Amazon.com will pay Toys R Us $51 million to settle a 5-year-old lawsuit over an agreement once touted as a way to strengthen both of their positions online. The settlement will be paid in the third quarter, and then all claims and counterclaims will be dismissed.
Their failed partnership ended three years ago, and now their legal dispute has, too.
Amazon.com said Friday it will pay Toys R Us $51 million to settle a 5-year-old lawsuit over an agreement once touted as a way to strengthen both of their positions online.
The settlement will be paid in the third quarter, and then all claims and counterclaims will be dismissed, Amazon disclosed in a regulatory filing.
In 2000, Seattle-based Amazon and Toysrus.com, a division of Wayne, N.J.-based Toys R Us, entered into an agreement that was supposed to last through 2010, giving Toys R Us exclusive rights to sell some products on Amazon’s Web site.
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For Amazon, the deal was seen as the cornerstone of a new strategy to expand through partnerships rather than trying to sell everything itself. For Toys R Us, it provided access to a major online-sales channel.
Four years later, Toys R Us sued Amazon in New Jersey Superior Court, accusing Amazon of violating their agreement by letting other third-party merchants sell toys, games and baby products on its site. Amazon countersued, citing a “chronic failure” by Toys R Us to keep items in stock.
In a strongly worded 133-page judgment, New Jersey Chancery Court Judge Margaret Mary McVeigh ruled in 2006 that Amazon had breached the agreement and damaged Toys R Us’ unique position and ability to plan or craft strategies.
The two companies ended their online partnership, but the legal dispute continued.
This past March, a three-judge state Appeals Court panel directed the lower court to reconsider Toys R Us’ damage claims, while denying Amazon’s claims.
Amazon disclosed in April that Toys R Us was seeking damages of about $93 million, which it called “grossly overstated,” and expressed interest in appealing to the New Jersey Supreme Court.
Neither Amazon nor Toys R Us would comment about the settlement.
For the first quarter ended March 31, Amazon made a profit of $177 million, up 24 percent from a year ago, on sales of $4.9 billion. As of March 31, the company had $1.7 billion in cash and equivalents.
Privately held Toys R Us was acquired by three buyout firms in 2005.
Amy Martinez: 206-464-2923 or firstname.lastname@example.org