Consumer News Release
For immediate release -- Tuesday, May 25, 1999.
Contact Bob Brammer - 515-281-6699
Toys 'R' Us Will Pay over $40 Million in Cash and Toys to Settle States' Antitrust Lawsuit
Miller: In Iowa, tens of thousands of toys will go to Toys for Tots for the next three holiday seasons.
DES MOINES-- Attorney General Tom Miller said Tuesday that Toys 'R' Us, the nation's largest toy retailer, has agreed to settle a lawsuit by Iowa and 43 other states alleging that Toys 'R' Us used its substantial market power to illegally pressure four toy manufacturing companies to restrict sales and supply of their most popular product lines to other retailers, especially warehouse clubs.
"Toys 'R' Us will make it right by paying $40.5 million in cash and toys -- including almost $400,000 in cash and toys for Iowa," Miller said. "Tens of thousands of toys will go to the Toys for Tots program in Iowa for the next three holiday seasons."
Also as a result of the suit, Mattel will pay $8.2 million in cash and toys and Little Tikes Company will pay $1.3 million in cash and toys. In Iowa, the total benefit in cash and toys from the three defendants settling today is expected to exceed $450,000. Another toy maker, Hasbro Inc., settled its portion of the suit in December for about $6 million -- including 4,700 new toys distributed in Iowa. The toy manufacturers were alleged to have also participated in the violations.
Miller said the multi-state lawsuit, which was settled today in federal court in Brooklyn New York, alleged that Toys 'R' Us had sought to limit the competitive threat posed by low-margin, low-price warehouse clubs, such as Sam's Club. The suit alleged that Toys 'R' Us -- which sells billions of dollars of toys every year and has about ten stores in Iowa -- used its market power to make illegal agreements with the toy manufacturers.
The suit alleged that the illegal agreement intended to ensure that warehouse clubs could only obtain popular toys in "combination packs" -- which cost consumers more and whose prices could not be compared easily with items sold by Toys 'R' Us. "We argued that hurt competition in two ways," Miller said. "Toys available to the clubs were more expensive, and consumers found it hard to compare prices between the clubs and Toys 'R' Us. Consumers depend on competition and good information," Miller said. The companies did not admit any wrongdoing.
The complaint alleged Toys 'R' Us pressured toy suppliers not to sell the clubs individual toys that were sold to Toys 'R' Us. It said Toys 'R' Us "policed the manufacturers' sales, and when necessary enforced its policy by taking product off its shelves or not buying product that manufacturers had sold to clubs."
"This settlement is good for all toy buyers, because it protects healthy competition and choice," Miller said, "and it's good because it will get thousands of new toys to needy children and projects like the Marines' Toys for Tots program."
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