news The Federal Parliament’s inquiry into local price markups on technology goods and services has gotten under way, with the committee overseeing the initiative issuing its terms of reference and calling for submissions from the general public on the issue.

In late April, Communications Minister Stephen Conroy confirmed the Government would hold an official parliamentary inquiry into the issue of technology companies marking up goods and services for Australia, following a long-running campaign by Federal Labor MP Ed Husic. Husic 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.

Earlier this month, 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 a statement issued this morning, the House of Representatives Standing Committee on Infrastructure and Communications officially confirmed it would conduct an inquiry into the price differentiation of IT software and hardware in Australia compared to overseas markets.

The Chair of the Committee, Nick Champion, said “Australians are often forced to pay more for IT hardware and software than consumers in overseas markets. The Committee’s inquiry aims to determine the extent of these IT price differences and examine the possibility of limiting their impact on Australian consumers, businesses and governments. The Committee will look into the cost of computer hardware and software, including games, downloaded music, e-books, and professional software, to name a few. The Committee is looking forward to hearing from the companies who set these prices and the consumers and businesses that purchase their products.”

The terms of reference for the inquiry, which will take public submissions until 6 July, state that it will examine:

• Whether a difference in prices exists between IT hardware and software products, including computer games and consoles, e-books and music and videos sold in Australia over the internet of in retail outlets as compared to markets in the US, UK and economics in the Asia-Pacific;
• What those differences are;
• Why those differences exist;
• What the impacts of these differences might be on Australian businesses, governments and households; and
• What actions might be taken to help address any differences that operate to the disadvantage to Australian consumers.

The committee consists of Champion, Husic, deputy chair and National MP Paul Neville, Liberal MP and former Optus executive Paul Fletcher, Labor MPs Stephen Jones and Mike Symon, independent Rob Oakeshott and Liberal MP Jane Prentice. In the past Shadow Communications Minister Malcolm Turnbull has also sat on the committee as a supplementary member for a matter related to telecommunications.

In a separate statement issued this morning, Husic said: “For too long, businesses and consumers have asked: why does it sometimes cost up to 80 per cent more to simply download software in Australia compared to overseas. The problem’s been IT vendors have seemed unwilling to explain why software and hardware costs more in Australia,” he added. “This Inquiry gives an opportunity for businesses and consumers to have their say on IT prices. But it also gives IT firms a chance to educate the public on the factors they take into account when shaping their pricing approach.”

Husic welcomed the breadth of the inquiry’s Terms of Reference. “This inquiry will look into the impact on a wide range of consumers – examining the cost of IT systems for business through to the cost of music and game downloads,” he said. “This just reflects the simple fact that with technology weaving its way into our lives in so many ways, people from all walks of life should have their say on this issue. I particularly hope that small businesses and young people take the chance to make a submission and have their concerns heard.”

After the inquiry was announced, Delimiter invited global vendors Adobe, Microsoft, Apple, Lenovo and Amazon, which are some of the most visible companies selling high-profile technology goods and services to Australians, whether they would commit to attending the parliamentary inquiry if invited, and whether they had any other statement to make on the matter.
Adobe said it would cooperate with the inquiry, and Microsoft said it would review the terms of reference. However, the other companies did not respond to requests for comment on the matter.

opinion/analysis
As Australia’s technology sector and — for want of a better, less hyped word — “digital economy” gradually expands, the issue of local price mark-ups is only going to grow in importance and prevalence in the debate about the nation’s innovative future. It will be fascinating to see what comes out of this inquiry, and I am sure it will be closely followed by Australia’s technology press on a blow by blow basis. There is the chance to enact some significant change here, and I encourage all those interested to make a submission to the review.

Image credit: Chris Gordon, royalty free

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1. true believer
   Posted 24/05/2012 at 3:54 pm | Permalink | Reply

   <<<<Whether a difference in prices exists between IT hardware and software products, including computer games and consoles, e-books and music and videos sold in Australia over the internet of in retail outlets as compared to markets in the US, UK and economics in the Asia-Pacific;

   YES

   <<<<What those differences are;

   $$$

   <<<<Why those differences exist;

   microeconomics 101: price elasticity of demand and revenue maximisation

   <<<<What the impacts of these differences might be on Australian businesses, governments and households; and

   higher costs

   <<<<What actions might be taken to help address any differences that operate to the disadvantage to Australian consumers.

   None — price discrimination is not illegal.

   Message to the pollies (with central economic planning tendencies): If you think these big corporations are going to sit down with you and explain in minutae detail the highly-sensitive, commercial-in-confidence international pricing policies for their proprietary products (ATO's recurring wet dream)…

   BwAHAHAHA!!

   • Alex
     Posted 24/05/2012 at 5:52 pm | Permalink | Reply

     So you support multinationals over average Aussies…?

     • Roger
       Posted 24/05/2012 at 7:38 pm | Permalink | Reply

       I read ‘true believer’s’ comments and I read the poster’s stance as neutral.
       Taking into account current legislation, the multi-nationals are just doing what they do. To make them do different would require new legislation. Having said that, if the company selling the product is based overseas and the product is downloaded/sent from overseas then it’s not really possible to even legislate to stop the situation.

