Nintendo Settles with the FTC
On this day in 1991, Nintendo announced that it had settled an investigation by the Federal Trade Commission by agreeing to send out $5 coupons to millions of its customers.
The investigation -- headed by the FTC along with the states of New York and Maryland -- was in response to allegations that Nintendo was engaging in illegal price fixing of its NES console. Allegedly, Nintendo threatened to slow down or even cut off supplies of its hot-selling products to any retailer that sold the NES for less than its $99.95 suggested retail price.
Despite hundreds of testimonies to the contrary, Nintendo denied any wrong-doing, saying that it agreed to a settlement "rather than risk our company's goodwill while engaging in costly litigation," and that the company was "concerned with how Nintendo game players might view these allegations."
Atari, which was involved in a separate case against Nintendo over similar retailer bullying that prevented shops from selling its unlicensed games for the NES, released a statement that day praising the FTC.
"We are gratified that the FTC investigation has confirmed what we've believed for a long time -- that Nintendo has built its business on illegal activities," said Atari Games' senior vice president Dennis Wood.
It may have seemed like a victory against the Nintendo empire at the time, but in reality the decision was a brilliant bit of marketing for NES games. An estimated nine million Nintendo-playing consumers received $5 coupons in the mail, good only toward games and merchandise bearing the official Nintendo Seal of Quality.
Given Nintendo's profit margin on its games -- particularly those made by other companies -- the enormous amount of sales brought in by this free government-mandated marketing must have made the additional $4.75 million it agreed to pay amongst several states as part of this settlement seem almost negligible.
This Day in History: Nintendo Settles with the FTC
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