Why American Steel Is Big Again

Économie managériale Articles de Journaux A.13

Toys ‘R’ Us charged with using clout to fix prices A.13 Morton, Peter

THE FINANCIAL POST May 23, 1996

Retailing giant Toys ‘R’ Us Inc. is being accused by the U.S. competition watchdog of using its huge international clout, including that of its Canadian chain, to bully major toy manufacturers and stifle competition.

The Federal Trade Commission yesterday charged that Toys ‘R’ Us, the largest toy retailer in the U.S., tried to fix prices by pressuring manufacturers such as Hasbro Inc. and Mattel Inc.’s Fisher-Price Inc. unit into not selling popular toys to competitors.

This has hurt the growth of warehouse clubs as toy retailers, making it difficult for consumers to compare prices, and left consumers paying higher prices than they otherwise would have had to pay,» said William Baer, director of the FTC’s competition bureau.

Baer said Toys ‘R’ Us used its international buying power to leverage concessions from manufacturers. The company has 299 international stores including 56 in Canada, its largest foreign chain. Its 618 U.S. stores control about 20 % the market. Its total sales last year were US$9.5 billion.

Canada’s Competition Bureau said yesterday it could not disclose whether it had launched its own investigation into Toys ‘R’ Us’ Canadian operation, but added there is a «high degree of co- operation» between it an the FTC.

After signing an international co-operation agreement last August, the Competition Bureau and U.S. agencies have launched a number of joint investigations, said Don Mercer, deputy director of criminal investigations.

The FTC charged that Toys ‘R’ Us used a number of schemes to control the sale and prices of the industry’s hottest-selling toys. Most widely used was a threat to cut off manufacturers who sold to discount clubs.

In addition, it would only allow manufacturers to sell popular items to discounters if the toy was repackaged to be sold at a substantially higher price, the FTC said.

As well, manufacturers were forced to tell the company what toys they were selling to other retailers, giving it a virtual veto over sales, Baer said. «Toys ‘R’ Us was able to stop the steep discounting from going on and was able to prevent comparison shopping that [it] worried would undercut its low-price image,» Baer said.

New Jersey-based Toys ‘R’ Us said it plans to «vigorously contest» the charges, which go before a special FTC administrative judge this summer. «Given the combined impact of the practices of

1 Économie managériale Articles de Journaux A.13 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,» said chief executive Michael Goldstein.

The FTC began its investigation in 1989 when warehouse clubs had about 2 % of the U.S. toy market. That has since slid to 1.5 %, Baer said.

The complaint is the latest in a series of challenges launched by the FTC in recent months. It effectively killed the merger of the country’s two largest drugstore chains and has forced a number of asset sales.

It is also said to be challenging the US$7.5-billion takeover of Turner Broadcasting System Inc. by Time Warner Inc.

QUESTIONS

1. La compagnie Toys  R" Us possède-t-elle un pouvoir de monopole et comment l’utilise-t-elle ?

2. De quelle façon les consommateurs et les concurrents de Toys  R" Us sont-ils affectés par les comportements de la compagnie ?