Nintendo has been zapped by a force even stronger than Super Mario Brothers.
Nintendo of America Inc., the U.S. division of the Japanese company Nintendo Co., agreed yesterday to settle federal and state charges of fixing prices on its popular video game systems, the nation's best-selling toy.
It agreed to pay nearly $5 million in fines and legal costs and to distribute $5 coupons to up to 5 million Nintendo game owners entitling them to discounts on future purchases of Super Mario games and other cartridges.
The coupons will be given to people on a Nintendo mailing list of warranty holders, game club members and others who bought the games between June 1988 and the end of last year.
Customers not on that list may apply for coupons by contacting Nintendo.
Nintendo neither admitted nor denied wrongdoing as part of the settlement with the Federal Trade Commission and officials of more than 30 states.
But it agreed not to attempt to control retail prices on its products in the future and not to punish any retailers that sell Nintendo games at a discount.
"I feel very strongly that we haven't done anything wrong, and it would have taken millions of dollars to establish that one way or the other," said Howard Lincoln, senior vice president of the Redmond, Wash.-based company.
"Sometimes it doesn't make sense to spend that money when you can put the same amount in the hands of consumers.
"We could end up engaging in a lot of litigation over a long period of time and probably end up winning the battle but losing the war, in the sense of damaging our relationship with our consumers."
Over the past few years, Nintendo has almost single-handedly revived the home video game business, left for dead after an initial fad crested in the early 1980s.
Nintendo has sold an estimated 27 million game consoles and hundreds of millions of cartridges for individual games, and it is expected to sell around $4 billion worth this year -- more than 80 percent of total video game sales.
As of 1989, the FTC said, nearly one in four American households had a Nintendo system.
That kind of market dominance has stirred some grumbling about the company's tactics.
Competitors have complained that Nintendo has guarded its electronic secrets so tightly that it is virtually impossible for the competitors to manufacture games and accessories for the systems without paying license fees to Nintendo.
Nintendo is locked in an ongoing legal battle with rival video game maker Atari Games Corp., and last month Nintendo won a court order barring Atari from marketing clones of Nintendo game cartridges.
Consumers also complained, telling the FTC and state attorneys general that Nintendo products always seemed to carry the same price -- $99.95, in the case of one "The retailers are now free to discount if they want to." -- Kevin J. Arquit, director of FTC's bureau of competitionpopular basic system -- no matter what store was selling it.
"This one belongs to the consumers. We got an awful lot of feedbackfrom Maryland consumers noting the similarity in prices," said Alan Barr, assistant attorney general in Maryland, the state that led the national investigation along with New York officials and the FTC.
Retailers told regulators that they were forced by Nintendo to hold the line on prices or face supply shortages or tougher credit requirements, investigators said.
"We claimed that they entered into agreements to fix prices, that they had illegal agreements with retailers to set the prices at which they sold the product," said Kevin J. Arquit, director of the FTC's bureau of competition.
"What this does, of course, is prevent the retailers from discounting. ... The retailers are now free to discount if they want to."
The case is only the second retail price-fixing case brought by the FTC in a decade, and it parallels other price-fixing cases brought in the past couple of years by state officialsinvolving retail prices set by manufacturers of consumer electronics products.
Nintendo will pay $3 million in damages and $1.75 million in costs to be split among the states participating in the agreement.
So far, more than 30 have signed up, including Maryland, the District and Virginia.
Although the $5 coupons may be inducements to consumers to buy even more Nintendo game cartridges, law enforcement officials said they weren't worried that they might be inadvertently helping Nintendo gain additional business.
"I think the consumers are not going to be doing anything that they would not otherwise be inclined to do," Barr said.
"The good news is that they will be able to do it cheaper."