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Europe hits Nintendo with €168m fine for fixing game prices

Dishonourable mention for John Menzies

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Nintendo and several of its distributors have been hit by the European Commission for total fines of €167.8 million for "colluding to prevent trade in low-priced products." And to the slight shock of The Register, these low-priced products seem to have been in the UK, with Nintendo and friends acting to block their export to countries where they could command higher prices, such as Germany and the Netherlands.

We are more used to this being the other way around, but it was some time ago that Nintedo games were 65 per cent cheaper in the UK. The Commission's investigation covered the period between January 1991 and 1998, and its report says "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."

So if the distributors didn't play ball, Nintendo would cut off their air supply. Nintendo catches by far the largest share of the fine, €149.128 million, but next is highly reputable UK newsagent gone on to greater things John Menzies, which is in for €8.64 million. The Commission quotes some smoking pistol correspondence between John Menzies and Nintendo. First, a memo from John Menzies to Nintendo, April 1996:

"I fully understand the difficulty that this differential pricing creates for other mainland European countries where the market can clearly stand a much higher price than that which the market can stand here in the UK. [...] I am sure that we can, by working closely together, better control the situation on grey imports and find a much better way of isolating our products and our prices to within the shores of the UK, thus reducing the impact that this differential pricing has upon mainland Europe."

And then the follow-up letter: "I can tell you that a significant amount of activity has been undertaken by THE (John Menzies's subsidiary called THE Games Ltd) since January/ February this year [1996] with a view to stopping the grey exporting of products from the UK into the continental European market. Our major activities in this regard have been to either shut off supplies completely or to really control/restrict the supply of product into the UK market place, to certain questionable retailers.[…]"

The Commission notes that Menzies had been boycotted by Nintendo prior to starting to play ball, and justifies its large fine to Nintendo with: "Nintendo was the instigator and the leader of the infringement and carried on with the illicit behaviour even after the Commission had started its investigation as did John Menzies. This constitutes an aggravating circumstance. The latter also tried to mislead the Commission with regard to the real scope of the infringement in mid-1997. These aggravating factors were duly balanced with the fact that, after December 1997, John Menzies and Nintendo co- operated with the Commission. Similarly, in setting the final fine on Nintendo, the Commission also took into consideration its decision to offer substantial financial compensation to third parties, which suffered material harm. Nintendo and John Menzies were, nevertheless, granted large reductions, which stresses the importance the Commission attaches to co- operation by companies that have infringed EC competition law even if this was not through participation in a 'classic' horizontal cartel." ®

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