2. Daniel
   Posted 25/05/2012 at 12:40 am | Permalink | Reply

   ABOUT FREAKING TIME.

   My parents bought 2 copies of adobe software TOTALLYING NEARLY $5 grand. (Design Standard, Design Premium). – UPGRADES ~$700 dollars per version.

   3D STUDIO MAX $3,500, Upgrades ~$1100 DOLLARS.

   • Daniel
     Posted 25/05/2012 at 12:40 am | Permalink | Reply

     OH I FORGOT – YOU CANT’S IMPORT COPIES FROM THE USA OR OTHER COUNTRIES.

     BECAUSE LICENSING RESTRICTIONS.

     • Master_T
       Posted 25/05/2012 at 10:07 am | Permalink | Reply

       Two words bro:

       Forwarding Service.

       ^ Now who says we cant get around licencing restrictions? :D

     • AM
       Posted 25/05/2012 at 2:26 pm | Permalink | Reply

       Hay Dan….

       http://images.cheezburger.com/completestore/2011/4/7/24526895-31d0-42c4-8a62-156d0d4b9383.jpg

       Almost safe for work ;-)

       AM

3. Gav
   Posted 25/05/2012 at 9:27 am | Permalink | Reply

   When it costs something like $10 to burn and package a PS3 game, there is no justification for that product costing $60 in the US and $110 here.

   These products are made in Asia, which last time I checked is closer to Australia than the US. And before someone comes along about economies of scale, thats pure rubbish. Sure there is some, but for a couple of reasons its irrelevant.

   Economies of scale reduce as the volume increases – there simply isnt enough profit left to reduce, so going from 10,000 units to 50,000 units isnt going to see a big difference.

   These products are often digital – how can it cost $1000 more to digitally download an Adobe product here in Australia vs the US?

   • Noddy
     Posted 25/05/2012 at 10:15 am | Permalink | Reply

     Yes, 10 to burn and package, actually, it is slightly more than that, but close enough.

     Of course that is assuming it didn’t cost them about 10-30 million to develop, so there is another 10-30 dollars a copy for a million selling title. Oh, and lets forget the 10-20 million in advertising.

     Yes, $10. Want to find a couple of hundred people to work on it for 2 years for nothing so your dream can become real?

     The extra cost in Australia comes down to greedy local distribution channels.

     • Gav
       Posted 25/05/2012 at 11:43 am | Permalink | Reply

       Yeah was just using broad numbers to get the message across. Doesnt matter if the game is sold in Australia, the US, or the UK, it would have come from the same factory in SE Asia. They charge Sony a tenner (give or take) to get that product to a retail level of production.

       Sony ships the product to country X, middlemen move it about to get to Retailer Y, who puts the same $10 disc & package on the shelf for $110 or so. There shouldnt be more than one wholesaler between Sony/distributor and the bricks and mortar retailers, which cant justify a $50-$70 price difference per unit.

       Ask EB who they buy the products off. I’m sure they’d love to be able to charge what JB HiFi does, and keep their $30 profit margin.

       • Noddy
         Posted 25/05/2012 at 12:49 pm | Permalink | Reply

         I have spoken to an employee at EB and he showed me their price list from their importer.
         When I saw prices in Australia I had thought it was the retailer. I knew the company I worked for (a games developer/publisher) sold to Australia at the same price as elsewhere. This is what I saw.

         We sold the game to importers/suppliers/store chains around the world at $40 US, this was when the AU dollar was about on parity. EB bought it off the importer for $80. EB was selling it for $90. So the importer was pocketing $40 for fark all.

4. Mike
   Posted 25/05/2012 at 10:44 am | Permalink | Reply

   I think you’ll find that a large portion of what is happening (with regards to digital purchases) is influenced more by local figures (middlemen) who have us anchored somewhere in 1970.

   Looking at video games you can see a clear link in online pricing (say Steam for example) with that of retail brick and mortar stores. The reality of an online store retailing Batman Arkham City in Australia at the same RRP as what Americans paid (USD $45 from memory), and a retail brick and mortar chain attempting to match the price would see that store incur a loss.

   Batman Arkham City was priced at USD $90 for Australians when it was first released on Steam. We received no additional content over other regions and the bits were all sourced from the same server locations. Can someone explain what this 200% markup is all about when we get no added benefit in paying more?

   You could very likely see our local retail sector become the scapegoat. The status quo will remain the same. Online digital providers and middlemen in the retail sector will still be laughing their heads off while the retail sector continues to struggle and consumers will be no better off.

   • Noddy
     Posted 25/05/2012 at 3:59 pm | Permalink | Reply

     It’s not really a matter of the digital providers wanting to make a killing in all cases. I have had several games go on Steam and to stores. Stores are the big seller still. So when the Australian distributor tells you to up your Steam price or they won’t distribute your games to Australia, you do it. Australian stores are too lazy or too intimidation to buy direct. They could lose supply of other lines if they tried bypassing their distributors.

