Toys R Us Sues Amazon.com

The online unit of Toys R Us (TOY) has filed suit against Amazon.com (AMZN), charging the e-commerce leader with violating the terms of their marketing agreement and claiming some $200 million in damages.

In a suit filed Friday in state Superior Court in Paterson, N.J., Toysrus.com, the toy retailer's online division, alleges that Amazon promised that it would be the exclusive vendor of toys, games and baby products on Amazon's Web site under a 10-year deal. But Toysrus.com charges that rival retailers are now offering some 4,000 products on Amazon in those categories.

Amazon hosts and handles fulfillment for the Toysrus.com and Babiesrus.com Web stores as part of the deal the companies signed in 2000.

"We expect Amazon.com to respect its contract with us and to support our position especially, since we pay a very high fee to maintain this exclusivity," said David J. Schwartz, Toys R Us' general counsel, in a statement. "We would be happy to compete with other vendors in these categories, but we are not willing to pay for exclusivity that we are not receiving."

Greg Ahearn, the general manager of Toysrus.com, estimated that since 2000, when his company struck its deal with Amazon, Toys R Us has paid Amazon about $200 million for its exclusivity rights. Through its suit, Toysrus.com is seeking to have Amazon repay that amount. Toysrus.com is asking the court to rule that Amazon is in violation of their agreement and is seeking to block Amazon from launching a new initiative that would allow any vendor to sell products in Amazon's games, toys and baby products areas.

Toysrus.com's charges are "without merit," said Amazon spokeswoman Patty Smith.

"We are relentlessly focused on increasing selection for customers consistent with our contractual commitments. Among other things, we believe we can have multiple sellers in the toy category, increase selection, and offer products that [Toysrus.com] doesn't have," Smith said.