Toys 'R' Us plans World's Largest Toy Store

Aug. 2, 2000 -- Toys ‘R’ Us has announced plans to build theworld’s largest toy store, a 101,000-square-foot emporium with alife-size dollhouse and a 60-foot-tall Ferris wheel in TimesSquare.

The three-story glass-enclosed store, which would become thecompany’s flagship, is scheduled to open next summer, said JohnEyler, the company’s chief executive officer.

“We expect it to draw over 20 million visitors a year — that’stwo and a half times more people than visit the Empire StateBuilding, the Statue of Liberty and Ellis Island combined,” Eylersaid Tuesday.

The store would join a host of family-oriented theme restaurantsand corporate stores that have opened in Times Square in recentyears. Its neighbors would include the WWF Store, the ESPNZonerestaurant and the Disney Store.

Court Rules Against Toys ‘R’ Us

Meanwhile, a federal appeals court onTuesday ruled against the nation’s largest toy retailer, findingToys ‘R’ Us had acted illegally to raise competitorsprices and reduce competition.

The unanimous decision by a three-judge panel in Chicago wasa major victory for the Federal Trade Commission which had firstbrought the charges in 1996.

The U.S. Court of Appeals for the Seventh Circuit rejectedthe company’s challenge of the FTC’s findings and its order tohalt practices which the agency charged had led toy makers todeny their most popular products to discount shopping clubs.

“We conclude that the commission’s decision is supported bysubstantial evidence on the record, and that its remedial decreefalls within the broad discretion it has been granted under theFTC Act,” said Judge Diane Wood in the opinion.

The Paramus, N.J.-based company did not return calls seekingcomment.

FTC: Toy Chain Prevented Competition

FTC Chairman Robert Pitofsky hailed the decision as animportant reaffirmation of antitrust law with broaderimplications for Internet retailing. “I think it restores someprinciples that people had begun to doubt,” he told Reuters.

“This case involved price clubs but the implication forthe future has to do with traditional distributors precludinge-commerce from challenging their entrenched position,”Pitofsky said.

The FTC held that Toys ‘R’ Us had used its dominance toforce major toy manufacturers to sell only so-called “valuepacks” of several toys or discontinued items to discountshopping clubs like Costco and Pace.

Those practices prevented consumers from comparing price andquality of products and curtailed the effectiveness of the clubsas competitors, the FTC charged.

FTC Administrative Law Judge James Timony heard the case andbacked action against Toys ‘R’ Us in a 1997 decision. FTCCommissioners voted 4-0 to uphold Timony’s opinion in 1998,leading to the appeals court challenge by the company.

‘Giant in the Toy Retailing Industry’

The appeals court said Toys ‘R’ Us had argued that itlacked the muscle to force its toy suppliers to change theirmarket arrangements with the price clubs.

But the court said Toys ‘R’ Us was “a giant in the toyretailing industry,” selling one in five toys sold in theUnited States.

Even the largest toy makers, like Hasbro Inc., could notfind alternative retailers if they rejected Toys ‘R’ Us’marketing conditions.

“Taking steps to prevent a price collapse throughcoordination of action among competitors has been illegal” atleast since 1940, the opinion said.