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Saturday, June 26, 2004 - Page updated at 12:20 A.M.
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Amazon suit tells Toysrus: Let's quit

By Monica Soto Ouchi
Seattle Times technology reporter

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Amazon.com yesterday asked a New Jersey Superior Court judge to terminate its long-standing partnership with Toysrus.com and award it damages of more than $750 million.

Toysrus.com, a division of Wayne, N.J.-based Toys R Us, sued Amazon on May 24, alleging it violated a 4-year-old exclusivity agreement by letting other third-party merchants sell toys, games and baby products on the Amazon site.

In a court filing yesterday, Amazon spent little time responding to the claim, saying the dispute could be easily resolved by looking at the agreement, which "gives clear and unambiguous meaning to the words in question."

Rather, it focused most of the filing on a countersuit in which it said Amazon should be allowed to end the partnership because of Toysrus.com's "chronic failure" to meet the terms of the contract.

A Toysrus.com spokesman did not return calls seeking comment.

The countersuit attempts to prick holes in a partnership universally lauded for allowing Amazon and Toysrus.com to remain competitive online at a time when Wall Street began doubting the viability of e-commerce.

Amazon and Toysrus.com agreed in August 2000 to run co-branded toy and baby stores online — a deal that combined the strengths of both retailers and eventually became the cornerstone of Amazon's strategy to expand its selections through partnerships.

Toysrus.com paid handsomely for the right to exclusivity — more than $200 million since the start of the agreement, according to Toysrus' lawsuit.

But in Amazon's counterclaim, the Seattle-based online retailer said Toysrus.com has failed to effectively choose the top toys and baby products and to keep products in stock.

During peak holiday buying weeks last year, Toysrus.com was out of stock on more than 20 percent of its most popular products, the countersuit said.
 
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In the third quarter of last year and the first quarter of this year, Toysrus.com's out-of-stock percentages consistently exceeded 10 percent, the countersuit said.

"Only by enabling more sellers to sell these products — and only by doing so quickly, before the next holiday selling season — can Amazon.com begin to make up for (Toysrus.com's) failures to provide adequate selection and to keep top-selling products in stock," Amazon said.

A hearing is set for July 23 in Superior Court of New Jersey's Chancery Division.

Amazon's shares closed yesterday at $51.80, up 78 cents.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

Copyright © 2004 The Seattle Times Company

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