Rash's Judgment: Nintendo -- Not Just Fun and Games
 
Microbytes Daily News Service
Copyright (c) 1989, McGraw-Hill, Inc.
Over the past year, the case of Nintendo of America has grown
from a matter of concern to the computer software industry to a
matter for hearings in Congress. Nintendo, manufacturer of
computers and software for use as video games, was first shown by
BYTEWEEK to be engaging in practices that most businesses
consider reprehensible. The company would, for example, dictate
to software companies who could produce software and who could
not. It would threaten retailers who carried a variety of
competing systems with a loss of their right to sell Nintendo
unless they dropped other lines. The company even played
favorites with its friends in Japan by granting them the right to
produce extra quantities of heavily controlled software, while
refusing permission for US companies to produce more than limited
quantities of competing software.
 
These practices have now been exposed in hearings conducted last
week by the the antitrust subcommittee of the US House of
Representatives Committee on Small Business. After a series of
hearings here in Washington, the chairman of the subcommittee,
congressman Dennis Eckart (D-OH), forwarded the results of the
hearing to the US Department of Justice for further inquiry and
possible prosecution.
 
The subcommittee hearings disclosed the same information that was
originally revealed by BYTEWEEK almost a year ago, and in
addition it found that Nintendo was using its control over
software to punish companies who developed software for other
systems, that it had refused to allow production of software by
any company other than itself, and that it was now using bundling
as a way to further discourage competition.
 
According to the findings of the committee, Nintendo has been
successful far beyond the point that IBM had reached in the 1960s
when that company's position in the market first attracted the
attention of the Justice Department's antitrust troops. The
committee was most disturbed by the move by Nintendo into the
personal computer market.
 
It is the implications for the rest of the personal computer
market that make the activities of Nintendo so serious. Through
an apparent coordinated series of actions that were intended to
intimidate and manipulate, Nintendo used its market share to
eliminate fair and open competition. The only reason that there
have not been more calls for help is that this is seen as an
issue involving video games, and therefore not a serious issue.
 
It is, in fact, more than a game. Nintendo's actions are far more
extreme than those of IBM's two decades ago, which did result in
a Justice Department investigation. The only reason that such an
activity has not surfaced in the personal computer industry is
that no single manufacturer has had a market share that is so
commanding that it could get away with it, and none was willing
to take the chance that it would attract the attention of the
Justice Department. Nintendo, apparently feeling that it was
above both the law and ethics, has chosen to go where other
companies fear to tread. The US government has taken the first
step to stop these practices, but further steps remain, or
Nintendo will be free to practice competition through
intimidation.
 
In any case, Nintendo is not the only issue here. It is, in
addition, the issue of how much control a computer hardware
company should have over its retailers and software vendors.
Until lately, that has been assumed to be fairly little control,
but the outcome of the actions regarding Nintendo can change all
that.
 
                              --- Wayne Rash
 
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