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  • Enterprise IT, Featured, News - Written by on Sunday, April 29, 2012 11:21 - 37 Comments

    IT’S ON: Govt sets up IT price hike inquiry

    news Price-hiking technology vendors are set to be hauled before Australia’s Parliament to justify their local markups, with Communications Minister Stephen Conroy confirming the Government will hold an official parliamentary inquiry into the issue, following a long-running campaign by Federal Labor MP Ed Husic.

    Husic (pictured right) has been raising the issue in Parliament and publicly since the beginning of 2011 (he was elected in the 2010 Federal Election), in an attempt to get answers from technology giants such as Adobe, Microsoft, Apple and others as to why they felt it was appropriate to price products significantly higher in Australia (even after taking into consideration factors such as exchange rates and shipping) than the United States.

    Just last week, for example, global software giant Adobe continued a long-running tradition of extensively marking up its prices for the Australian market, revealing that locals would pay up to $1,400 more for the exact same software when they buy the new version 6 of its Creative Suite platform compared to residents of the United States.

    In late March, after achieving some initial success in raising the issue with David Bradbury, Parliamentary Secretary to the Treasurer, and the Treasurer himself, Wayne Swan, Husic revealed he would write to Communications Minister Stephen Conroy (who is generally seen as having responsibility for the technology portfolio in Australia), asking for a parliamentary inquiry into the matter. In a letter to Husic on 10 April seen by Delimiter, Conroy responded.

    “I agree that Australian businesses and households should have access to IT software and hardware that is priced fairly relative to other jurisdictions,” he wrote. “I also agree there is evidence to suggest that the innovative use of technology is not always matched with innovative new business models, in the case of products and services distributed online. The global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets.

    “In light of your letter, I will consider possible terms of reference for the House of Representatives Standing Committee on Infrastructure and Communications to inquire into the pricing of software and other relevant IT-related material.”

    Top-ranking executives from major companies are often invited to appear before such parliamentary inquiries into their sectors. In this case, it is likely that high-profile companies such as Adobe, Microsoft, Apple, Lenovo and so on, would be invited to attend, due to their existing position in the line of fire, as well as companies retailing video games for the local market, which has also been an area of focus for the criticism, and other companies ranging from top-end camera manufacturers to business software vendors.

    In his earlier communications with Conroy, Husic had written that such an inquiry held by the parliamentary committee mentioned by Conroy could:

    • Determine whether a difference in pricing existed, as well as determining the extent of the difference
    • Examine why households and small businesses have to suffer the increased prices
    • Set out the impact of the price hikes on Australian businesses, households and even Government (“bearing in mind that $2 billion is spent on IT procurement by Government”)
    • Examine what might be done within the law to deal with this issue, which Husic said IT companies had failed to respond to.

    The parliamentary inquiry may also be given a little more bite through the interest which the competition regulator, the Australian Competition and Consumer Commission (ACCC) has in the outcomes. In parliament last week fronting a committee on the NBN, ACCC commissioner Ed Willett was asked by Husic whether the regulator would consider pursuing the matter, “given that consumers rightly feel that they have been unfairly slugged for the prices that they are paying, particularly, as I mentioned before, on software”.

    “Over time, information technology will mean it will be harder and harder for particular service providers to maintain higher prices for products in Australia compared to overseas,” Willett responded. “I think that model that we have seen in the past in a number of services has been exacerbated by the value of the dollar, and that has made those comparisons even more stark. I think those sort of practices will be harder and harder to sustain.”

    “But certainly the Commission will be pretty keen to ensure that those sort of differences are not supported by contraventions of the Act.”

    Technology vendors such as Adobe and Microsoft have in the past offered a number of reasons for why prices were set differently in Australia compared with their home country of the US. In August last year, Microsoft responded to Husic’s comments about Australian markups on its products by stating that it doesn’t set final prices to local customers — and stating that it was difficult to make direct pricing comparisons between countries, given differing local conditions in each jurisdiction.

    Microsoft is charging Australian software developers about 83 percent more than their US counterparts to access subscription services associated with its Microsoft Developer Network (MSDN) platform, and also charges higher prices for software products and cloud computing offerings.

