Toys R Us said it prevailed in a lawsuit against Amazon.com ( AMZN).

Toys R Us, the closely held Wayne, N.J., toy seller, had sued Amazon to void the companies' partnership on grounds that Amazon violated an exclusivity clause. On Thursday, Toys R Us said, a New Jersey court will sever the nearly six-year-old agreement, allowing Toys R Us to set up a rival Web site.

Amazon, which wasn't immediately available for comment, claimed Toys R Us failed to maintain an adequate selection of toys, according to The Wall Street Journal.

"Our goal was to protect the Toys R Us brand while continuing to provide a positive shopping experience for our customers," says David J. Schwartz, Toys R Us' general counsel, in a statement Thursday. "This ruling allows us to do that."

People who go to toysrus.com will no longer be directed to Amazon. In its latest 10-K filing with the Securities and Exchange Commission, Amazon said it would attempt to replace the products supplied by Toys R Us, "but our operating results could be negatively affected."

The verdict is a blow for Amazon, which is struggling with increased competition from both rival online sites and bricks-and-mortar stores including Wal-Mart ( WMT). The company is attempting to expand its product line through digital media including a potential rival site to Apple's ( AAPL) iTunes.

Analysts estimate that Amazon gets about one-third of its profit from retailers that set up shops on its site, according to the Journal. Last year, Circuit City ( CC) ended a similar pact with Amazon.

Shares of Amazon fell $1.07, or 2.8%, to $36.05 early Thursday. They have tumbled 24% this year, driven by concerns about increased competition and the company's disappointing fourth-quarter results.

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