## Facts

- Consumer plaintiffs sued Toys “R” Us, Inc., doing business as Babies “R” Us (BRU), and multiple baby-product manufacturers and distributors.
- Plaintiffs alleged BRU was a dominant U.S. retailer of baby products and faced discount pressure from online retailers beginning around 1999–2000.
- Plaintiffs claimed BRU pressured manufacturers to restrain online discounting by threatening to stop carrying their products unless they limited internet retailers’ discounts.
- According to plaintiffs, manufacturers agreed to enforce minimum resale prices or otherwise curb discounting by online sellers, preventing BRU from having to match lower internet prices.
- Plaintiffs alleged the vertical retailer–manufacturer restraints produced a collective price effect, stabilizing or raising prices for specified baby-product lines sold through BRU stores.
- Plaintiffs sought treble damages under § 4 of the Clayton Act based on alleged § 1 Sherman Act violations.
- The case came before the court on plaintiffs’ motion to certify a Rule 23(b)(3) damages class; the court considered product- and period-specific subclasses.

## Issues

1. Whether the proposed class and subclasses satisfied Rule 23(a) numerosity, commonality, typicality, and adequacy.
2. Whether Rule 23(b)(3) predominance was met, including whether antitrust impact and damages were capable of common proof rather than individualized proof.
3. Whether a class action was superior to other adjudication methods given the size of individual consumer claims and the complexity of the alleged pricing restraints.
4. Whether the alleged separate vertical agreements could be treated as a common conspiracy suitable for class-wide adjudication.

## Decision

- The court granted class certification in substantial part.
- The court certified five Rule 23(b)(3) purchaser subclasses defined by specified baby-product lines and defined time periods.
- The court found the central conspiracy and price-effect questions common to purchasers within each subclass.
- The court concluded that individualized differences in transactions (e.g., coupons or promotions) did not defeat certification because they primarily affected damages amounts rather than class-wide impact.

## Legal Principles

- Rule 23(a) requires numerosity, commonality, typicality, and adequacy of representation.
- Rule 23(b)(3) requires that common questions predominate over individual ones and that the class action be a superior method of adjudication.
- In antitrust damages class actions, plaintiffs must show that antitrust impact (fact of injury) is capable of proof with common evidence for the class or subclass.
- Class certification may be appropriate where economic and pricing evidence can test a common theory that restraints reduced discount competition and resulted in supracompetitive prices for purchasers.
- Subclassing by product line and time period can address manageability and align proof of restraint, impact, and damages with the relevant purchaser groups.

## Conclusion

The court certified five consumer purchaser subclasses challenging alleged retailer–manufacturer restraints that suppressed online discounting, holding that Rule 23’s requirements were met because the existence of the alleged conspiracy and its price effects could be addressed with common evidence on a subclass-wide basis, while individualized variations largely concerned damages calculations.


McDonough v. Toys “R” Us, Inc., 638 F. Supp. 2d 461 (E.D. Pa. 2009)