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Toys “R” Us Puts Pressure On Suppliers

Parents, given the prices of baby strollers and other fashionable and necessary baby products, does this news come as a surprise?

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Toys “R” Us on Tuesday agreed to pay the Federal Trade Commission a $1.3 million civil penalty for violating a 1998 order that prohibits it from asking any supplier about its sales to any toy discount store or urging a supplier to refuse to sell to a discounter.

In its complaint, the FTC alleges that the retail giant’s unit Babies “R” Us asked for information from several suppliers – including distributors of breast pumps, high chairs, strollers and car seats – and complained to those suppliers about discounts other retailers were giving to customers.

Here’s why consumers should be concerned: the FTC says these kinds of complaints could lead those suppliers “to limit supply or refuse to sell their products to toy discounters.” Importantly, however, the FTC did not find evidence that Toys “R” Us entered into agreements with those suppliers that violated the 1998 order.

But that order goes back to an administrative complaint in 1996 when the FTC alleged that Toys “R” Us used its power as a dominant player to keep prices higher and reduce toy outlets by extracting agreements from manufacturers to stop selling certain toys to warehouse clubs like CostCo or to put toys into what the FTC calls more expensive “combination packages”.

Toys “R” Us spokeswoman Kathleen Waugh declined to comment on the original FTC complaint against the company, but on the latest fine by the FTC she says, “We are pleased that this matter is fully resolved and is now behind us.”

However, fuzzy questions remain. Why was Babies “R” Us complaining to suppliers? And why were no records kept for all to see?

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About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.

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