Has Amazon thrown its Toys (R Us) out of the pram?

Amazon.com is fighting fire with fire by countersuing Toys R Us, its business partner turned legal adversary, for $750m.

Toysrus.com last month sued Amazon, claiming the pioneering e-tailer broke an exclusivity agreement by allowing other toy companies to sell their goods through the Amazon.com site.

Now Amazon has hit back with a $750m lawsuit in which it calls upon a New Jersey Superior Court to terminate the contract. In the filing, seen by silicon.com, Amazon accuses Toysrus.com of a "chronic failure" to meet the terms of the two companies' four-year contract. Amazon claims this failure damaged the company's brand and reputation.

Much of the legal wrangling concerns the semantics of the agreement and the percentage of revenue Amazon is able to derive from selling toys from other sources.

However, the Amazon filing claims that "fortunately, this dispute is easily resolved, because the Agreement itself gives clear and unambiguous meaning to the words in question. Less easy to resolve, however, is how Amazon.com's business will be able to overcome the adverse effects of [Toysrus.com's] chronic failure... to meet its basic contractual obligation".

Amazon claims Toysrus.com failed to maintain stock levels of popular products and failed to select the best-selling items in the market place - both of which had a strong impact on Amazon's reputation with consumers.

In happier times in July 2001, the two companies launched a co-branded website, but within a year there were serious concerns over the wisdom of the tie-up, which began to erode Amazon's value.