The New York Times - October 15, 1998

F.T.C. Tells Toys 'R' Us to End Anticompetitive Measures

By JOEL BRINKLEY

WASHINGTON -- The Federal Trade Commission on Wednesday unanimously upheld a 1997 ruling by an administrative law judge that Toys 'R' Us, the nation's largest toy retailer, had colluded with manufacturers to prevent competing retailers from offering toys at lower prices.

The commission's opinion, written by FTC Chairman Robert Pitofsky, found that Toys 'R' Us had "used its dominant position as toy distributor to extract agreements from and among toy manufacturers to stop selling to warehouse clubs the same toys that they had sold to other toy distributors."

The FTC ordered the company to stop engaging in the illegal practices.

Toys 'R' Us spokeswoman Rebecca Caruso said: "We're disappointed but not completely surprised. We thought it would be highly unlikely that the FTC would overturn an opinion from their own administrative law judge" -- James Timony. Ms. Caruso said that the company would immediately appeal the decision to a U.S. Court of Appeals.

Toys 'R' Us, which is based in Paramus, N.J., and operates about 650 stores nationwide, is estimated to have about 30 percent of the nation's toy business. It also operates 300 stores in foreign countries.

The government first filed a complaint against the company in 1996, contending that Toys 'R' Us was using its dominant market position to eliminate competition from warehouse price clubs, like Price/Costco and the Sam's Club arm of Wal-Mart Stores.

The complaint also accused the company of pressuring toy manufacturers to stop selling popular models to competing retailers.

In examples cited by the government, Hasbro Inc. refused to sell Hall of Fame GI Joe dolls directly to the warehouse clubs, and Mattel Inc. declined to sell them Fisher Price pool tables.

October 15, 1998