Before she gave birth to her first daughter back in October 2003, physicians and fellow mommies alike gave Darcy Trzupek the same advice: If you need a breast pump, get the Medela. "I didn't want to mess around with something that was going to break," says Trzupek, 41, a stay-at-home mom from Chicago. Especially when a hungry, wailing baby is involved.
So Trzupek, an experienced coupon clipper and Web-browsing bargain hunter, searched far and wide for a deal on the Medela. But she says she noticed something odd: the pump was listed at $300 everywhere she looked. For five months, she held out for a discount. Nothing. Finally, a week before going into labor, Trzupek gave in and shelled out $300 for the pump at Babies "R" Us (BRU), the retail outlet that parent company Toys "R" Us started more than a decade ago. Result: satiated baby, smaller wallet.
But was that breast pump part of a widespread price-fixing conspiracy that protected the profits of Babies "R" Us, the country's dominant big-box baby retailer? According to a federal judge, it appears that could be the case. On July 15, the U.S. District Court in Philadelphia granted class-action status to a complaint that Babies "R" Us coerced manufacturers of high-end strollers, car seats, high chairs, strap carriers and breast pumps into preventing Internet retailers from discounting their products.
No Discounts or Else!
The dirty deal, according to the suit, was simple. From 2001 to 2006, Babies "R" Us told companies like Medela that they had to enforce resale-price maintenance i.e., tell the Web retailers, who can more easily discount products since they avoid brick-and-mortar costs, to sell your products at X, or you'll cut off the supply. If they resisted, Babies "R" Us threatened to cut off the manufacturers, according to the suit, and refuse to sell their products in Babies "R" Us stores. Since Babies "R" Us sold 30% to 50% of these companies' products, Medela, which is based in Switzerland, and other brands like BabyBjörn, the Swedish strapmaker, and Maclaren, the strollermaker based in the U.K., had no real choice but to go along.
"I want to let Babies 'R' Us and other retailers know that consumers aren't going to put up with unfair trade restraints," says Trzupek, who joined the plaintiff class in 2006, when the suit was originally filed. The plaintiffs are pursuing an unspecified amount in damages; attorney Beth Fegan says the price agreements affected more than $500 million worth of baby products.
While Judge Anita Brody's July 15 opinion wasn't a final ruling on the case, Babies "R" Us is portrayed as a tough negotiator intent on protecting its top marketplace position. The other companies named in the suit Medela; Maclaren; BabyBjörn; Regal Lager, the agent supplying BabyBjörn's products to the U.S. market; Peg Perego, the Italy-based maker of strollers, car seats and high chairs; and Britax, which sells car seats and strollers come across as weak accomplices in the scheme, which Brody distinctly labels a "conspiracy." For example, Brody writes that effective Feb. 1, 2000, "pursuant to the conspiracy, Regal Lager and BabyBjörn vigorously enforced resale-price maintenance against Internet retailers, gave BRU preferential treatment and stopped opening Internet accounts. During this period, BRU accounted for most of Regal Lager's business. Its founder, Bengt Lager, said about BRU, 'It's hard to say no when they have over 50% of our business!' "