Game over

The European Commission has fined Japanese games maker Nintendo and seven of its European distributors for colluding to prevent trade in low-priced products.

The European Commission has imposed a fine of 167.8 million Euros on Japanese video games maker Nintendo and seven of its official distributors in Europe for colluding to prevent exports to high-priced from low-priced countries.

The fine on Nintendo alone was calculated at 149 million Euros to reflect its size in the market concerned, the fact that it was the driving force behind the illicit behaviour and also because it continued with the infringement even after it knew the investigation was going on.

Prices for play consoles and games differed widely from one European Union country to another during the period investigated by the Commission, with the United Kingdom up to 65% cheaper than Germany and the Netherlands.

‘Every year, millions of European families spend large amounts of money on video games. They have the right to buy the games and consoles at the lowest price the market can possibly offer and we will not tolerate collusive behaviour intended to keep prices artificially high,’ European Competition Commissioner Mario Monti said.

The decision concerns Nintendo and seven distributors of Nintendo products, namely John Menzies (Nintendo’s distributor for the United Kingdom), Concentra – Produtos para crianças SA (Portugal), Linea GIG. SpA (Italy), Bergsala AB (Sweden), the Greek unit of Japan’s Itochu Corp, Nortec AE (Greece), and the Belgian unit of Germany’s CD-Contact Data GmbH.

The Commission has collected evidence showing that Nintendo and its distributors colluded to maintain artificially high price differences in the EU between January 1991 and 1998.

According to the arrangements, each distributor was under the obligation to prevent parallel trade from its territory, i.e. exports from one country to another via unofficial distribution channels. Under the leadership of Nintendo, the companies intensively collaborated to find the source of any parallel trade. Traders that allowed parallel exports to occur were punished by being given smaller shipments or by being boycotted altogether.

The investigation showed that during the seven-year period price differences in the European Economic Area (EEA) EU plus Norway, Iceland and Liechtenstein – were frequent and significant. The UK usually had the lowest prices by far, which understandably tempted traders into re-exporting cheap goods to high-price countries.

The most striking price differences were observed in early 1996, when certain Nintendo products were up to 65% cheaper in the UK when compared with the Netherlands and Germany. They were also more affordable than in Spain (up to 67% more expensive than the UK), Italy (54%) and Sweden (39%). The difference narrowed but remained significant in 1997, when the UK price for all N64 game consoles and game cartridges was 33% lower (in October) than everywhere else in the EEA.

The fine is the fifth largest ever imposed for any anti-trust infringement. It is also by far the largest fine ever imposed for a so-called vertical infringement i.e., in this case, between a producer and its distributors as opposed to a horizontal cartel between manufacturers of the same product.

The fine on Nintendo is also the fourth largest ever imposed on an individual firm for a single infringement.