Class action settlement of Babies ‘R’ Us antitrust case

Posted on: January 27th, 2012 by Steve Larson

A federal judge has approved a $35.5 million settlement in a class action in which plaintiffs charged that Babies ‘R’ Us and a group of baby product manufacturers violated antitrust law.

The class action charged that Babies “R” Us conspired with the manufacturers to restrict competition by requiring all retailers to sell their goods at or above a minimum resale price, and thus, that the class paid inflated prices for products, Judge Brody said Tuesday in her memorandum opinion in McDonough v. Toys ‘R’ Us Inc. and Elliott v. Toys ‘R’ Us Inc.

The other defendants are Britax Child Safety Inc., Peg Perego USA Inc., BabyBjörn AB, Regal Lager Inc., Medela Inc., Maclaren USA Inc. and Kids Line LLC.

The settlement represented 24 percent of estimated actual damages, Judge Brody said. Among other factors, the risk of establishing liability and damages weighed in favor of settlement, the judge said.

The class includes customers who bought certain items between 2001 and 2006.

When the case was started, a “resale price maintenance” agreement was a per-se violation of the Sherman Antitrust Act. Then the U.S. Supreme Court “overturned nearly a century of precedent to rule that RPM agreements are no longer per se violations … Defendants, therefore, could argue that the challenged agreements constituted reasonable restraints on trade and thus were legal,” Judge Brody said.

“Even if the plaintiffs could establish liability, they would not have had an easy time proving damages because there were no universal price ‘markup.'”

The judge also said the U.S. Supreme Court and the 3rd U.S. Circuit Court of Appeals have rendered opinions making it more difficult for district courts to grant class certification, so verdicts in favor of the plaintiffs might be rejected by the appellate courts. Inc. and The Baby Club of America Inc. filed a separate antitrust lawsuit against all of the defendants, charging that the plaintiffs were prevented from discounting items. Judge Brody said she consolidated that case for purposes of discovery.