Toys 'R' Us, the $1 billion discount firm, today filed suit against General Mills Inc. and its Izod subsidiary and against Federated Department Stores Inc., the retail giant, charging that the firms are conspiring to hamper its efforts to move into the children's clothing field.
The suit, which is certain to have wide implications for the burgeoning discount clothing business, charges that a General Mills decision barring Izod, maker of the popular products with the alligator emblem, from selling to the new Kids 'R' Us clothing subsidiary is an effort to limit competition and fix prices.
Through a distributor, Izod wrote to the discounter on Aug. 17 saying that it had made a "unilateral decision" to close its accounts with the Toys 'R' Us firm.
The suit asks for triple damages of $9 million and an injunction barring the defendants from continuing the practices.
Moreover, the lawsuit charges that Federated has violated antitrust laws by publicly warning manufacturers that it will not purchase goods from those who sell to discount retailers like Kids 'R' Us
Besides Bloomingdale's and the clothing chain Children's Place, Federated's 500-store holdings also include its own discount children's clothing chain.
Filing of the suit comes at a time of raging debate within retail circles about manufacturing and distribution practices toward discounters. According to sources, the Federal Trade Commission is conducting at least two investigations of these practices and is studying remarks by a Federated official that indicated the company would no longer buy from manufacturers whose products are sold in both conventional department stores and discount stores.
Congress and the FTC have both been pressed by discounters to take action against these alleged vertical price-fixing practices, but Reagan administration appointees at both the FTC and the Justice Department have not moved on the matter.
Charles Lazarus, founder and chairman of Toys 'R' Us Inc., said in an interview that, although his new clothes venture could function without Izod products, the suit was brought to make a point about the retail environment. "We're doing this to protect the nearly 100 percent of the manufacturers who are selling to us," Lazarus said. "The message is clear: Why should consumers get ripped off?"
Kids 'R' Us, the discount venture patterned in pricing policies after the toy chain, has opened two "pilot" stores in the New York City vicinity and plans to open more stores next year in what is likely to be a nationwide program.
Both targets of the lawsuit denied the charges. Federated issued a brief statement saying the company complies with federal antitrust laws and "will vigorously defend" itself.
General Mills issued a lengthier response, saying the suit's intent is to challenge the company's "basic right" to maintain a long-standing policy of "selective distribution." The company added that it intends to continue selling to companies that "present an image of fashion leadership and status." Noting that it sells Izod-labeled products to about 12,000 accounts, the company called the conspiracy charge "absurd."