Atari Games Accuses Nintendo of Monopoly

The Detroit Free Press

December 14, 1988

NEW YORK — Atari Games Corp. said Tuesday it has sued Nintendo Co. Ltd., alleging that the Japanese company has monopolized the U.S. video game market because it's top-selling home entertainment systems have used only cartridges made by Nintendo.

At stake is the lion's share of the fast-growing video games market, which toy experts said has surpassed the $2 billion mark this year.

Playthings, a monthly international trade magazine, reported in it's annual survey of best-selling toys that Nintendo's entertainment systems were number one for the second year in a row.

"Nintendo really dominated the marketplace," said Frank Reysen, Jr., editor of the New York based magazine.

According to Atari's lawsuit, filed in federal court in San Francisco, Nintendo has built a lock-out system into it's video game machines, equipping machines with a computer chip that allows them to accept only video game cartridges with a compatible chip.

Although about 30 manufacturers were licensed to sell Nintendo games under their own brand names, the cartridges are all made by Nintendo.

Atari Games, a privately held company based in Milpitas, Calif., and unrelated to computer-maker Atari Inc., claims it's profits have been hurt because it is required to turn to Nintendo for cartridges and is limited in the number it may sell.

"We are so frustrated by our inablility to get the proper supplies," said Dennis Wood, Atari Games senior vice-president.

The suit claimed that "using this barrier and it's completely dominating position in the market for home video game machines, Nintendo has forced the more than 30 companies that have written games that play on Nintendo machines to have all of their game cartridges manufactured by Nintendo-Japan at prices it dictates."

The suit claims Atari Games lost between $30 million and $35 million because of inadequate supplies. Atari Games is seeking three times it's direct losses, under the provision for treble damages in anti-monopoly suits.

It is also seeking an injunction to stop Nintendo from any further actions "to forclose competition in the manufacturing market for (Nintendo-compatible) video game cartridges sold in the United States."

In another action directed at Nintendo, Tengen Inc., an Atari subsidiary, has announced it had introduced the first independently produced Nintendo-compatible game cartridges.

Nintendo in recent years has cashed in on what some have described as an almost cult-like devotion to it's games. The company reported $800 million in sales last year and expects to more than double that this year.