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Enterprise IT, Featured, News - Written by Renai LeMay on Tuesday, October 30, 2012 14:19 - 30 Comments
“Obstruction, avoidance and evasion”:
IT giants stonewall price inquiry
news Members of Parliament from both major sides of politics have very publicly blasted global technology giants such as Apple, Adobe and Microsoft and even representative group the Australian Information Industry Association, for what they described as “deep reluctance and resistance” to give evidence before a parliamentary committee investigating local IT price hikes.
In May, following a public campaign on the issue by Labor backbencher Ed Husic, the House of Representatives Standing Committee on Infrastructure and Communications called for submissions to help inform an inquiry into pricing of technology goods and services in Australia, publishing the terms of reference for the initiative on its web site. The results have so far demonstrated a strong groundswell of public anger about ongoing markups on technology goods sold in Australia.
Many of the submissions from users focused on the fact that online stores such as Apple’s iTunes, Valve’s Steam, Microsoft’s Xbox Live, Sony’s PlayStation Network, Amazon’s Kindle store and Adobe’s software store charged Australians higher prices for the exact same software and content than residents of other countries, particularly countries such as the US. Companies such as Microsoft have previously justified the charges based on the increased cost of doing business in Australia.
However, not all companies whose products have been mentioned by the inquiry have volunteered to attend to give evidence. US software giant Adobe, for example, declined to appear to give evidence to the inquiry, although it participated in a submission by the Australian Information Industry Association. Adobe has a practice of commonly marking up software products for the Australian market such as its popular image editing application Photoshop — despite the fact that the software is often downloaded from the same site in Australia and the US.
The reluctance of major vendors to appear in front of the inquiry has resulted in public displays of anger by members of the committee. In September, for example, Husic publicly raised the prospect of compelling recalcitrant technology vendors to appear before a parliamentary committee on IT price hikes in Australia, alleging that some suppliers are “treating the Parliament with contempt”.
If dramatic speeches given yesterday are any indication, it appears to be the case that both Labor and the Coalition have run out of patience on the issue.
Speaking yesterday in the House of Representatives, committee chair Nick Champion said to date the committee had received “only qualified and sporadic cooperation from industry groups and major IT companies” during the proceedings.
For example, he said, the AIIA, industry association representing IT companies, “provided a submission and appeared but was unable to provide specific information on behalf of its individual members”. Champion added: “Once it became apparent to the committee that major companies did not intend to appear before the committee and give public evidence, we did ask the AIIA to reappear on behalf of the industry; but this request was refused.”
For its part, Apple made a confidential submission and provided a confidential briefing to members of the committee but had refused repeated written requests to make a public submission or to appear before the committee to give evidence, while Adobe initially informed the committee that it would be represented through the AIIA. “But, given the AIIA’s inability to provide detailed answers to the committee’s satisfaction, we then sought further information and submissions from Adobe, which they provided on a confidential basis,” Champion said.
“They have offered to appear—but only if other companies in the sector appeared at the same time. Microsoft, to their credit, made a submission and some further supplementary submissions to the inquiry but have been unwilling to appear before the committee and have proposed alternative contributions instead.”
In general, Champion said, “to one degree or another, there has been a real unwillingness to submit evidence in public or to appear before the committee on the part of both industry associations and major companies in the area of IT”.
He added: “The committee detects a deep reluctance and resistance on the part of the relevant companies to discuss in public the issues that the committee is considering or to publicly defend their business models and pricing structures … the industry seems to employ the tactic of giving either little or limited cooperation to the committee, particularly in public testimony.”
Champion said this behaviour stood in stark contrast to what had happened in other inquiries which had investigated areas of commercial sensitivity – for example, the retail sector inquiry in 1999, in which Woolworths appeared twice and included its chief executive and five other senior managers.
“If it is good enough for an Australian company such as Woolworths to give public evidence on matters of commercial interest to them, it should be good enough for Apple and others to appear and do the same,” Champion thundered in the chamber. “It is not good enough for the industry to simply stonewall the inquiry—or, for that matter, to ignore interested consumers who have a legitimate public interest in IT pricing.”
“The companies’ failure to appear leaves the committee with an unenviable choice between compelling the attendance of individuals to give evidence and reporting without hearing in detail from industry. The choice between one or other of these alternatives can only be averted by the IT industry’s following the first rule of good public relations: always turn up and put your case.”
Nationals MP and deputy chair Paul Neville agreed with Champion, in a rare show of unity between the major sides of politics.
“I rise to support the chair of the committee as his deputy,” Neville told the chamber. “It is obvious from the evidence we received from members of the public and people on the consumer side of this agenda that the public has had enough of this pricing, which puts Australia at a disadvantage in a whole range of areas, such as IT hardware and software and things that spin off them—music downloads and engineering, medical and educational software.”
“The committee sought constructive, candid involvement from various large companies. But they have been difficult, as the chairman just pointed out. There seemed to be a reluctance from some international corporations to get involved in the inquiry, even after a number of direct requests. We feel that we have come to a point where there is obstruction, avoidance and evasion. One of the silliest
ones is that, on the one hand, the industry body says they are there to represent the industry, but, when we ask them a specific question, they say they cannot possibly talk for individual members. So we have this catch 22 going on.”
Nevill added: “The ultimate sanction for this sort of thing is to invoke the committee’s powers to subpoena people. I am always reluctant to do that, but I think a time comes when we should consider the sanctity of the parliament and what it is here to do. When the minister asks us to look into something and report back to this parliament and we are deliberately frustrated, I think we need to send out a signal that we are not going to accept that and that we expect a better level of conduct from the industry.”
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.
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.
I’ve enjoyed a long-running relationship with the local offices of major technology vendors such as Microsoft, Adobe and Apple for the better part of a decade now. Good people work at these companies, and I admire much of the work they do. Certainly I continue to use and write about their products almost every day. I simply could not do the work I do without Microsoft Office and Windows 7, Apple’s Mac and iPad products, and Adobe’s Creative Suite.
So it is with respect, and conscious of that long relationship, that I say, enough is enough. These companies are treating the Australian consumer and the Australian Parliament with contempt right now on this issue, and need to pull their head in. Strength and pride can be virtues at times, but so can humility, and right now a little humility is needed from these companies, before both sides of Federal politics decide that they are tired of being treated like they don’t have any authority and start making the vendors’ lives very, very difficult indeed.
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