    Adobe stated the issue wasn’t one for the technology industry alone — claiming it was a wider problem affecting other areas such as the automotive sector as well. At the time, the company said the majority of Adobe’s software in Australia was sold through channel partners — and so the prices listed on its online store may not reflect competitive pricing in the market. In fact, the price through its own online store would reflect a price towards the upper end of the range which its channel partners were charging. The company didn’t want to undercut its channel partners in Australia.

    PC manufacturer Lenovo has also attempted to defend of its Australian pricing, despite in 2011 launching its flagship new ThinkPad X1 laptop in Sydney for $560 more than the same hardware will cost in the United States. Apple also commonly charges more for its products in Australia, although the company has made some moves towards international price harmonisation over the past year.

    The issue has also come to the attention of the NSW Government, with NSW Fair Trading Minister and Liberal MP Anthony Roberts adding his voice to the debate about price markups on technology goods sold in Australia in October 2011, claiming iconic technology giant Apple was “price gouging” the Australian public when it comes to digital goods such as films, music and software.

    opinion/analysis
    In 2012, it’s common to be extremely cynical about politicians, but I think we have to re-think this approach when it comes to Labor MP Ed Husic.

    Despite being a backbencher who only entered parliament in the 2010 Federal Election, Husic has proven extremely successful already at representing the views of his electorate (I note his efforts regarding the National Broadband Network) as well as the wider community. In his ongoing campaign to highlight technology product price hikes in Australia, Husic has tapped into an undercurrent of dissatisfaction on the issue on the part of the Australian community. And now his tireless efforts have paid off, with the creation of a dedicated parliamentary inquiry to look into the matter.

    In some ways, Husic reminds me of that other relatively new parliamentarian interested in the technology sector — Greens Senator Scott Ludlam. Their personal styles and political affiliations are obviously markedly different, but like Ludlam, Husic has been successful at using the structures and relationships set up in Australia’s Parliament to his advantage. The Committee system, the openness of ministers to discussing issues within the Government, the Government’s relationship with regulators, the importance of comment on the Parliamentary floor (even late at night) in getting issues on the record; Husic has worked all of these tools to his advantage to a remarkable outcome.

    I don’t know, at this stage, whether the inquiry will have any impact on actual prices of technology prices in Australia. However, what I do know is that it will certainly do much to highlight the issue to the broader community, and make powerful corporations accountable to their customers. And that can only be a great thing. You can bet that there will be a bevy of journalists listening in as Husic and others question the likes of Microsoft, Apple, and Adobe on Australian IT price hikes.

    So for now, let’s recognise that Australia’s political process, even for the often-low profile technology sector, sometimes isn’t broken. Sometimes, when individuals such as Husic show determination and passion, it can work and achieve real outcomes. In all processes, there is a time for cynicism. But for now, with relation to the issue of IT price hikes in Australia, there is an appetite and determination for positive change. It will be fascinating to see where it takes us.

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    37 Comments

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    1. Posted 29/04/2012 at 1:07 pm | Permalink |

      I don’t expect much to come of this and I really don’t want a regulator deciding how much markup is too much.
      I think what @jclacherty said on twitter is right
      ‘about all they can do is make parallel imports easier and warranty requirements on them more strict.’

      • alxx
        Posted 29/04/2012 at 6:54 pm | Permalink |

        How about forcing two years warranty on all products like in Italy

        • Bourke
          Posted 29/04/2012 at 8:24 pm | Permalink |

          We already have laws that give us very good warranties – that is the main reason why hardware is higher priced in Australia.

          However software, music, books, and videos do not require warranty – and should therefore be identical to overseas pricing. This is the main point of Husic’s complaint.

          Down with geographical market segmentation!

          You wouldn’t steal a car.
          You wouldn’t steal a handbag.
          You wouldn’t steal a television.

          Region coding is stealing from consumers!
          Don’t buy into American piracy!

    2. Thateus
      Posted 29/04/2012 at 1:31 pm | Permalink |

      Hopefully there is some point to the FTA (http://www.dfat.gov.au/fta/ausfta/final-text/chapter_16.html) in that it could resolve this. However, I’m not an expert on the FTA – I suspect the items in question are below the dollar threshold of care factor.

