Nintendo was sued by the State of California back in 1991. This was one of the most interesting cases against Nintendo because it involved pricing gauging and intimidation which no one would have thought Nintendo was capable of due to their innocence presence.
Nintendo was sued by State of California
So you’re probably thinking who cares what happened back in 1991 between Nintendo and the State of California. Well actually, it’s an important part of Nintendo’s history and retailing in general. Companies get sued (like Nintendo was sued now) all the time which is part of running a multi-million dollar company. Most of the usual suspects are patent infringements, providing false information before an earnings reports and copyright issues. The boring stuff. But when it came to Nintendo, it was for a different reason.
Top of the Food Chain
You see, back in the late 80’s and early 90’s, Nintendo was UNTOUCHABLE. They were the cool kids on the block and everyone wanted to part of their crew. If you weren’t part of the Nintendo crew, you were left behind. Wanted in the group? You had to follow Nintendo’s rules. That’s right, you were Nintendo’s b***h and there was nothing you or anyone could do about it. If you sold Nintendo products, you had to do and say whatever Nintendo says. I remember even seeing “Nintendo gangs” back in elementary and if you were a Sega fan, you had it coming! haha! So that’s the power Nintendo had in the early 90’s. They were King…. well… so they thought.
Nintendo was Price Fixing in the 90s
Back in 1991, Nintendo was hit with a law suit from the State of California. For what you say? Price Fixing. Basically price fixing is an agreement between two or more competitors to raise or lower prices equally which is essentially restricting competition/results in consumers paying a higher price. This is coined “consumer fraud” since there’s no competition and consumers are forced to pay more for overpriced items. Nintendo was doing that exactly with their products back in the late 80’s. The Federal Trade Commission got involved after there were accusations that Nintendo was violating the antitrust laws by price fixing their products.
So that’s when the State of California stepped in and filed a lawsuit saying that Nintendo was being a bully to all the retailers selling Nintendo products. Essentially what Nintendo was doing was threatening. To cut off the supplies of their products if those retailers were discounting the sales prices. Sadly the 1991 case wouldn’t be the only time Nintendo was price fixing. Nintendo was also bullying publishers whereby they had to adhere to strict rules in order to publish a game on the Nintendo Entertainment Platform; essentially bullying publishers as well. When you have that much power as Nintendo had, you are almost unstoppable… unless of course the government steps in.
After the settlement was issue, roughly four to 5 million $5 coupons were issued out to Nintendo consumers in all the US states. Each consumer received a letter signed by the Attorny General for the State of California explaining why they were receiving $5 and a brief conclusion to the claim. Although Nintendo was loosing millions in this settlement, it’s nothing compared to the amount of profits they saw throughout the price fixing years.
Here’s the complete contents of the Settlement Letter of Nintendo was sued:
I am pleased to send you the enclosed $5.00 Instant Redemption Certificate as part of the settlement of State of California v. Nintendo of America Inc., an antitrust lawsuit filed by my office on behalf of California Nintendo Console Purchasers. This is part of a nationwide Counsel of the District of Columbia.
This certificate represents the court-approved mechanism for affording relief to those consumers whom, we claim, were overcharged for Nintendo Entertainment System consoles at retail stores as a result of Nintendo’s resale pricing policies. Nintendo denies this claim. The company has cooperated fully with our office in bringing about this settlement.
We believe that this recover represents a swift and successful settlement of what would have been a lengthy and complex lawsuit. In approving the settlement, the Federal Court concluded that the settlement is fair and that it provides sufficient monetary relief to qualified purchasers. The lawsuit and its prompt settlement also demonstrates how the antitrust laws can help to protect the consumers of our nation and state.
You can present this certificate at any retail store which carries Nintendo p[roducts to obtain a $5.00 discount towatrds th purchase of any Nintendo or Nintendo license 8-bit video game cartridge. Please not that the certificate expires MArch 15, 1992.
Sincerely Daniel E. Lungren Attorney General”
Other instances of Nintendo Price Fixing and how Nintendo was sued: