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Toys "R" Us' holiday marketing plans are going along unimpeded after the retail giant was hit by a Federal Trade Commission judge's ruling that the toy store used its muscle to keep prices high.

Although the ruling could have important marketing ramifications for retailers in other specialty areas, an appeal by Toys "R" Us means no changes are imminent, and next week the No. 1 toy retailer will launch a TV campaign for its holiday catalog, as scheduled.

The campaign from Wells BDDP, New York, will be complemented by a new online push, in which Toys "R" Us for the first time will sell certain products via its Web site (

That move follows the launch this month of a new online rival, called e Toys (, which lets consumers shop from 1,000 products marketed by leading toy companies.


Toys "R" Us recently hired Organic Online, San Francisco, to direct all its online media strategy, planning and execution. Organic will develop an extensive banner campaign designed to drive traffic to retail locations. It also plans to revamp Toys "R" Us' Web site, introducing entertainment and education-oriented programming.

The FTC judge last week ruled that since 1989, Toys "R" Us has leveraged its market share to prevent toy companies such as Mattel and Hasbro from selling popular products to warehouse clubs as a means of keeping prices high.

Toys "R" Us plans to appeal the ruling, said Rebecca Caruso, VP-corporate communications.

The ruling must be voted on by the full commission and can be further appealed through the federal courts, a process could take years.

Ms. Caruso said the company has no plans to address the ruling through advertising.

"It's a political issue more than anything else," she said.


Toy companies last week were sizing up the ruling impact, both immediate and long term. Mattel executives testified in the FTC hearing on behalf of the retailer, denying it had violated any regulations in its marketing arrangements with Toy "R" Us.

"We find it difficult to believe that the evidence represented on the record as a whole could possibly sustain the findings of the judge," Mattel said in a statement. A spokeswoman added: "We have six key accounts, and one of them is Toys "R" Us. What effect, if any, this will have on us is uncertain. But we are not changing our holiday season plans."

Industry analysts believe the ruling's impact could go well beyond Toys "R" Us and its suppliers.

"Retailers have had an easy time of it from the Federal Trade Commission and the Department of Justice for most of the 1980s and 1990s," said Alan Millstein, publisher of Fashion Network Report.


With the spotlight on a high-profile retailer such as Toys "R" Us, the government is now "taking a hard look at how retailers can hurt competitors as well as put an arm on suppliers," he said, adding the case "should send a shiver down their spine. There are ramifications beyond Toys 'R' Us."

Mark D. Whitener, deputy director of the FTC's Bureau of Competition, said the Toys "R" Us case is the second to squarely address the issue of use of market share to influence prices. The commission recently successfully opposed the merger of Staples and Office Depot because of the clout the combination would have had in the office products category.

"If you do find yourself in the fortunate position of being dominant, you can't abuse your market power to exclude competition unfairly," Mr. Whitener warned.

Contributing: Mercedes M. Cardona, Laura Petrecca.

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