    3. Gordon Edwards
      Posted 29/04/2012 at 5:10 pm | Permalink |

      One hopes the inquiry will not be restricted to IT vendors.

      Noddy’s $500 Oxygen Sensors for his Commodore (?) highlighted in http://delimiter.com.au/2012/04/24/adobes-biennial-tradition-50-aussie-price-hikes/#comment-391341serve to remind us that as soon as offshore manufacturers realise we can’t or won’t make our own stuff, we become fair game.

      Personally, because I can do it, because having the latest and allegedly best bloatware* is less than important, I make the best of a pretty good situation by purchasing (mostly) pre-loved goods which have depreciated to ridiculous places far below their Australian RRPs.

      *Bloatware — the middle-age spread that manufacturers equate with mean, lean, cutting-edge productivity, be that with Toranas looking like obese Kingswoods, or word processors that do everything except process words.

      I also look for substitutes, which (most times) give me superior performance with smaller footprints at far less dollar cost. Of course, I understand that many commercial entities are constrained by tradition and the opinions of their competitors, so cannot go down my road.

      Gordon.

      • Noddy
        Posted 29/04/2012 at 8:03 pm | Permalink |

        It was over $1000 for two, and it was for an Astra Turbo. The pair were $170 from Vauxhaul UK including delivery. I am not sure that is overseas companies screwing us, just Holden as usual. I regret ever buying it. Because they only imported 300 the dealers always have to order in parts. I am totally sick of them keeping my car over night because they can’t get the part too. I organise the parts a few weeks in advance, check they have got them in when I leave the car in. They then dismantle the car, don’t have the part, ring me to say they can’t get it for a day or so. Happened to me 4 times now.

        • Gordon Edwards
          Posted 29/04/2012 at 10:02 pm | Permalink |

          General Motors IS an oversears company.

          Worse, the Astra Turbo is from Opel, made in Belgium, fully imported to Australia.

          Believe it, it’s overseas companies screwing us.

          Gordon.

    4. R
      Posted 29/04/2012 at 5:23 pm | Permalink |

      One of two things will happen:
      -the price fixing will stop, perhaps via the passage of some new legislation or the utilization of some existing law
      -more and more Australians will start buying products from Amazon and other online (international) retailers, at which point the local market will implode

      I bought my last laptop from Amazon because it was $200 less (even with shipping) and the manufacturer offered an international warranty. Before that I’d barely used it, but these days it’s the first place I look if I think local prices/availability leave something to be desired. The only time I go into brick and mortar shops is to look at the display models, before going home to order it on Amazon; I’m definitely not the only one doing this.

      • Zwan
        Posted 30/04/2012 at 3:14 am | Permalink |

        Buying offshore doesnt work. Look at the steam store.. You buy from a US market and still pay twice as much (well at least for activion games)

        All they need to price scalp you is your address/IP/credit card info.

        • Matt
          Posted 30/04/2012 at 10:46 am | Permalink |

          Then all you need to do is have a US address and use a VPN service to obtain the “correct” pricing.

          Credit/Debit card info accepted for the majority of places doing it this way (some do a verification of where that credit card is from – but not many) and anyways you can have your Visa tied to an Amex card … and then it doesn’t matter if you can use that too.

          Plenty of ways around things. I am always happy to pay for my goods and services … what I will not pay is exorbitant costs associated with nothing whatsoever (and no reasonable explanation to back up that price).

          • SMEMatt
            Posted 30/04/2012 at 11:44 am | Permalink |

            The point is you should need to use work a rounds.
            One other thing is what you are doing is also considered fraud.

    5. Goddy
      Posted 29/04/2012 at 6:38 pm | Permalink |

      There is no politician in this country that has the brass balls required to take on the “Australia Tax”. Count me extremely cynical.

    6. justme
      Posted 29/04/2012 at 6:57 pm | Permalink |

      Legislation could help, but I don’t have any confidence in any australian government passing legislation that makes sense.

