Warranty costs do not justify high IT pricing: Choice

Warranty costs do not justify high IT pricing: Choice

Summary: Choice has shot down claims by the AIIA that Australia's warranty scheme plays a big part in driving up the cost of local IT products.


Australia's warranty laws are not to blame for the high cost of IT products sold in the country, according to consumer advocacy group Choice, speaking at a parliamentary inquiry into IT pricing in Sydney.

Choice's response countered claims by the Australian Information Industry Association (AIIA) this morning that the high cost associated with honouring product warranties in Australia is a big contributor to higher prices for IT goods, including hardware and software. In a report by Choice, the price disparity between IT products sold in Australia compared to the US can be as high as 50 per cent.

In 2011, the Federal Government consolidated consumer-protection regimes, encompassing product warranties, into the Australian Consumer Law (ACL), but the IT industry organisation claimed that the local warranty scheme still bears a high price.

"One of our members said [Australia's] consumer warranty landscape is the most expensive in the world," AIIA CEO Suzanne Campbell said at the IT pricing inquiry. "A life cycle of a product could be three years, and that makes provisioning of warranty of those products very expensive in this market."

Choice rejected the AIIA's explanation, especially when comparing Australia to the US, where warranty laws may differ from state to state and yet IT products are still sold at a cheaper rate.

"Our view is that we fail to see evidence of how offering warranty in the Australian market under the ACL could be that much more expensive than offering that requirement under the US legislation," Choice head of campaigns, Matthew Levey, told the inquiry. "We understand that it's part of doing business, and there may be some jurisdictions out there that don't have sophisticated consumer legislation.

"But we don't believe the difference between Australia and the US market would justify that."

Choice used Kogan, which is a parallel importer of electronic equipment, as an example of how it is possible to sell IT goods at a lower price while still providing adequate warranty for the products.

"It obviously shows it is quite possible to operate here quite profitably selling products and still offer significant price savings," Levey said.

In its response to the inquiry, the AIIA also blamed the high cost of doing business in Australia, citing tax, rent paid by retailers and labour costs as contributing factors.

Choice disagreed, claiming that these factors wouldn't cut into margins to the extent that they would justify the disparity in prices between Australia and the US. Based on its own research, the consumer advocacy group concluded that the issue stems from vendors setting wholesale prices higher in the Australian market.

"Those [cost] factors that comprise the gross margin of the goods are simply not that much higher in Australia, even cumulatively, to account for the price differences we have identified," Levey said.

Topics: Government, Enterprise Software, Government AU, Hardware

Spandas Lui

About Spandas Lui

Spandas forayed into tech journalism in 2009 as a fresh university graduate spurring her passion for all things tech. Based in Australia, Spandas covers enterprise and business IT.

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  • if I were Chairman ...

    ... I would ask the AIIA to produce another report: warning them that if it was as incompetent as the first then the individuals involved in its presentation would be fined, the senior managers imprisoned and the organisation disbanded for criminal negligence.

    If they cannot see the differences between the economies of physical goods distribution and the virtues of digital then the existence of the AIIA is counterproductive to the National interest and the company should be punished as a lesson to others who might be equally misguided.
  • And the boxes are sealed with red tape

    There's something goofy going on when the method of setting prices in the country has turned into "dueling experts" testifying before legislators. The helping hand of government has become so stifling that only the Big Guys who can afford industry associations, lobbyists, etc., can afford to play. Expecting more government to fix this is like urinating up a halyard.
    Robert Hahn
    • keep blaming government

      If government wasn't paid by big biz you would find a way to solely blame it.

      Government's only problem is allowing itself TO be bought by big biz... think it through and don't spin on it...
    • correction to my post

      You would still find a way to blame solely government...

      You must hate government....