Class Action Claims Babies ‘R’ Us Fixes Prices

(CN) - Babies "R" Us bullied its manufacturers to fix resale prices on "high-end" baby products, such as strollers, car seats, breast pumps and bedding, to "thwart" competition from Internet retailers, according to an antitrust class action in Philadelphia Federal Court. "As part of their agreement with [Babies "R" Us], the manufacturers ... demonstrated their compliance by threatening, intimidating, individually negotiating with, cajoling, exhorting and requiring that the retailers raise and maintain retail prices at the manufacturers' suggested retail price," the complaint states. But Babies R Us allegedly exempted itself from its own guidelines.

The class claims consumers were forced to pay inflated prices due to Babies R Us's scheme.

Babies "R" Us, a branch of Toys "R" Us, opened in 1996 with six stores, bought 76 baby superstores in 1997 and grew at an average rate of 15 stores per year between 1998 and 2009, the class claims.

"A 2006 market research report called '[Babies "R" Us] the mightiest infant-specialty retailer on the planet,'" which gave it "great influence" over manufacturers, the class claims. It adds, "manufacturers could experience enormous sales growth simply by selling to" Babies "R" Us.

But with profits threatened by Internet competitors, Babies "R" Us began pushing its manufacturers to set minimum price guidelines for its competitors, doggedly monitoring other retailers' product pricing, the class claims. The class says that Babies "R" Us would refuse to sell certain manufacturers' products or cancel orders if it discovered that other retailers were offering discounts.

"Internet retailers of high-end baby and juvenile products are highly efficient competitors because, among other reasons, their operating expenses are low," the complaint states. But those retailers were often cut off by manufacturers in attempt to appease Babies "R" Us, the class claims.

The class claims that manufacturers would close retailers' accounts, deny them credit or stop shipments if they continued to offer discounts. And it claims that manufacturers exempt Babies "R" Us from the pricing policies and guidelines that it has imposed on other retailers.

The manufacturers bent over backward for Babies "R" Us, knowing they would suffer greatly if they lost the account, the complaint states.

As a result, consumers were not offered competitive pricing for baby products and "paid more ... than they would have without the restraints," the class claims.

The lawsuit follows a similar class action in the same court against Toys "R" Us and "Babies "R" Us that was certified in July 2009 by U.S. District Judge Anita Brody. Toys "R" Us has also been sued by Internet retailers and is being investigated by the Federal Trade Commission, ABC News reported in October.

The manufacturers named as co-defendants include Britax Child Safety, Kids Line, Maclaren USA, Medela, and Peg Perego USA.

The class demands damages and an injunction for Sherman Antitrust Act violations and restraint of trade.

Lead counsel is Eugene Spector with Spector Roseman Kodroff and Willis.

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