      I am no expert on legislation making matters but I think maybe they could require that all international companies selling their goods in Australia are required to sell for a comparable markup compared to the country of origin. So if an American company sell for 20% markup in USA then they can markup by 20% in AUS, no more, otherwise they get slugged with a fine. This obviously has to take into account that many goods are handled by middle men, which I have never really understood.

    7. Dave
      Posted 29/04/2012 at 7:18 pm | Permalink |

      The government is only doing this for:

      A) vote buying; and
      B) because they finally worked out people are noe buying things overseas and the aren’t getting the GST on it!

      • Matt
        Posted 30/04/2012 at 10:49 am | Permalink |

        Nothing wrong with politicians looking for votes … in this area with more and more people buying online and seeing the discrepancies of cost … of course it is becoming a sore point – especially when we all still want stuff and other costs are ever increasing.

        As for GST … I don’t think people really care. Even if they had to pay GST on overseas goods – the price would still be far cheaper than what we can get here. It will not change people’s buying thoughts one iota.

    8. myne
      Posted 29/04/2012 at 9:13 pm | Permalink |

      How is it that Australian built Commodores are cheaper in the USA?

      • JUSA
        Posted 06/05/2012 at 9:58 pm | Permalink |

        Up until reading your comments I had never heard of a Commodore. I just got done looking it up and I don’t believe they sell those anywhere in the US. I’ve traveled extensively and never seen one in the USA.

        • Sam
          Posted 27/05/2012 at 11:43 am | Permalink |

          That’s because in the US they are called a Chevy

    9. Gav
      Posted 30/04/2012 at 1:25 am | Permalink |

      The government can put pressure on companies to lower prices relative to foreign markets without legislation. For example, the government could say that if the recommended retail price of an IT product is >20% the recommended retail price in key foreign markets, once you account for local taxes and exchange rates, then government procurement departments must consider rival products first and justify any decision to purchase the product. They’d need to limit this to major purchases to justify the research time, but it would go some way to pulling major companies into line without legislating against them.

      In terms of legislation, the Copyright Act currently states that it is legal to parallel import a computer program and sell it. A more pro-consumer stance would be to legislate that a company cannot apply restrictions that prevent a product purchased in a foreign market from working as-is in Australia, or prevent Australians from purchasing a product in a foreign market i.e. no geo-IP blocking. This wouldn’t mean that companies have to go out of their way to support the practice (e.g. by providing local support or doing translations), but they couldn’t attempt to block it either. Making this cover electronic literary or musical items too would be preferable.

      • Zwan
        Posted 30/04/2012 at 3:23 am | Permalink |

        Copyright/Patent law needs a complete overhaul so the rights holders only have the rights to making money off it.

        They should have the limited ability to set prices, not be able to dictate who can purchase rights, not dictate how its sold to consumers, or where its sold and when it can be sold.

        Its clear these company’s aren’t capable of playing it fair in a free market, and use these ‘rights’ to their full extent to quash any form of competition.

        These patent battles and copyright bullying does nothing for our economy and just stunts it.

        • Gav
          Posted 30/04/2012 at 8:08 am | Permalink |

          “not be able to dictate who can purchase rights, not dictate how its sold to consumers, or where its sold and when it can be sold.”
          That’s taking it a bit far. We’d probably be breaching a treaty or three if we did that.

    10. Dave H
      Posted 30/04/2012 at 9:32 am | Permalink |

      I fully support this inquiry, current pricing models don’t mesh with our global economy. That said, I imagine one of the reasons that companies like Adobe and Autodesk mark up their downloads so much is to not undercut guys like http://www.stormfx.com.au, the same reason why Valve is forced to sell games like COD on Steam at $90 AUD instead of $50 USD (to not undercut local bricks and mortar distributors). Right now big, traditional companies are trying to have it both ways: the convenience and reduced cost of online distribution, as well as continued support of traditional distribution channels. This is leading to the online channel artificially inflating to not step on toes. It’s time to cut the umbilical ;)

      • Gav
        Posted 30/04/2012 at 9:40 am | Permalink |

        Quite true. The government has probably been avoiding an inquiry for this very reason. The fact that they’re having one in a weak retail economy suggests they’re probably nuts, unless they’ve invented a politically acceptable way to attack retailers in spite of the ‘retail jobs’ argument. If we do lose all retail for non-physical digital goods, as seems increasingly likely, then there’s the very difficult question of how to deal with the lost tax revenue.

