Toys 'R' Us Pays $1.3 Million Fine to FTC: Broke Price-Fixing Agreement

toys r usToys "R" Us, Inc. agreed to pay a $1.3 million penalty to settle Federal Trade Commission allegations it violated a 13-year-old order banning it from manipulating the U.S. toy market to maintain artificially high prices and restrict competition.

The 1998 order bans the nationwide toy retailer from pressuring suppliers to limit the supply of toys or from doing business with cut-rate competitors. The order also bars Toys "R" Us from asking suppliers about their sales to toy discounters, and requires the company to preserve records of communications with suppliers related to their sales and distribution.The $1.3 million fine arose from FTC accusations that between 1999 and 2010, Toys "R" Us violated the order by complaining to suppliers about discounting of their products, requesting information from them about their supplies to competitors and failing to keep records of these communications.

These anti-competitive actions are prohibited by the 1998 order, which was issued after the FTC learned Toys "R" Us abused its dominant market position to extract agreements from toy manufacturers to prevent sales of identical toys to competing warehouse clubs.

"This case reaffirms the importance of complying with all aspects of a Commission order," Richard A. Feinstein, Director of the Bureau of Competition, said in a statement. "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."

Specifically, the recent FTC complaint against the company accused Toys "R" Us of protesting to manufacturers through its Babies "R" Us subsidiary about discounts competing retailers were giving consumers, which it said could induce them to limit supplies or refuse to sell their products to toy discounters. The FTC said Toys "R" Us also requested information from manufacturers about their supply of products to toy discounters.

Finally, despite a promise to maintain records of communications with suppliers, the FTC said Toys "R" Us deleted the emails of all former employees from December 1998 until at least May 2010, including those it was required to keep under the 1998 order.

In its initial 1996 complaint, the FTC accused Toys "R" Us of using its market share to preserve high toy prices and reduce toy outlet choices for consumers. Toys "R" Us, the FTC said, pressured toy manufacturers to stop selling certain toys to warehouse clubs. It also forced them to put some toys into more expensive combination packages to prevent consumers from getting better deals or easily comparing prices.

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