For some gamers, the Nintendo price fixing scandal may seem like a distant dream. But it’s likely most people reading about this strange moment in time don’t even realize that from 1989 to well into the 2000s, Nintendo attempted to skirt around claims they were strong-arming retailers into selling their products for high prices. They also made stores jettison anything made by their competitors. But what happened during the Nintendo price fixing scandal? How did Nintendo deal with being called out for mob-like tactics? And what was their penalty? What follows is an explanation of the Nintendo price-fixing scandal that attempts to explain exactly how a fan-favorite gaming company could bilk players out of millions and continue to stay on top.
In 1989, Nintendo hadn’t yet cemented their status as one of the most beloved game manufacturers in the world. They were still about a decade away from Tri-Force tattoos and Super Smash Bros. parties. In the '80s, they were just a global corporation of up-and-comers, trying to claw their way to the top of a growing pack of gaming companies. Their plan to fix prices made them the company they are today, but it also exposed the seedy underbelly of a business that made its bones off of being fan friendly. Let's take an in-depth look at the Nintendo price-fixing scandal and the ramifications of the company’s attempt to be the king of the mountain at any cost.
What Is Price Fixing And How Was Nintendo Doing This?
To put it simply, price fixing is the maintenance of prices at a certain level through an agreement between competing sellers. In Nintendo's case, they weren't actually working with sellers, or even their direct competition to keep prices regulated.
Instead, they allegedly threatened to cut off shipments of games and consoles to retailers if they didn't meet their terms. Nintendo was accused of threatening to cut off shipments of the NES to retailers who didn't sell the system for their established price of $99.99.
How Did The FTC Find Out About The Price Fixing?
It turns out Nintendo's price fixing plan worked out better than they thought it would. So well, in fact, people were starting to take notice of how great they were doing. David Sheff, author of Game Over, the definitive history of Nintendo's take over of the gaming industry, writes:
“[T]he Nintendo Entertainment System, in just five short years, was brought into more than a third of the households in the United States and Japan... Sega tried to compete with Nintendo, but in spite of investments in the hundreds of millions of dollars, they shared less than 10 to 15 percent of the market through 1991.”
It's ridiculous to think those kinds of numbers aren't going to make people take a long, hard look at your business practices.
Nintendo May Have Killed The Sega Master System
SEGA, one of Nintendo's biggest competitors, was obviously not happy about the whole price fixing thing. To this day, they insist Nintendo's strong arming of the retailers is the primary reason the Master System never hit. Even though the Master System was supposedly a better console, SEGA thinks Nintendo had a deal that kept their system off the shelves at some of the country's biggest retailers.
Nintendo's Scheme Turned Small Businesses Against One Another
When Nintendo started their price fixing scheme, they didn't just overcharge customers, they turned independent retailers against one another over minute amounts of money. From Game Over by David Sheff: "Stores tried to discount the NES and the games, but Nintendo pressured them to stop. One chain reportedly lowered the price of the NES by a matter of cents and advertised it in Sunday newspapers, and a competitor called Nintendo, which immediately froze shipments to the company offering the lowered prices.”