This company doesn't understand public relations. Rather than countering bad PR with good PR, they decided to double down, cutting off their nose to spite their face.
Except that there will be no price to be paid for this (because no one will ever hear about it, and they sell toys), and the people who will remember it are their employees, who will be effectively intimidated from commenting on their experiences at the company after they leave.
The Streisand Effect is starting to function like the Law of Averages in some people's minds. There is no publicity fairy flying around to right all wrongs. Publicizing things is extremely hard if they don't go viral, and they only go viral if they are funny, cute, bizarre, or incredibly cruel.
You vastly overestimate how much PR matters. There's no shortage of companies and politicians with absolute dog water public images, that are still wildly profitable/constantly get re-elected.
Lots of companies are run by bad people who should never run companies. Sometimes you don't know they're bad until they completely fail to handle adversity properly.
A company I once worked for was violating several state laws. When I brought it to the owner's attention, he threatened to sue me. When I reported it to the state†, he fired me and said he was going to send his lawyers after me.
They never got the chance. The state shut him down a few weeks later.
†Note: When you report something to the state, in some states, you have no right to privacy. Not every state has whistleblower protections. This was explained to me by the state liaison I spoke with. He said under state law, he had to tell the employer who filed the complaint.
The Streisand Effect is starting to function like the Law of Averages in some people's minds. There is no publicity fairy flying around to right all wrongs. Publicizing things is extremely hard if they don't go viral, and they only go viral if they are funny, cute, bizarre, or incredibly cruel.