Amazon Hits Back at Toys "R" Us

Amazon.com (AMZN Quote) has fired back at Toys "R" Us (TOY Quote) in the companies' dispute over a marketing agreement, charging in a counter-suit that the toy retailer broke the agreement and is asking for damages in excess of $750 million.

Toys "R" Us did not live up to its obligation under the disputed deal to identify hundreds of top-selling toys and baby products, Amazon charged. The toy chain also failed to keep Amazon's virtual shelves stocked, especially during the holiday season, Amazon said in its complaint.

Toys "R" Us' "chronic unwillingness or inability .... to offer a comprehensive selection of top-selling toys and games and baby products on the Amazon.com Web site, and to keep those items in stock .... causes real harm to Amazon," the e-tailer alleged in its counter-suit. "Such harm includes lost product sales revenue, damage to Amazon.com's brand, and Amazon.com's inability to offer a comprehensive .... selection of products."

Amazon.com representatives declined to comment about the counter-suit.

"We believe this counterclaim has no merit," Toys "R" Us spokeswoman Susan McLaughlin said in a statement.

McLaughlin declined to comment further, saying that the two companies are currently in mediation.

Amazon began hosting Web stores for Toys "R" Us in 2000 as part of a 10-year agreement. The deal was the first major alliance Amazon struck with a brick-and-mortar retailer. Since then, the company has signed deals with Target (TGT Quote), Circuit City (CC Quote) and other companies to host their online stores.

In a suit filed last month, Toys "R" Us charged that Amazon had violated their agreement. The toy retailer claimed that Amazon had promised the company that it would be the exclusive vendor of toys, games and baby products on its site under that deal. But Toys "R" Us claimed that Amazon had since allowed rival toy sellers to offer thousands of competing products on its site.

As part of its suit, Toys "R" Us claimed some $200 million in damages.