FTC action takes no bite out of Nintendo - Federal Trade Commission, Nintendo Company Ltd - Washington Report

Discount Store News, August 5, 1991 by Ken Rankin

FTC Action Takes No Bite Out of Nintendo

Earlier this year, when Federal Trade Commission antitrusters joined state officials in charging Nintendo with conspiring to eliminate retail discounting of its popular home video games, the action was widely hailed as a sign of fresh enforcement vigor at the agency.

FTC antitrusters had gone a decade without filing a single resale price maintenance complaint, and many people saw the Nintendo action as a signal that the commission had finally resumed enforcement of the longstanding prohibition against antidiscounter RPM conspiracies.

But a consensus is growing that there are no teeth in FTC's enforcement bite after all. The suspicion is that soft-headed federal and state antitrusters were snookered into a settlement that actually rewards Nintendo for its resale price fixing.

For their part, officials at the International Mass Retail Association are calling for changes in the FTC's proposed settlement agreement to prevent the Japanese video game supplier from retaliating against discounters by withholding co-op ad allowances.

IMRA president Robert Verdisco said "cooperative advertising programs are often used as a vehicle to police resale price maintenance agreements," and the FTC should amend the consent agreement to prohibit Nintendo from imposing co-op ad restrictions on discount retailers.

Other critics maintain that the consent agreement is so flawed that it should be abandoned altogether.

Because the federal order imposes no fines or restitution requirements on the company, "there is little impact on Nintendo's business and little incentive not to continue its wrongful activity," Atari president Sam Tramiel told the FTC. "The effect is to reward Nintendo for retail price fixing."

The so-called "sanctions" imposed on Nintendo by a number of separate settlement agreements with state antitrust agencies are even more controversial than the FTC plan.

Under these arrangements, the resale price fixing charges will be dropped in return for the manufacturer's agreement to offer previous purchasers of Nintendo video games $5 rebates on future purchases of the company's products.

According to the ceo at Computer Easy International, this "restitution" plan is a "sham" because "it requires consumers who have already been injured by Nintendo practices to buy another game from the same people who have ripped them off!"

Similarly, execs at Sega called that settlement nothing more than "a court-sanctioned software sales promotion" that will produce windfall profits for Nintendo.

With "penalties" like these, it's a wonder more manufacturers don't view resale price fixing schemes as cash cows.