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Amazon Countersues Toys R Us
Online Retailer Wants to Scrap Four-Year Partnership

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  Toys R Us chief executive John Eyler, left, and Jeff Bezos, his counterpart at Amazon, had high hopes as they set up the online toy partnership in 2000. (Stuart Ramson -- AP)


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By Jeffrey Gold
Associated Press
Tuesday, June 29, 2004; Page E05

NEWARK, June 28 -- Online retailer Amazon.com, responding to a lawsuit by Toys R Us Inc., is seeking to dissolve their partnership, citing a "chronic failure" by the nation's No. 2 toy seller to adhere to their contract.

Seattle-based Amazon.com suggested it should be awarded at least $750 million as compensation for lost shipping revenue and other costs, in a countersuit filed Friday in state Superior Court in Paterson, N.J.

"We believe this counterclaim has no merit," Susan McLaughlin, a spokeswoman for Wayne, N.J.-based Toys R Us, said Monday. "We are currently engaged in mediation and have agreed to avoid additional commentary."

The filing was reported Saturday by the Seattle Times.

Toys R Us subsidiary Toysrus.com sued Amazon.com in May, charging that the Web-based retailer violated exclusivity terms by selling, and letting others sell, products that their agreement required to be sold only by Toys R Us.

Toys R Us claimed it paid $200 million over four years for the privilege of having competitors kept off the Web site.

In its response, Amazon.com said their agreement provides exceptions that allow Amazon.com and others to compete for sales of toys, games and baby products.

For instance, Amazon.com said that the deal allowed other vendors to sell such products on its Web site on terms available to the general public and that those are not subject to exclusivity.

Amazon.com charged that Toysrus.com demonstrated a "chronic unwillingness or inability" to meet its contractual obligation to offer a comprehensive selection of top-selling toys, games and baby products.

It claimed that Toysrus.com was out of stock of the most popular items during the critical holiday buying season, hurting efforts to compete with Wal-Mart Stores Inc., the nation's top toy seller.

Both Amazon.com and Toys R Us seek a judgment that the other is violating the agreement.

Toys R Us seeks unspecified monetary damages for breach of contract, or a ruling that would void the contract and force Amazon.com to return the $200 million.

With the signing of the deal in August 2000, Toysrus.com stopped selling products through its own site to join the Amazon.com site, Toys R Us said.

Toys R Us shares fell 38 cents to close at $16.18 Monday on the New York Stock Exchange, while Amazon.com shares rose $1.59, or 3.1 percent, to close at $53.39 on the Nasdaq Stock Market.


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