 |
 |
|
|
|
|
|
|
|
| | | |
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
1
.
STATEMENT
|
EXTRACTED KEY WORDS
TRU TOY CLUBS EVIDENCE AGREEMENT COMPETITORS POLICY COLLEAGUES MAJORITY BOYCOTT ROSSI OPINION TOY RETAILING PRESSURE CONSPIRACY RESPONSES PLAN MATTEL CONTRAST STANDARD ROOFING SCHEME COMMITMENT ACTING REASSURANCES UNIFORM ARZEE MARKET PLAUSIBILITY |
Opinion of Commissioner Orson Swindle,
Concurring in Part and Dissenting in Part
In the Matter of
TOYS "R" US, INC.
Docket No. 9278
I concur in the Commission majority's determination that respondent
Toys "R" Us, Inc. ("TRU"), entered into a series of anticompetitive
vertical agreements with various toy manufacturers, and I join in the
portions of the Commission's order aimed at proscribing the vertical
restraints. In my view, however, the evidence does not support the
majority's finding that some toy manufacturers entered into an
anticompetitive horizontal agreement, and thus I dissent from my
colleagues' conclusion that TRU orchestrated such a horizontal
combination.
The evidence shows that club stores loomed as a small but growing
threat to TRU's status and self-image as the leader in discount toy
retailing. By dint of its powerful position as the indispensable
retail outlet, TRU induced a number of key manufacturers to accede to
its plan to choke off the supply of desirable toys to the clubs.
Pursuant to TRU's vertical agreements with Mattel, Hasbro, Fisher
Price, and others, certain manufacturers began to make toys
unavailable to the clubs -- or available to them only on economically
disadvantageous terms -- and the clubs' once-growing share of toy
retailing began to shrink. A new channel of toy distribution that
promised deep discounts for consumers was imperiled in its infancy,
and TRU was spared downward pricing pressure from the clubs. The
evidence suffices to establish that the series of vertical agreements
between TRU and certain manufacturers had a significant adverse effect
on competition, and I agree with my colleagues that TRU has not
presented persuasive business justifications to the contrary.
The argument for a horizontal combination, on the other hand, lacks a
firm foundation. As the majority makes clear, each manufacturer that
entered into one of the vertical undertakings bowed to TRU's power in
the market for toys. The majority opinion, true to the evidence in
this case, casts TRU in the unmistakable role of the nation's
preeminent year-round, full-line toy retailer -- the one customer
whose patronage many manufacturers considered essential to survival.
It is entirely plausible that particular manufacturers would react to
pressure from TRU by deciding -- on their own -- to disfavor the club
stores. No inference of horizontal agreement is necessary to make
sense of the manufacturers' actions.
SNIPPETS:
|
|
2
.
PITOFSKY COMMISSION OPINION
|
EXTRACTED KEY WORDS
TRU TOY PRICE SELL TOY MANUFACTURERS SUPPLIERS SOLD COMPETITION MEETING MATTEL GODDU RETAILERS POLICY MARKET COMPETITORS IDF UNITED STATES WAREHOUSE CLUBS COMMUNICATIONS TOY COMPANIES FISHER PRICE COMMITMENT VICE PRESIDENT NEGOTIATIONS WHOLESALE CLUB TRADITIONAL TOYS MERCHANDISE VIDEO GAMES EXECUTIVES |
OPINION OF THE COMMISSION
[PUBLIC RECORD VERSION]
By Pitofsky, Chairman:
INTRODUCTION.
Boiled down to essentials, this case is about how Toys "R" Us ("TRU"), the largest toy
retailer in the United States, responded to a new type of competition in toy retailing posed by
wholesale clubs ("clubs"), an innovative class of discount retailers. Instead of meeting this new
competition in the market place, TRU communicated with all the toy manufacturers that supplied
both TRU and the clubs, and induced many suppliers to agree -- with TRU and each other --
either that they would not sell to the clubs at all, or more usually that they would sell on
disadvantageous terms and conditions. TRU's goal was to prevent consumers from comparing
the price and quality of products in the clubs to the price and quality of the same toys displayed
and sold at TRU, and thereby to reduce the effectiveness of the clubs as competitors.
We find that TRU's conduct violates Section 5 of the FTC Act.1 In doing so, we do not
intrude on the right of a trader unilaterally to announce terms on which it will deal with
even if those terms disadvantage a rival. That is a company's long-recognized right under United
States v. Colgate & Co., 250 U.S. 300 (1919), reaffirmed by the Supreme Court in 1984 in
Monsanto Co. v. Spray-Rite Servs. Co., 465 U.S. 752 (1984). What a firm cannot do is (1) agree
with each of its suppliers not to sell or to sell on discriminatory terms to particular
rivals, and (2) organize a boycott of suppliers to put its rivals at a disadvantage. A finding of
illegality is amply justified here. First, TRU's purpose was to eliminate a form of competition
many consumers prefer; second, TRU and the toy manufacturers both had "dominant" market
power; and third, the effect was harmful to competition and consumers.
TRU's principal defense is that it provided valuable services to consumers that the clubs
did not provide, and that it was only by saving on those services that the clubs could unfairly
underprice TRU. The problems with that explanation, the so-called "free-rider defense," are
many: (1) TRU's claimed services are not the type on which a "free-rider" defense is typically
based; (2) TRU was compensated fully or in large part by toy manufacturers for all significant
services it provided; and (3) TRU presents no evidence, beyond speculation, that the clubs' "no-
frills" approach did or would drive valuable services out of the market place -- an essential
element of the "free-rider defense."
