news Federal Parliament has issued documents formally compelling major technology vendors Apple, Microsoft and Adobe to compulsorily appear before its committee investigating price hikes on technology products sold in Australia, in a move that finally ends months of stalling by the vendors, who have proven unwilling to voluntary discuss their pricing strategies in public.
In May last year, 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. The results 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. Apple gave a private hearing to the committee, but not a public one, and Microsoft is believed to have taken a similar industry representation approach to Adobe.
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 the committee, alleging that some suppliers are “treating the Parliament with contempt”. And in October MPs from both major sides of Parliament blasted the vendors in the House of Representatives over the issue.
In a short statement issued this morning, the House Committee on Infrastructure and Communications note that it had summonsed the following organisations to appear before the Committee as part of its inquiry into IT Pricing: Apple, Microsoft and Adobe. “Summonses have been issued for a public hearing in Canberra on 22 March 2013,” the committee noted.
Husic also issued his own statement on the issue this morning, welcoming the move. “This is an important move – but one we shouldn’t have to take,” Husic said. “These firms should have cooperated and been prepared to be more open and transparent about their pricing approaches. In what’s probably the first time anywhere in the world, these IT firms are now being called by the Australian Parliament to explain why they price their products so much higher in Australia compared to the US.”
“Adobe, Apple and Microsoft are just a few firms that have continually defied the public’s call for answers and refused to appear before the IT Pricing Inquiry. While television and computer prices fell 14 per cent according the to the latest Consumer Price Index Figures, there’s still a long way to go – with some estimates suggesting that Australian prices are up to 60 per cent higher than the US.
“Given the widespread use of IT across businesses and the community, the prices paid for hardware and software can have a major commercial and economic impact. Getting downward movement on IT prices and easing the bite of price discrimination should be an important micro-economic priority – so I’m looking forward to hearing from these firms about their pricing approaches.”
The three companies have all had a practice of marking up goods and services for the Australian market over the past few years.
For example, in April 2012, Adobe confirmed it would continue 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. Similarly, in June 2011, when Microsoft released its new Office 365 suite in Australia, it listed local prices up to 76 percent higher than the exact same service will cost in the United States.
Apple has recently changed substantial parts of its pricing strategy in Australia. For example, in June 2012 the company appeared to have broadly harmonised the Australian prices of its MacBook laptop line with its US pricing, with its new line-up of products released at that time to cost broadly the same locally as they do in its home country. Similarly, in July 2011 the company set local prices of apps on its online App Store to be much closer to their US counterparts.
However, consumer groups such as Choice have published comparison studies showing that music sold through Apple’s iTunes store, for example, still costs substantially more for the exact same digital products in Australian than it does in the US. The committee’s move to compel the vendors to attend will be welcomed by consumer organisation Choice. In November last year, the group called for the committee to force the vendors to give evidence.
“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.”
I highly welcome and support the Committee’s move to compel these vendors to give evidence regarding their pricing strategies in Australia, and will be covering proceedings closely. 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.”
Apple, Adobe and Microsoft are good companies, with a lot of good people working for them. I am looking forward to seeing a bit more honesty and transparency from them with regard to why their products (especially digital products) can at times be so heavily marked up for the Australian market. If nothing else, at least seeing some more honest evidence in this case will help fuel a wider debate about how the Australian Government can create a more favourable environment for major technology companies to operate in Australia.