      • Matt
        Posted 30/04/2012 at 11:03 am | Permalink |

        If the price hikes are there so as not to undercut bricks and mortar stores here … then there is a bigger problem overall isn’t there?

        Why are importers (and if anyone sees the “cost” prices at a retail outlet then you would realise it is mostly importers/distributors/warehousing costs that are stupidly expensive) able to pass on such high costs to retailers and thus the consumer?

        Is it rents/wages? Sure that might be part of it, but I think there is a fair bit of gouging going on. If I can freight a piece of camera gear over here for $40 and then if I actually applied GST and there is still a discrepancy of 500+ dollars … that does not equate and never will.

        Anyways, back on topic. Let’s take Adobe for example. They are actively out here with offices etc. They would be the ones taking orders for CS6. They would set a wholesale price and then bring the product into Australia for distribution. The product would be boxed overseas (or downloaded to a distributor here to do it). Do these “costs” represent what they are actually saying? Nope. They set the initial price. Thus they are the ones who cause this problem in the first place. And them saying that they need to ensure they are looking after the channel partners is insulting to our intelligence.

    11. Jay
      Posted 30/04/2012 at 10:03 am | Permalink |

      They might also like to find out why a bottle of wine that costs $20 in Australia can be bought for $NZ14 ($AU11) in New Zealand. Or why cars are so much cheaper in New Zealand and the USA? Or why houses are so much cheaper in the USA? Or why furniture is so much cheaper in the USA?

      Is this going to be another failed inquiry? Or an inquiry that simply deduces that the fault is the federal governments? After all, it is the federal government that prohibits the importation of used cars, or bananas, and it is the federal government which imposes heavy taxes. And it is also the federal government that allowed state governments to renege on dropping stamp duties.

    12. Aryan
      Posted 30/04/2012 at 10:23 am | Permalink |

      First of all, why is this just relevant to IT? Has anyone compared the price of the Nissan Leaf in Australia vs. The United States?

      Secondly, so now we want the Federal Government to dictate the price of goods and services sold in Australia?

      Like any other technologies, I’m appalled by the price difference in many IT product between here and the US, but this is hardly a new phenomenon or restrcited only to IT. Fact is that we have a small market without much competition in many sectors which results in this. If you want a more competitive and dynamic market here, lets open the borders and let our population grow much faster. That will take care of that the issue!

      • Gav
        Posted 30/04/2012 at 11:06 am | Permalink |

        Cars are kind of big. It should be obvious that additional issues come into play with cars that don’t exist for a software package you can download. Protecting local industry probably has a bit of a role with vehicle prices, but there’s no such argument for most software.

        • Jay
          Posted 01/05/2012 at 10:51 am | Permalink |

          The size of cars doesn’t matter. It costs roughly the same to send a car from Australia to NZ as it does from Australia to the UK. In any case, that would not explain why cars are half the price in NZ as they are in Australia. NZ is even more remote than Australia. But massive Australian government subsidies to local car manufacturers and very restrictive importation might be a reason.

          • Gav
            Posted 01/05/2012 at 11:26 am | Permalink |

            My point, which you seem to have missed, is that broadening the review beyond IT, to issues like imported car prices, will add a lot of complexity because a car is a physical good and computer software is not (if you use the Internet to acquire it).

            The issues to be considered are intellectual property ones about the ability of the producer to capitalise on their ownership rights. The producers think they can segment the market along geographic lines despite additional cost pressures not being present (or minimally so) due to distribution to Australia. The question of whether or not they can do that is centered around their IP rights. The government, in line with international treaties, decides what those rights are. Whether the treaties provide enough scope for action on this issue is a question for the government.

            If you’re talking about cars, then you need to go and think about the hundreds of manufacturing companies and thousands of jobs involved. You very quickly get a long way from considering IP issues – you’re talking more about the structure of the economy and what skill sets the country should retain.

