Amazon.com Case Study
1) Toys “R” Us stated that the agreement with Amazon was that they were to be sole sellers of toys, games, and baby products on Amazon. Amazon claimed Toys “R” Us failed to deliver that promise. Amazon also argued that Toys “R” Us had a different interpretation of the word, exclusivity. In 2001, Amazon made a partnership with Target. Toys “R” Us complained to Amazon stating that this deal was counteracting their agreement.
Amazon argued back that Target wasn’t allowed to sell toys, games or baby products on Amazon. com According to both companies Toys “R” Us wanted to change the fee structure of their partnership so Toys “R” Us could become profitable of its section on Amazons site. Amazon agreed to give Toys “R” Us an annual fee of $50 million, which was paid to Toys “R” Us in 2001. In 2002 a memo was conducted which stated Amazon wanted to expand its toys section, knowing Toys “R” Us would be upset about this decision.
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The memo also stated that Toys “R” Us would more then likely take legal action if this occurred. In 2003, Toys “R” Us noticed other companies selling toys and baby products on Amazon. Amazon offered to share the profits, Toys “R” Us refused. Amazon said there was a provision, which allowed them and other companies to sell up to 3. 5% of toys, games and baby products. Toys “R” Us disagreed. Amazon stated that the contract stated that they were allowed to sell products that Toys “R” Us didn’t offer.
Later in 2003 Amazon told Toys “R” Us that a wide section would increase sales, Toys “R” Us agreed to negotiate, which they never could come to a compromise. Toys “R” Us asked Amazon for a calculation in sales to see if they went over their 3. 5% limit, Amazon failed to do so. In 2004, Toys “R” Us decided to sue Amazon for $74 million in damages. Amazon countersued saying Toys “R” Us failed to keep products in stock, which the agreement stated it would. Amazon countersued for $4. 71 million in damages.
The judge ruled to allow Amazon to add new toys and baby retailers, but not allowing them to sell the same products as Toys “R” Us. Also allowing Toys “R” Us to start selling any product it wanted to stop other companies from doing so. Amazon was fined $18,000 for violating this order. In 2005 investors bought Toys “R” Us for $6. 6 million, owning all of the company. This didn’t change any of Amazon and Toys “R” Us’ agreement lawsuit. I feel that Toys “R” Us should have been made to go solo, destroying any and all contract agreements in had with Amazon