Did Babies R Us spend years ripping off parents?
It is that power and how it was used at issue in a class action lawsuit against the chain and its parent Toys R Us.
The lawsuit asserts the company threatened its suppliers -- some of the biggest names in the business -- and forced them to make sure no upstart competitor would beat its prices.
Corporate spokeswoman Jennifer Albano said the company will not comment on pending litigation.
The local Mom and Pop baby stores began disappearing (down from 2,700 to 600 between 1996 and 2002) as Babies R Us began growing. The now 260-store chain, whose locations carry far more products than the local shops, dominated that part of the retail market.
But the growth of e-commerce changed the equation and, according to a 2006 lawsuit filed in U.S. District Court in Philadelphia that was certified by a judge last week for class-action status, caused the company to cheat its competitors and consumers.
In its defense, Babies R Us told the court it would not have lowered its own prices even if Internet retailers began undercutting them, using examples of lapses in some of the pricing agreements. But the plaintiffs countered that despite the periodic lapses, Babies R Us was playing for keeps.
They presented evidence that Babies R Us forced the breast pump company Medela to stop doing business with 17 e-commerce sites. "We discontinued Internet sellers to protect (Babies R Us's) business and margin and therefore accepted considerable legal risk," Medela acknowledged in the judge's ruling.
In her opinion, Judge Anita Brody wrote that the periodic lapses in the price agreements were meaningless because the evidence shows Babies R Us knew it could always impose them again at will. Some of the companies that allegedly cooperated with Babies R Us' scheme were Maclaren, Peg Perego, Britax and the distributor of the Baby Bjorn line.
An added irony to this case is the repeated citing of a prior price fixing case from a decade ago against its parent company, Toys R Us. In that case, the nation's biggest toy store chain was accused of trying to fend off the expansion of warehouse stores, such as Costco, Sam's Club and BJs.