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Apr 15, 2012

Parliamentary inquiry likely to take on big IT companies over pricing

One of the greatest frustrations of Australian consumers – the extraordinary differences in IT prices between Australia and elsewhere, and the cavalier refusal of major IT companies t

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One of the greatest frustrations of Australian consumers – the extraordinary differences in IT prices between Australia and elsewhere, and the cavalier refusal of major IT companies to explain them – is set to be examined at a Parliamentary inquiry.

Crikey understands that as a result of a campaign by Labor MP Ed Husic, the government is considering undertaking a Parliamentary inquiry into IT price differentials and legal options for preventing them. Husic flagged his interest in establishing the inquiry in a speech to Parliament in March.

Among the biggest offenders is Apple. Apple prices its own products differentially in Australia – a 17inch MacBook Pro costs $2899 here compared to US$2499 (currently $2408) from Apple in the US – $250 more than the US product with 10% GST. But its iTunes services also features a remarkable array of outrageous pricing differentials. The album Up All Night by British zygote band One Direction is $14.99 for Australians but US$9.99 ($9.63) for Americans, a difference of 55%. Adele’s 21 is US$10.99 ($10.59) for Americans but $16.99 here, a difference of 60%.

Apple has persistently refused to explain the reason for the price differences, or whether copyright owners or Apple itself are responsible for the blatant gouging of Australian music fans.

However Apple is far from alone in the practice – Husic, who has conducted a long-running campaign on the issue – has used Twitter (@edhusicMP) to identify example after example of companies such as Microsoft, Adobe and Canon and games companies selling hardware and software in Australia at prices sometimes double those of the same products offshore. To take only the most obvious example, Microsoft’s Office suite ranges in price from US$119 ($114.69) for a home version to $350 ($337.32) for a single licence professional version in the US; the same range is $169 to $499 here, with both available by download.

Nor is IT the only industry where this is rampant, as Crikey showed last year, gouging of Australian consumers is widespread across a range of major product categories.

Australian consumers aren’t the only victims of the practice; businesses face inflated costs for key inputs like software and equipment. Adobe’s Creative Suite Premium software, for example, costs American buyers US$1,899 ($1830) but will set back Australians purchasers $2,886.30 before GST. The parliamentary inquiry is likely to examine the impact on business as well as consumers.

The Productivity Commission looked at the issue of differential pricing in its inquiry into the retail industry last year and declared itself unimpressed:

The Commission is also aware of the longstanding practice by which some international suppliers set differential regional prices. This effectively treats consumers in one region as willing, or able, to tolerate significantly higher prices than those in other regions. Australian consumers have an increasing awareness of such price differences and are now able, in many cases, to circumvent them by directly ordering online. This represents an example of ‘parallel importing’ which is the import of genuine products without the permission of the local licensee. Some international suppliers have attempted to defend price discrimination due to the cost of supplying a remote and relatively small market like Australia, which in some cases has its own unique requirements. These arguments, in most cases, are not persuasive, especially in the case, for example, of downloaded music, software and videos where the costs of delivery to the customer are practically zero and uniform around the world.

The inquiry may struggle to identify workable legal solutions to the problem given the difficulties of imposing Australian competition law on overseas-based companies. In 2001-02, the Allan Fels-era ACCC grappled with the issue of regional coding of DVDs, ostensibly a copyright protection mechanism but in fact a mechanism for overcharging consumers; the ACCC eventually settled for declaring that chip modifications that enabled DVD players and game consoles to play foreign-sourced DVDs was legal.

But it will put substantial pressure on the biggest offenders to finally publicly explain to Australian consumers why they continue to get ripped off compared to consumers overseas.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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