Amazon suffers setback in Toys R Us litigation

A court has dealt a blow to's efforts to keep in force a contract with Toys R Us, according to papers filed by with the U.S. Securities and Exchange Commission (SEC) Friday.

Toys R Us sued in 2004, alleging that breached a contract for Toys R Us to sell its products on the Web site. Toys R Us won the case in March this year, after successfully arguing that violated the contract by allowing competing retailers to sell products on its Web site that Toys R Us had a contractual exclusivity for. then filed a motion with the Appellate Division of the New Jersey Superior Court, and sought a stay of the contract's termination, pending a decision on the company's appeal of the March decision to render the contract invalid.

In its filing Friday to the SEC, Amazon said, "since we did not prevail on our stay motion, operating profit could be negatively impacted by as much as US$50 million for 2006 and US$25 million for the second quarter 2006, much of which is due to's failure to pay fees for the second quarter." still believes it will prevail in its appeal, according to the filing.

Meanwhile, in May, Toys R Us announced it is moving forward with its plans to re-launch its online stores, now that the contract with Amazon has been declared invalid. It is partnering with other e-commerce providers and plans to re-launch and in July of this year.

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Juan Carlos Perez

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