Retailers will sell a system for the wholesale price, plus a markup. If the NES retail price only fell by $10 from 1985 to 1989, either the wholesale price also only fell slightly, or it fell considerably.

If the former, NES is under no obligation to lower its price over time, even if its costs decrease. This would allow Nintendo to make extra profits, but that's legal.

If the latter, Nintendo was forcing its retailers to make more profits than they would have otherwise, because they kept the retail price up while the wholesale price fell.

In that case, it is the retailers who made the excess profits, not Nintendo. So it's not clear why Nintendo is being penalized.