            Basically, its an IT-centric review, so stick to arguing about IT.

      • Sam
        Posted 27/05/2012 at 11:45 am | Permalink |

        What about software – that’s the main instigator of this. Software that is digitally delivered like buying a song from the iTunes store – why should that have such a high markup…

    13. Ferdinando
      Posted 30/04/2012 at 10:41 am | Permalink |

      Finally. I agree on comments that everything should be reviewed, and regulated – including tradesmen labour charges. Enough of electricians and plumbers shooting $100-$200 per hour!!
      Let’s talk about cars, one of the most outrageous price gouging ever existed in the entire planet.
      …And so forth… And the right wing extremist that will jump up and call everyone a communist, please, get lost. You have been proven wrong by the fact that the Australian dream has been killed by greed.

      • Apollo
        Posted 30/04/2012 at 11:24 am | Permalink |

        ^ This.

        This is whats stuffed this country, its what makes me sad knowing that I went to combat for this.
        I went and protected my country and I come back to learn that ultra-conservatives are everywhere and greed is rife. Overcharging isnt the way. God help us if this inquiry returns nothing.

        I purchase almost everything online now. Stuff bricks and mortar shops. Until the retail sector changes its colossally outdated business model, this will continue. You’ve only gotta head into a local shop to see the massive price differences in things like an iPhone. $499 USD > $800 AUD. Thats a big jump. Thats not the cost of staffing, GST and extra rent – thats flat out overcharging.

    14. SMEMatt
      Posted 30/04/2012 at 11:59 am | Permalink |

      The Fed already knows why cars are overpriced it is taxation to protect industry.

      The reason other goods are overpriced is anti-competitive practices in the US and other foreign markets are already illegal in Australia. Here is a hint if they want to fix price gouging how about the next time the US want to force copy right laws on us we force some competition laws on them.

      • Gordon Edwards
        Posted 30/04/2012 at 5:13 pm | Permalink |

        So why is the local brand-model so much more expensive than the o/s brand-model?

        Gordon.

    15. Brendan
      Posted 30/04/2012 at 1:48 pm | Permalink |

      Best of luck with that.

      Taxes here are a little different; also it’s ridiculous comparing an online only e-tailer, such as amazon, with a local bricks-and-mortar store. It’s seldom ever going to be cheaper to walk-in. The input costs are massively different.

      Having said that, Software titles, particularly Game titles are are ripe for regionalised extortion. Valve (Steam Store) regularly prices titles above the US pricing. Having said that, it’s not always the retailer, but the supplier setting charges.

      And I swear, if the “I’ve worked in the games industry for eleventy-billion-years and it’s not like that” person pipes up, I am going to laugh at you.

      When there was a dollar disparity, then sure, you would expect physical technology to cost more than the US (frieght/ distribution costs, etc) however as parity has been the case for something like a year now? Poor excuse.

      The exception (at least for me) was pre-purchasing “Guild Wars 2″, which is selling 1:1 US:AUS.

      The problems aren’t just ticket price; the Government has to review whether import duties are artificially inflating prices (hint, there’s a reason a lot of overseas vendors write “gift” on the export sticker).

      If software can also be impacted by import taxes, then the Federales might want to review that too. :)

      • Brendan
        Posted 30/04/2012 at 1:53 pm | Permalink |

        Wait, correction, at the time I bought the title, I had to acquire from a local distributor (online) – $10 over the US price. So not quite 1:1 but a lot better than other titles where the difference is typically > 30%.

    16. Peter
      Posted 03/05/2012 at 10:07 pm | Permalink |

      What is preventing Australians from purchasing digitial Adobe products directly from their website in the USA?

      After all, this is the way all media is purchased in the 21st century.

      Adobe Creative Suite 6 comes in five flavours depending on what group of Adobe products you need:
      Design Standard US$1299
      Design & Web Premium: US$1899
      Production Premium: US$1899
      Master Collection: US$2599
      Creative Cloud : US$49.99/mo

      Buying Guide: Product Comparison
      http://www.adobe.com/products/creativesuite/buying-guide.html




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