim has "no merit" but declined to go into further detail, citing a mediation agreement that bans the company from making additional comments.

After its own online store stumbled, the toy giant turned to Amazon. In the 2000 deal, it agreed to pay the then rapidly growing retailer a $200 million premium for exclusive rights to sell toys and baby items through its site. The partnership established a template for future growth at Amazon, which has since made similar deals with retailers such as Office Depot, Circuit City and Borders.

In its court request, Amazon acknowledged that it had made deals with third-party toy and baby products suppliers to begin marketing their products through its site but said it did so only after Toys "R" Us was unable to meet the partnership's established standards. Amazon said the terms of the original agreement gave it the right to enlist other suppliers if Toys "R" Us did not keep 90 percent of its products listed on Amazon's Web site in stock at all times.

Amazon contends that Toys "R" Us also reduced the number of low-price items it offered through the deal, thereby hurting the online retailer, since products selling for less than $5 made up what it called a "significant portion" of its overall toy sales.

Amazon declined to comment on its filing.

The online giant asked that the court move quickly to end the partnership, thereby giving it sufficient time to recruit additional toy vendors in time for this year's holiday buying blitz.

 

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