Toys R Us Under Investigation by FTC For Baby Product Price Fixing
Toys R Us is under investigation by the Federal Trade Commission for possible antitrust violations. The FTC is looking into allegations that the toy retailer used its market power to stifle discounting and force consumers to pay more for baby products. The company was ordered eleven years ago to stop engaging in anticompetitive tactics, according to The Wall Street Journal and some believe that the company is up to its old tricks once again.
Last time, the company got in trouble for strong-arming toy makers into boycotting Costco. The FTC put a stop to it. This time Toys R Us is accused of price fixing in connection with breast pumps, strollers, car seats and high chair. Breast pump price fixing? Taking advantage of nursing mothers? How low can you go? Apparently pretty low, according to incriminating emails the WSJ got ahold of.
The probe is a signal that federal enforcers are taking a more aggressive role in one of the most contentious issues in retailing: whether manufacturers and retailers can agree to set a minimum retail prices on products.
FTC investigators are expected to review numerous emails exchanged among Babies R Us and various manufacturers.
One set of email exchanges filed in a class-action case appears to show Babies R Us urging the Britax Childcare unit of Carlyle Group LLC to get Target Corp. to raise prices. The subject field in the email exchanges said: "Target has not raised prices."
"Did Target commit to you when they will raise their prices?" Cesar Garcia, director of merchandising at Babies R Us, allegedly asked in an email dated Jan. 6, 2006.
According to the emails, a couple of hours later, Scott Doerstling, a Britax representative at the time, allegedly responded: "Target said they would honor the new MSRP's [Manufacturer Suggested Retail Price] ... please be assured that Britax's goal is to have uniform MSRP's in the market place."
Five days later, according to court records, Mr. Doerstling allegedly sent another email to Mr. Garcia reassuring him that "We are in communications with them [Target]. We understand your position and are doing what we 'legally' can do to ensure MSRP harmony in the marketplace."
It's all very dramatic, with allegations of intimidation and threats. Apparently the baby product world is just one big Sopranos episode.
Other documents indicate that Babies R Us canceled orders from Swiss company Medela Inc. of Switzerland because the company didn't enforce pricing agreements with Internet retailers. Medela buckled under the pressure and stopped selling to Internet retailers. And it just gets worse from there.
Price fixing is unethical, and illegal under federal law. This probe is just getting started. Toys R Us denies any wrongdoing.