     • Mike
       Posted 25/05/2012 at 7:04 pm | Permalink | Reply

       Are you suggesting that retail as well as developers/publishers are being bullied about by distributors? We’re such a tiny market by comparison to the EU, US, and other parts of Asia that it seems laughable to think that could ever be the case…

       The reality of the (changing) world we live in now as we get more connected means that eventually the guy with the killer app is going to tell the distributor where to go. The distributor (deservedly) gets left out in the cold and if you really do have a killer app, word of mouth will get it to where you want it to go (buyers).

       Not all distributors are bad. Retailers can be incredibly greedy at which point if I can I’ll purchase direct from a distributor or from overseas.

       • Noddy
         Posted 25/05/2012 at 8:47 pm | Permalink | Reply

         Why is it hard to believe? They don’t make the publishers quake in fear. They just ask them to put the online price up or they won’t distribute the game in Australia. If you are a retailer you could lose your discounts or access to certain products if you bypass a distributor. It is only a small market for publishers, they don’t really care that is why they put the price up instructed. Australian retailers are Australian retailers, this is their whole market.

         Killer app, yes, provided you have it. And some of them do tell the distributer where to go. Not everyone can however. Even though a company may have a killer app they may also have many others that they need distribution of. Also it means setting up your own distribution or encouraging retailers to import. Then they risk the wrath of those your killer app bypassed.

         Purchase from overseas. Buggered if I am paying the distributor/retailer padding. It is just so many time people have pointed directly at the publishers. yes, some will set their price based on what other things are sold for here and make a killing. Many prices however are set locally however. Are you really going to bother fighting the Australian retail system for the piddling amount of sales made here if you are a publisher? No, not worth it. Either just put it into the distribution system or don’t even bother selling it here, much easier.

         • Mike
           Posted 26/05/2012 at 12:02 pm | Permalink | Reply

           I find it so hard to believe because with a retail system that is very clearly not working and has not been working for a long time now that retailers are still aligning themselves with local distributors.

           They just ask them to put the online price up or they won’t distribute the game in Australia. If you are a retailer you could lose your discounts or access to certain products if you bypass a distributor.

           That in itself is a misuse of market power and is against the law. See here.

           Here is a report on the Australian retail sector released last year. Worth a read if only for the recommendations.

           • Clytie Siddall
             Posted 27/05/2012 at 4:09 pm | Permalink | Reply

             Where ebooks are concerned, publishers are the ones setting much higher prices specifically for Australians. No brick-and-mortar shops or distributors are involved: go to Amazon using your obviously-targeted Australian account, and you can see popular fiction ebooks at nearly three times the price of the new paperback for each title (over $20 for the ebook, about $7 for the new paperback). Just before Christmas 2011, Hachette and HarperCollins more than doubled ebook prices for Australians. Penguin and Macmillan have followed suit. Don’t identify yourself as Australian, and you can watch the prices plummet.

             Amazon, Diesel, BooksOnBoard and other ebook retailers would happily discount, but the publishers won’t let them. In the case of ebooks, publishers are the rapacious middlemen between the content creator (author) and the customer.

             I’ve put in a brief submission, also pointing out how this disadvantages disabled Australians (like me) who can only read electronic text.

5. AM
   Posted 25/05/2012 at 2:47 pm | Permalink | Reply

   Similar issues in all forms of retail.
   And it’s the shop fronts that take most of the public flack, which in a lot of cases isn’t right.

   Distribution is where most of “Oz tax” winds up.
   Thats why operations like Aldi can clean up.

   • Noddy
     Posted 25/05/2012 at 3:56 pm | Permalink | Reply

     Maybe they should take a share appropriate to their effort. It might mean the boss has a BMW rather than a Ferrari, but they have been getting fat at the public’s expense for a long time.

6. Maude
   Posted 17/06/2012 at 9:58 pm | Permalink | Reply

   Are hearing aids sufficiently ‘IT’ to be included in the Inquiry? I hope they are because all the hearing aid multinationals are mercilessly ripping us off. Hearing aid prices in Australia are typically double the price for exactly the same item in the US, and there is no GST on these medical devices.
   For example, the Oticon Intiga 8 is $US1635 from Discount Hearing Aids in Massachusetts (discounthearingaidsofnewengland.com), ₤1245 ($AU1940) from Crystal Hearing UK (crystalhearinguk.co.uk) and $3495 from hearingaidprices.com.au. It’s a similar story with other brands and types.

   Unfortunately it’s really not possible to buy over the internet because hearing aids really need to be fitted to the individual. I could fly over to the US, have my hearing aid fitted, and fly back for the difference in price, but follow up consultations may be difficult. So I’m stuck with paying whatever price these oligopolists decide.

7. Hearing Aids Sydney
   Posted 21/06/2012 at 9:34 pm | Permalink | Reply

   So nice blog you have shared for us..When i read this blog, I get a lot of information from this blog…Thanks for sharing this type of blog:-)

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