ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, May 23, 1996 TAG: 9605230062
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: JANET L. FIX KNIGHT-RIDDER/TRIBUNE
THE NATION'S TOP TOY RETAILER bullies toy makers into only selling more expensive "deluxe" toy versions to competitors, the government says.
Toys `R' Us doesn't play fair and has cheated millions of consumers by conspiring to hold prices high and keep the most popular toys for itself, the Federal Trade Commission charged Wednesday.
The FTC accused the nation's top toy retailer of violating antitrust laws by bullying four major toy makers into deals that keep some toys from being sold at warehouse stores such as Sam's and Price Club. In other instances, the FTC charged, toys were packaged so they cost more when sold by discounters.
Toys `R' Us has used its clout to force Mattel, Hasbro and other toy makers into arrangements that cut out competition and ``forced consumers to pay more than they otherwise would have for toys,'' said William J. Baer, director of the FTC's bureau of competition.
Baer would not estimate how much extra consumers may have paid for toys. But he said they continue to pay higher prices, because the deals Toys `R' Us began cutting in 1989 are ``still in effect and hurting consumers.''
Baer offered this example of how consumers pay more: Hollywood Barbie sells for $10.99 at Toys `R' Us. It sells for $15.99 at warehouse clubs, where it's available only in the ``deluxe'' version. The extra $5 buys a plastic stencil and a gold lame bath outfit for Barbie.
Toys `R' Us controls the biggest share of toy sales; $1 of every $5 of the $19 billion a year Americans spend on toys. It dwarfs its competitors, including warehouse clubs that share 2 percent of toy sales. That share would be bigger, the FTC argues, if Toys `R' Us had not used deals with toy makers to keep discounters from growing.
Toys `R' Us contends its agreements are legal. Michael Goldstein, the company's chief executive, said in a statement that the company's buying practices were designed to protect its big stake in the toy industry - not bully toy makers.
``For over 25 years, customers have benefited from Toys `R' Us' commitment to quality, choice and value - and they continue to do so,'' Goldstein said.
``Given the combined impact of the practices of warehouse clubs, our own contribution to the industry and the intensity of the competition in our marketplace, we reserve our unquestionable right to refuse to carry the same items as warehouse clubs,'' he said.
But the FTC contends Toys `R' Us crossed the line by essentially demanding ``veto power'' over which retailers toy makers sold to, and by promising toy makers reluctant to agree to the deals that other competitors would follow suit.
Baer said Toys `R' Us made the deals because ``discounters were hurting its image.''
Toys `R' Us promotes itself as having ``lower prices'' and a ``bigger selection - guaranteed'' than its competitors.
But in recent years, mass-market retailers such as Kmart and deep price discounters such as Price Club have eroded Toys `R' Us' profit margins - and its ability to make that claim.
``Toys `R' Us does not have the lowest retail prices among national toy retailers, which include Kmart, Wal-Mart and others,'' Baer said. What it does have is ``the power to get manufacturers to stop selling popular toys to discounters.''
The outcome of the FTC action could affect other big toy sellers such as Kmart and Wal-Mart, said John G. Taylor, toy analyst for Arcadia Investments in Portland, Ore.
``Every toy vendor explores exclusivity deals ... because all want toys that they can use to bring customers into their store alone,'' Taylor said. ``The toy business is so cutthroat, retailers even sell toys below cost. They have to to survive.''
LENGTH: Medium: 79 lines ILLUSTRATION: PHOTO: AP 1. William Baer, director of the Federal Tradeby CNBCommission's Bureau of Competition, holds up a Barbie doll Wednesday
to announce antitrust charges against Toys `R' Us. 2. (chart).
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