If a large toy retailer can engage in the actions pursued by TRU, then any large retailer in
any sector of retailing could do the same, foreclosing competition in what has been over the years
the highly competitive, open and efficient retailing sector of the United States economy. Indeed, a
remarkable irony of this case is that if the law were as TRU contends -- if a large incumbent or
group of incumbent retailers could cut off or encumber a new or innovative entrant's source of
115 U.S.C. § 45.
1
SNIPPETS:
|
|
3
.
FINAL ORDER
|
EXTRACTED KEY WORDS
RESPONDENT SUPPLIER RELATED PRODUCTS COMMISSION TOY DISCOUNTER SELL PURCHASE EMPLOYEES COMPLAINT OFFICER RETAIL FEDERAL TRADE COMMISSION UNDERSTANDING RELATING SALES SWINDLE DIRECTORS SUCCESSORS SUBSIDIARIES PRICES REFUSE COMMERCE ENTERING AGREEMENT PRESSURING FURNISH INTENDS FACILITATING COMMUNICATING |
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
Commissioners:
Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
In the Matter of
TOYS "R" US, INC., a corporation
Docket No. 9278
FINAL ORDER
I.
A. "Respondent" means Toys "R" Us, its directors, officers, employees,
agents and representatives, predecessors, successors and assigns; its
subsidiaries, divisions, and groups, and affiliates controlled by Toys
"R" Us, and the respective directors, officers, employees, agents and
representatives, successors, and assigns of each.
B. "Toy discounter" means any retailer of toys, including but not
limited to membership retail outlets such as Price-Costco, Sam's Club,
and BJ's Wholesale Club, that sells toys at discounted prices.
C. "Toys and related products" means any product that is sold by
respondent.
D. "Commission" means the Federal Trade Commission.
II.
IT IS ORDERED that respondent, directly or indirectly, through any
corporation, subsidiary, division or other device, in connection with
the actual or potential purchase or distribution of toys and related
products, in or affecting commerce, as "commerce" is defined in the
Federal Trade Commission Act, forthwith cease and desist from:
A. Continuing, maintaining, entering into, and attempting to
enter into any agreement or understanding with any supplier to
limit supply or to refuse to sell toys and related products to
any toy discounter.
B. Urging, inducing, coercing, or pressuring, or attempting to
SNIPPETS:
|
|
4
.
COMPLAINT
|
EXTRACTED KEY WORDS
CLUBS TRU SUPPLIER COMMISSION COMPLAINT PARAGRAPH RESPONDENT MANUFACTURERS ACT SELL PRICES COMPETITION FEDERAL TRADE COMMISSION RETAILERS RELATED PRODUCTS SALES PRACTICES TOY DISCOUNTER SOLD UNDERSTANDINGS RELATING AGREEMENTS LAW DISTRIBUTION CHARGES INDIVIDUAL TOYS CLUB SPECIALS ALLEGATIONS FACTS |
9410040
B195481
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
In the Matter of
Toys "R" Us, Inc., a corporation.
DOCKET NO. 9278
COMPLAINT
Pursuant to the provisions of the Federal Trade Commission Act, and by
virtue of the authority vested in it by said Act, the Federal Trade
Commission, having reason to believe that Toys "R" Us, Inc., a
corporation (sometimes referred to as "TRU" or "respondent"), has
violated the provisions of said Act, and it appearing to the
Commission that a proceeding by it in respect thereof would be in the
public interest, hereby issues its complaint, stating its charges as
follows:
PARAGRAPH ONE: Respondent Toys "R" Us, Inc. ("TRU") is a corporation
organized, existing, and doing business under and by virtue of the
laws of Delaware, with its principal office and place of business at
461 From Road, Paramus, New Jersey 07652.
PARAGRAPH TWO: TRU is the largest toy retailer in the United States.
It has approximately 600 stores located throughout the United States
and 300 stores in foreign countries, which sell toys, infant supplies
and equipment, juvenile sporting goods and related items ("products").
In 1995 its total sales were approximately $9.4 billion.
PARAGRAPH THREE: TRU's acts and practices, including the acts and
practices alleged herein, are in or affect commerce as "commerce" is
defined in the Federal Trade Commission Act.
PARAGRAPH FOUR: TRU's importance as a provider of distribution to
manufacturers of toys and related products has given it the ability to
exercise market power over those manufacturers, and TRU has exercised
this power.
PARAGRAPH FIVE: Warehouse clubs ("clubs") charge a membership fee and
retail a broad variety of products, including toys and other products
sold by TRU. The clubs operate on lower margins than TRU or other
national chain discounters. During the late 1980's and early 1990's,
club sales were growing at a much faster rate than other retailers.
SNIPPETS:
|
|
5
.
INITIAL DECISION
|
EXTRACTED KEY WORDS
TOY MANUFACTURERS SALES WAREHOUSE CLUBS TRU MATTEL RETAIL GODDU HASBRO UNITED STATES PRICE SELL ESQ COMPLAINT SELLING COMPETITORS VERRECCHIA FEDERAL TRADE COMMISSION RESPONDENT COMPETITION MERCHANDISE RETAILERS CUSTOMERS PRESIDENT CX-1 HALVERSON GOLDSTEIN FISHER-PRICE AGREEMENT |
PUBLIC RECORD VERSION
UNITED STATES OF AIMERICA
BEFORE FEDERAL TRADE COMMISSION
DOCKET NO. 9273
In the lMatter of
TOYS "R" US
a corporation.
INITIAL DECISION
James P. Timony
Administrative Law Judge
Date: September 25, 1997
--
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
SNIPPETS:
|
|
|
| | | |
|
|
