In August last year WATA generated plenty of headlines, as criticism started to mount over the boom of retro game prices amid allegations of wrongdoing from the game grading firm. Claims surfaced alleging that the company was artificially driving high prices, along with claims of collusion with auction house Heritage Auctions; this extensive video by Karl Jobst also did a great deal to bring the allegations to a wide audience.
It’s now emerged that a class-action lawsuit was initiated this week in the Central District of California (thanks, VGC). The lawsuit accuses WATA of “engaging in affirmative acts to manipulate the retro video game market, engaging in unfair business practices, engaging in false advertising, making false statements about the turnaround times for grading services and failing to disclose material delays to customers.”
The lawsuit does indeed focus on a number of allegations made in Summer 2021, related to the rating process, high-value transactions and potential conflicts of interest to drive perceived value of WATA-graded games to exceptionally high levels. At its peak a copy of Super Mario 64 sold for $ 1.56 million at auction, an incredible figure that shocked the conventional retro collector’s market. The lawsuit covers a lot of the ground highlighted in investigative reporting last year.
The lawsuit does also raise another, more practical complaint, that nevertheless applies to the broader allegations of market manipulation. There are claims that gradings took months rather than the expected 15 days, and that the company moved HQ (and therefore stock being graded) without informing clients.
Heritage Auctions benefitted by earning more commissions from sellers and buyers. Halperin benefitted from the value of his game increasing. Wata benefitted by the increased notoriety and increased demand for grading services.
Also, the increased value of the games allowed Wata to charge even more for its grading services since prices were tied to values. Yet, the relationship between Wata and Heritage Auctions was still unknown to collectors.
Meanwhile, video game collectors rushed to send in their own sealed games into Wata for grading, believing they could sell the games for profits as the market soared.
Unbeknownst to collectors, Wata was massively bogged down by the rush. Still the company advertised false and overly optimistic turnaround times on its website. Customers were not notified of the delays in advance of their purchases. Wata continued accepting orders and payments from customers.
WATA has previously denied a number of these allegations.
It’s likely that the class-action lawsuit will take quite some time, but it’s clear that the focus on WATA – its grading services and high-value game auctions – will only intensify.