Webkinz Get Sued!

Lawsuits and Lack of Trust Plague Online Plush

By Alison Marek
December 2007

Dec. 11, 2007 — From the “could it get any worse” department comes the news that toy-store owners are suing Ganz, Ganz may be returning the favor, Wal-Mart is buying Webkinz via a second-party distributor, and no one believes anyone anymore.

While specialty retailers have been threatening lawsuits for months, two have taken action. Via Station Enterprises, Inc., Hans and Patricia Masing, owners of online Brain Station and brick-and-mortar Tree Town Toys in Ann Arbor, Mich., are suing Ganz for $75,000 plus costs and legal fees. Tammy Bittinger of Shopping Therapy/Collector’s Club filed a small claims suit against “Ganz” on Sept. 5 for $1,500 in the District Court in Oklahoma County, Okla., as previously reported in TDmonthly Magazine.

Though Masing wasn’t able to comment directly on his case, documents filed at the District Court of the Eastern District of Michigan on Oct. 10 reveal that Ganz is charged with “[breaching] the parties’ contracts by, among other things, failing to deliver Webkinz merchandise within a reasonable time and canceling and/or refusing to deliver Webkinz merchandise unless Tree Town agreed to additional conditions.”

“Ganz is not respecting the people in this business who got them where they are,” Masing told TDmonthly. “Small retailers talk to each other … about who's getting product and who isn’t, and it’s been very inconsistent across the country.”

CUTTING OFF WEBKINZ

David Felton, co-owner of the online and brick-and-mortar Pamela’s Boutique LLC in Wareham, Mass., knows all about inconsistency. He told TDmonthly Magazine he was selling approximately $1.2 million of the cuddly computer toys per year when the company abruptly blocked his holiday shipment the day before Thanksgiving.

Ganz informed him that he’d been named as an eBay wholesaler and had therefore violated the terms of their sales agreement. Felton insisted he was not wholesaling Webkinz.

Ganz apparently is cracking down on online retailers because the appearance of Webkinz in Wal-Mart this month (see TDmonthly’s Dec. 6 news report) occurred behind their backs, according to an email Ganz sent to specialty retailers on Dec. 7. Ganz believes the unsanctioned toys are being bought online from retailers at near-wholesale prices and then resold. The toys have also popped up at Shaw’s, 7-Eleven, BJs, and Target. As of December 11, Ganz had not responded to queries about those stores’ status with the company. However, Limited Too and J. C. Penney are listed on Ganz's website as official retailers.

Wal-Mart’s corporate communications spokesperson, Melissa O’Brien, wrote to TDmonthly on Dec.10 that the company’s Webkinz purchase was made “through a distributor.” In a prior email, she said there were “no plans to re-order at this time — but we will see what the future brings!”

NO AFFIDAVIT, NO TOYS

That future looks dim to Felton. To continue with Ganz, he must sign one of two affidavits that force him to reveal contact information for retailers to whom he sold — whether knowingly or unknowingly — thus violating the confidentiality agreement on his website. The affidavits also give Ganz the power to shut down his shipments and renegotiate his terms at will.

In addition, he may be held liable by the company for a line of credit that was extended to him while orders were backed up and product trickled in slowly. Now he can’t entice customers to buy older product and the new product’s been blocked.

WHO’S SQUEEZING WHOM?

Of the nine toy-store owners TDmonthly reached yesterday, five had already dropped Ganz and three professed an uneasy relationship with the company. Only one was a satisfied customer:

“They've narrowed who they're going to sell to; they want those customers who are loyal,” explained Tricia Cooper, buyer for the 39-year-old family toy store Le Jouet in Metairie, La.

But Masing considered himself loyal, abiding by every condition that Ganz set, and Felton felt that he, too, had done whatever Ganz required. He told TDmonthly that he had even tried over the past two years to advise Ganz about how to identify retailers who were indeed engaged in wholesaling, but they’d ignored his recommendations. Now, ironically, he's buying from wholesalers himself.

"We have to do it to keep our store going," Felton shared with TDmonthly in January 2008, after failed attempts to negotitate with Ganz.

Janet Gregory, owner of Over the Rainbow in Anchorage, Alaska, paraphrased many complaints that TDmonthly has heard when she said, “My experience with Ganz has been a poor experience. It’s not one that entices me to do further business with them.”

Until now, dropping Webkinz and all other Ganz lines has been the most common tactic retailers have used to fight against what they perceive as unfair treatment. But Felton is considering an anti-trust suit against the company. With the two other suits pending, plus the entire state of Vermont suing the company for lead-tainted jewlery (according to the New York Times via Kloster Trading), 2008 should be a very interesting year for Ganz and Webkinz.

Click on the links below for previous Webkinz articles:
Ty Girls Spanked and Webkinz Whipped
Kookeys Aim for Webkinz Jugular
Good Co./Bad Co. – Who Makes You Burn?
Webkinz: Boom, Bust or Both?
Webkinz Knows What Kids Want
Webkinz are Exploding, Retailers Report