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  • Gadgets, News - Written by on Tuesday, November 27, 2012 13:48 - 21 Comments

    Parliament must subpoena IT giants: Choice

    news Consumer group Choice has called for the Federal Parliament to use its powers of subpoena to force recalcitrant IT vendors such as Apple, Adobe and Microsoft to give evidence about their price setting practices in Australia, due to the vendors’ reluctance to voluntarily appear before a committee into Australian 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”.
    In a statement released overnight, consumer group Choice called on the committee investigating the issue to “make international tech giants front up and explain the high prices paid by Australians”.

    Choice said it had been six months since the inquiry began, and the continued “stonewalling” from Apple, Adobe and Microsoft was a snub to millions of Australians who paid higher prices for their digital products.

    “Choice has provided evidence showing Australians pay around 50 per cent more than US consumers for identical music, software, games and hardware,” said Matt Levey, Choice head of campaigns. “With the industry unwilling to volunteer any detailed or public response, it’s time for the Committee to use the full powers of the Parliament and compel these businesses to front up and explain why they think it’s alright for Australians to pay higher prices.”

    Choice said it welcomed the Committee’s attempts to shine a light on IT price discrimination, but the must go beyond rehearsing a list of rip-offs and create real pressure for lower prices.
    “Just last week, AC/DC finally hit iTunes with a 54% difference, that’s $80 difference, between the local and US prices for the ‘complete collection’,” said Levey. “Unfortunately for those about to rock, this is far from an isolated example, and it is one reason why some music fans have taken to setting up US iTunes accounts to access legitimate, cheaper music.”

    He added: “We are calling on the Government to investigate whether measures used to sustain international price discrimination, like geo-blocking, are anti-competitive, and an important step towards that is for this inquiry to call the industry’s bluff on their pricing excuses.”

    Choice’s comments on the issue come a month after both sides of politics — Labor and the Coalition — blasted the IT vendors who were reluctant to appear before the commitee.

    Committee chair Nick Champion told the House of Representatives that to date the committee had received “only qualified and sporadic cooperation from industry groups and major IT companies” during the proceedings. 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”.

    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.”

    I agree wholeheartedly with Choice. It is time for the Parliament to compel these vendors to come forward. As I wrote in late October:

    “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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    1. NPSF3000
      Posted 27/11/2012 at 1:53 pm | Permalink | Reply

      I’m for it. They can charge us more, just as we can start applying pressure on ’em.

    2. daniel
      Posted 27/11/2012 at 2:02 pm | Permalink | Reply

      I am quiet happy for the government to use it’s powers to be granted this opportunity to use it’s powers.

    3. TechinBris
      Posted 27/11/2012 at 2:03 pm | Permalink | Reply

      The hypocrisy of Politicians is amazing, when this so called “outrage and contempt” against the Parliament is being championed by the two Parties who are advocating the signing of the TPP which will entrench and legalize this sort of behavior.

    4. Paul
      Posted 27/11/2012 at 3:14 pm | Permalink | Reply

      It would be interesting to see whether the price of music is set by the labels or Apple.

      • Nobby6
        Posted 27/11/2012 at 3:31 pm | Permalink | Reply

        I think we know the answer to that, just look at itunes prices, then pop over to bigpond music or even optus’s music store (forget its name off hand) which is pretty much same as BP, I pay on average 40c less per single track from BP compared to itunes.

      • Harimau
        Posted 27/11/2012 at 9:12 pm | Permalink | Reply

        In the case of Steam, I’m fairly certain that game prices are set by the publishers.
        http://www.steamprices.com/au/topripoffs shows just how absurd some of the price differences can be, particularly for AAA products.

    5. Ruslan
      Posted 27/11/2012 at 4:14 pm | Permalink | Reply

      Stock photo with an US-like fake subpenia template

    6. Yo
      Posted 28/11/2012 at 2:07 pm | Permalink | Reply

      What would a subpoena accomplish? This is just pointless grandstanding. Businesses are free to set their prices as they wish, outside of regulated industries like electricity. Computer hardware, software and IT services are not regulated industries. And I would be horrified if anybody suggested making them so.

      It seems unfair if private companies were compelled to release details of their internal processes for such a small issue as markups. They aren’t accused of criminal conduct, just charging high prices. How is that sufficient grounds to violate the confidentality of internal discussions and documents?

      • @GregLBean
        Posted 28/11/2012 at 3:55 pm | Permalink | Reply

        Sure businesses are free to set prices as they wish but they cannot vary those prices based on criteria that would be seen as discrimating against a certain group.

        When identical products are sold via the identical channel (the internet) how is it not discriminatory to vary price based on where you live especially when one is forced to purchase based on that geographical information. ie. you cannot buy the product anywhere else and use it legally where you reside.

        Imagine if you had to buy your petrol at a local neighbourhood station and pay a premium while the price in the next neighbourhood was cheaper but not available to you.

        That discriminatory pricing is the issue.

        • Harimau
          Posted 28/11/2012 at 4:21 pm | Permalink | Reply

          Actually a more accurate analogy would be, Imagine if you had to buy your petrol at a local neighbourhood station and you had to pay a premium, while someone from the next neighbourhood over buying the SAME petrol from the SAME petrol station is charged a cheaper price.

        • mash
          Posted 28/11/2012 at 4:41 pm | Permalink | Reply

          ..and you would then have to apply this to airline tickets where it costs more to travel from A->B than B->A depending on the country in which you booked the tickets. That is a worldwide problem.
          I’ve commented before, this entire inquiry is a “looks like we are doing something” smokescreen. The government has no powers to actually do anything to these companies without seriously compromising free-market principles and trade agreements from which we benefit. As with most things, the answer is probably stimulating proper competition.

