Signed in August 2000, the agreement between the companies gave exclusive rights in the toy, game and baby products categories on the Amazon.com site to Toysrus.com, according to the latter. The contract is due to last until 2010.
On the strength of the agreement, Toysrus.com stopped selling products through its own site, and is paying a high price for the privilege – $50 million a year for the ten year duration of the contract, according to a New York Times report.
But Toysrus.com sued Amazon.com, accusing it of breaching the exclusivity part of the deal.
As David Schwartz, Senior Vice President and General Counsel for Toys "R" Us, said at the time: "As of May 17, 2004 there were more than 4,000 products in exclusive categories being offered through competitive retailers on the Amazon.com platform. This violates the letter and spirit of our agreement. We would be happy to compete with other vendors in categories, but we are not willing to pay for exclusivity that we are not receiving."
"We expect Amazon.com to respect its contract with us and to support our position especially since we pay a very high fee to maintain this exclusivity," he added.
Amazon.com has in turn asked the New Jersey Superior Court to dissolve the agreement.
According to the Seattle Times, Amazon.com sued on Thursday, accusing Toysrus.com of a "chronic failure" to comply with the contract terms by failing to have sufficient products in stock, or to choose the top selling toys.
In peak buying weeks during 2003, said Amazon.com, over 20% of the top selling products were out of stock.
According to the Seattle Times, Amazon.com explained:
"Only by enabling more sellers to sell these products — and only by doing so quickly, before the next holiday selling season — can Amazon.com begin to make up for [Toysrus.com's] failures to provide adequate selection and to keep top-selling products in stock,"