In 1998, the US Federal Trade Commission (FTC) issued an order against Toys ‘R’ Us for the retailer’s anti-competitive behavior. According to the FTC, the retailer used the leverage associated with its size to force their suppliers into agreements that would keep those suppliers from “selling certain toys to warehouse clubs, or to put the toys into more expensive combination packages, so consumers could not obtain lower-priced toys from the clubs or compare prices easily.”
As part of the order, Toys ‘R’ Us was prohibited “from urging any supplier to limit supply of products or refuse to sell to discounters…bars Toys “R” Us from asking any supplier about its sales to any toy discounter, and requires the company to preserve and maintain records of communications with its suppliers related to its sales and distribution.” Yesterday, the FTC announced a civil penalty of $1.3 million to be paid by Toys ‘R’ Us for violating the order.
What got Toys ‘R’ Us sent to the principal’s office this time?
Three things, actually. But one of them really kinda bugs me.
That transgression was that Toys ‘R’ Us apparently was “complaining” to its suppliers about their discounting. The FTC claims that “these complaints could lead those suppliers to limit supply or refuse to sell their products to toy discounters.”
Now, I understand that Toys ‘R’ Us lost some privileges for its past misbehavior. And the other two violations of the order, which you can read about on the above-linked FTC announcement, I can understand.
But not being able to complain about discounts to suppliers?
It’s business. In procurement, complaining about discounts is a big part of what we do and one way we contribute to improved profits.
But, then again, corporal punishment never feels good now, does it?