          • Harimau
            Posted 28/11/2012 at 8:33 pm | Permalink | Reply

            I don’t think that’s equivalent. The service is not the exact same either way, and I mean, airline ticket prices vary from DAY TO DAY.

            Now, if metro-Joe and outersuburban-Sue both wished to book a ticket for the same trip on the same flight at the same time with the same online booking service, but Joe was offered a lower price than Sue, that would be price discrimination.

            Australia is definitely discriminated against on price. I’ve heard some people claim that Australians should pay more because we generally make more – but they ignore (or are unaware) of the fact that our costs of living for basic necessities, taxes, etc. are also generally higher, so our disposable income after the basics isn’t actually that much higher (if at all).

            Online digital-distribution is a global marketplace, so other than taxes, it makes no sense that different places pay significantly different prices. For instance, on Steam, we pay in US dollars… but we pay Australian prices; now how does that make any sense?

            • mash
              Posted 28/11/2012 at 9:55 pm | Permalink | Reply

              Incorrect. If I book a return flight from Melb to dest X and another person at dest x books a return flight to Melb, we will pay different prices even if we end up on the same flight from Melbourne to X. Yes airline tickets vary from day to day!- this is called price discrimination! and the airline industry is the perfect one at implementing this.

              Lets just be clear. The term “Price discrimination” as it is known in economics is not like “racial discrimination”. It is an economically valid, practiced and perfectly legal economic concept (see airlines). All businesses strive for it where possible as a way to maximise revenue but it depends on the industry.

              No-one is denying Australians are often being charged more for services that have the same costs of sales for overseas buyers, but we need to recognise that this concept is domestically and internationally pervasive and is also perfectly legal. Hence the difficulty in stopping it.

              • Harimau
                Posted 29/11/2012 at 1:08 am | Permalink | Reply

                Okay, I understand your explanation, but what I don’t see is your point. Is your point “it’s unfair, but that’s the way of the world, so let’s not do anything about it”? You would have done well as a serf. The point that I, and others, are making is that the internet is a global marketplace, where the product is no different, the costs for “manufacture” and distribution is no different, and yet the price is different. There should be a single market, but the market has been artificially segmented into several markets.

                You said, earlier, that the solution is to inject more competition, but this is of course impossible. For a certain product, how do you establish a competitor to a publisher that is the only one who owns the rights to sell that product (i.e. IP, copyright)? Piracy? These are effectively monopolies, and consumers are price-takers.

                There are only two ways I can think of to inject “competition”; one is, as I said, piracy, which is not legal. The second is establishing an overseas “friend” organisation that “gifts” you, which is probably not legal, and at the very least violates most Terms of Service.

                The government and Australian consumers are not actually that interested in companies’ price setting practices; they are interested in FAIR pricing. Fair pricing is the outcome desired, not the outing of price setting practices; the latter simply puts pressure on companies to voluntarily establish the former. Consumers are making an issue of it in the media, and making an issue of it through their representatives, and this is also, I’m sure you’d agree, perfectly legal.

                • mash
                  Posted 29/11/2012 at 12:52 pm | Permalink | Reply

                  No you miss my point entirely. The maximum outcome of the enquiry is that apple et al admit they charge us what they like “because they can” (which we already know). Unless there is something we can do about it then it is a waste of time. No point stalking a deer if you don’t bring something to shoot it with.

                  When I say competition I mean encouraging competitor companies with competitive products. You lack some basic economic understanding.

                  • Harimau
                    Posted 29/11/2012 at 2:52 pm | Permalink | Reply

                    It is not a waste of time, it’s the company’s reputation on the line (and by extension consumers’ goodwill, and in turn the company’s success in the Australian and other markets). Modern companies realise they are not simply merchants, and having a good relationship with a “consumer” is imperative for strong sales and especially return custom. Think BP’s desperate re-branding following Deepwater Horizon for an extreme case. The consumers’ “gun” is “social pressure”, through government action, media pressure and consumer initiatives. Petitions and boycotts may be “meaningless” since something is “legal” anyway, but if it’s “wrong” or “unfair”, then enough social pressure will still result in change for the better.

                    I think you’re defending the status quo too strongly, and I think you should re-examine your reasons for that.

                    You lack some basic understanding, period (or are wilfully misunderstanding). Let’s use the example in the article:
                    “Just last week, AC/DC finally hit iTunes with a 54% difference, that’s $80 difference, between the local and US prices for the ‘complete collection’,”
                    Demonstrate to me how you could possibly encourage competitor companies with competitive products that will result in Australian prices on iTunes for the AC/DC complete collection being closer to US prices.

                    Economic theories are not laws of the universe, and in this case, provides no answers.

              • SMEMatt
                Posted 29/11/2012 at 1:17 pm | Permalink | Reply

                The core problem is these companies are carrying out activities in overseas markets that allow them to artificially inflate the price in Australia. Activities that if they carried them out in Australia that would have the companies dragged before the competition watchdog and fined. As fare as I’m concerned if they want the protection of our laws in regards to copyright protection and free access to market they should respect other aspects of our competition laws when they are operating in other markets.

                Oh sorry big multinational you are going to stop US distros and Retailers selling to Australians while funneling money to OS tax havens to avoid you share of the tax burden for operating here. Well that’s fine I will instruct the Australian courts and law enforcement that copyright, patent claims and trade marks on your products are void.

                If you want an open market and free trade stop putting artificial restriction in place. If an Australian retailer wants to buy goods from a US distro(or any other country for that matter) they should be allowed to, not stopped from doing so because you local distro channels don’t want the compeition. Warranty isn’t an issue because lasted time I checked the retailer was responsible for warranty.

                That will fix the issue

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