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A federal judge has granted class action suit to a consumer case that accuses Toys ‘R’ Us of coercing manufacturers to prevent discounting by e-retailers. The case raises similar issues to those in a suit filed by BabyAge.com and Baby Club of America.
A federal judge has handed an important victory to consumers suing over minimum pricing policies, an issue that has sparked a similar suit by two online retailers.
Judge Anita Brody of the Eastern District of Pennsylvania yesterday awarded class action status to a suit brought by consumers against the Babies ‘R’ Us unit of multichannel retailer Toys ‘R’ Us and several manufacturers of strollers and other baby products. The suit makes similar claims of antitrust violations as a companion action filed by e-retailers BabyAge.com Inc. and Baby Club of America, which sells at BabyCatalog.com.
In both cases, the plaintiffs argue that Toys ‘R’ Us pressured the manufacturers to impose minimum pricing rules to prevent online retailers from undercutting the prices charged by the retail chain. The two cases have been joined for the purposes of discovery and certain legal motions.
While Brody’s ruling does not have a direct impact on the e-retailer’s suit, Elizabeth Fegan, the attorney for the plaintiffs in the consumer suit notes that both cases are before the same judge. “She’s overseeing the same evidence, so to the extent something good happens in one case it’s a win for the whole,” she says.
Fegan, a partner in the law firm of Hagens Berman Sobol Shapiro LLC, says the judge could set a trial date in 2010. She says it’s not been decided whether the suits will be tried together. The consumer plaintiffs have not yet specified the monetary damages they are seeking in the suit.
BabyAge.com, No. 280 in the Internet Retailer Top 500 Guide, and Baby Club of America argue in their suit that minimum pricing rules-which bar retailers from selling below a price set by a manufacturer-hurt e-retailers whose low overhead allows them to sell at lower prices than retail chains. However, not all online retailers support their position, with some arguing that minimum pricing policies help maintain profit margins.
It had been automatically illegal for manufacturers to set minimum prices until a U.S. Supreme Court decision in 2007 in a case known as Leegin. In that decision, the high court ruled that minimum price policies can benefit consumers in certain instance, such as by enabling retailers to offer better service, and said each policy should be considered on its own merits. Since that decision, some online retailers say many more manufacturers have imposed minimum prices.
Toys ‘R’ Us is No. 39 in the Internet Retailer Top 500 Guide.