This payment was not anticipated in advanced or reserved against, so the entire amount will be charged to "other operating expenses" in Amazon's second quarter. The settlement includes dismissal of all claims and counterclaims as well as mutual releases.
As Mike Duff, our BNET Retail colleague pointed out, Toys "R" Us has been on a buying spree as of late, including FAO Schwarz:
It has been acquiring web operations related to children since its February purchase of eToys from The Parent Co. While eToys is roughly in line with Toys "R" Us in terms of its approach to the marketplace, the acquisition deal also included the BabyUniverse and ePregnancy sites, additions that have expanded the scope of the Toys "R" Us offering, giving it room to play in new markets and build on its existing electronic commerce infrastructure.Sounds like the company will have some extra folding money for its shopping spree.
The dispute between the companies started back in May of 2004, when Toys "R" Us sued Amazon, alleging that the e-tailer was not honoring an exclusive arrangement for which the former had paid $200 million. Then in June, Amazon sued the toy retailer for $750 million a few weeks later and asked the court to end the four-year-old partnership the two had. Amazon alleged that Toys "R" Us was guilty of a "chronic failure" to keep product in stock and provide a comprehensive enough selection of toys. There were various actions back and forth. In 2006, Toys "R" Us prevailed in court and was able to sell toys on its own site. Amazon launched its own toy and baby departments later that year and appealed the verdict.