Amazon suffers setback in Toys R Us litigation

A court has dealt a blow to Amazon.com's efforts to keep in force a contract with Toys R Us, according to papers filed by Amazon.com with the U.S. Securities and Exchange Commission (SEC) Friday.

Toys R Us sued Amazon.com in 2004, alleging that Amazon.com breached a contract for Toys R Us to sell its products on the Amazon.com Web site. Toys R Us won the case in March this year, after successfully arguing that Amazon.com violated the contract by allowing competing retailers to sell products on its Web site that Toys R Us had a contractual exclusivity for.

Amazon.com then filed a motion with the Appellate Division of the New Jersey Superior Court, and sought a stay of the contract's termination, pending a decision on the company's appeal of the March decision to render the contract invalid.

In its filing Friday to the SEC, Amazon said, "since we did not prevail on our stay motion, operating profit could be negatively impacted by as much as US$50 million for 2006 and US$25 million for the second quarter 2006, much of which is due to Toysrus.com's failure to pay fees for the second quarter."

Amazon.com still believes it will prevail in its appeal, according to the filing.

Meanwhile, in May, Toys R Us announced it is moving forward with its plans to re-launch its online stores, now that the contract with Amazon has been declared invalid. It is partnering with other e-commerce providers and plans to re-launch www.toysrus.com and www.babiesrus.com in July of this year.

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