Welcome to the Department of Justice, Iowa Attorney General Tom Miller

For immediate release -- Thursday, December 10, 1998.
Contact Bob Brammer - 515-281-6699

Toys for Antitrust

Miller: Hasbro will provide more than 4,700 new toys to "Toys for Tots" in Iowa under settlement of an antitrust case.

DES MOINES-- Attorney General Tom Miller said Thursday that toy maker Hasbro Inc. will contribute 4,730 toys by Dec. 16 to the Marine Corps "Toys for Tots" holiday program in Iowa as a result of a multi-state antitrust case involving Toys 'R' Us and four major toy manufacturing companies, including Hasbro.

"Toys 'R' Us is the nation's largest toy retailer and sells billions of dollars of toys every year," Miller said. "It has enormous market power. Our suit alleges that Toys 'R' Us pressured the four toy makers to restrict sales of their most popular product lines to other retail competitors, especially warehouse clubs. We allege that's an antitrust violation that stifles price competition and reduces consumer choice."

Hasbro settled its portion of the case with Iowa and 43 other states. The antitrust case, which was filed Nov. 17, 1997, in federal court in Brooklyn NY, continues with the other defendants: Toys 'R' Us, Mattel, Inc., Little Tikes Company, Inc., and Tyco Industries Inc. (Tyco has been acquired by Mattel.)

The Hasbro settlement is valued at $5.95 million -- including $3.57 million in toys that will be allocated to the states proportionally on the basis of population. Iowa's share is $37,838 in toys, or an estimated 4,730 toys. The toys are to be delivered to the Marine Corps Toys for

Tots centers in Des Moines and Cedar Rapids December 14 to 16. The settlement also provides $2.38 million in cash payments to the states.

The states' suit alleges that Toys 'R' Us brokered an illegal agreement among the four major toy manufacturers to ensure that "warehouse clubs," such as Sam's Club, could obtain certain popular toys only in "combination packs," which cost consumers more and whose prices could not be compared easily with items sold by Toys 'R' Us.

"We allege that had two anti-competitive results," Miller said. "Toys available to the clubs were more expensive, and consumers found it difficult to compare prices between the clubs and Toys 'R' Us," he said.

"In our system, consumers depend on competition among retailers," Miller said. "Good service and the lowest possible prices depend on competition, and consumers need to be able to make authentic price comparisons from one store to the next. We allege that Toys 'R' Us used its enormous market power to pressure the toy makers and thus undermine these principles."

The Hasbro settlement does not affect the continuing suit against Toys 'R' Us and the remaining toy manufacturers.

The complaint filed last year by the states noted that Toys 'R' Us had cultivated a public image as a toy discounter with every-day low prices, but that in the early 1990s warehouse clubs were emerging as a major competitor in toy sales. The complaint alleged that Toys 'R' Us feared the clubs would force down prices "and that consumers would draw unfavorable comparisons" with Toys 'R' Us prices on a toy-for-toy basis.

The complaint said: "Toys 'R' Us top executives undertook a systematic campaign to use its market power to prevent its suppliers from selling certain toy products to warehouse clubs. To achieve this goal, Toys 'R' Us orchestrated understandings with and among its most significant toy suppliers not to sell the clubs individual toys that were sold to Toys 'R' Us."

The complaint said Toys 'R' Us "policed the manufacturers' sales, and when necessary enforced its policy by taking product off its shelves or not buying product that manufacturers had sold to clubs."

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