The 'Australia tax' is real, geo-blocking to stop

The 'Australia tax' is real, geo-blocking to stop

Summary: Australia's IT pricing inquiry has tabled its final report, and has found that the price differences for IT products cannot be explained by the cost of doing business in Australia.

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The House of Representatives Standing Committee on Infrastructure and Communications today released its report on IT pricing in Australia, making 10 recommendations and concluding that the long-discussed "Australia tax" is real.

"Particularly when it comes to digitally delivered content, the committee concluded that many IT products are more expensive in Australia because of regional pricing strategies implemented by major vendors and copyright holders," said the report by committee chair and Labor MP for Wakefield, Nick Champion.

The report was particularly damning of the practice known as geo-blocking, where content is restricted to users from certain geographies.

"While the committee acknowledges that in some cases, geo-blocking is a necessary business practice, it also notes that many IT vendors appear to use geo-blocking as a means to raise prices by restricting consumers' ability to access the global marketplace," the report said.

"The committee considers this form of geo-blocking to be a significant constraint on consumer choice."

To deal with the problem of geo-blocking for Australian consumers, the committee made a number of recommendations.

The report advised that the Australian government amend the Copyright Act's anti-circumvention provisions to "clarify and secure consumers' rights to circumvent technological protection measures that control geographic market segmentation".

In order to help Australian customers know how to circumvent technological restrictions, the committee suggested that the federal government look at options to educate the nation on how to "circumvent geo-blocking mechanisms in order to access cheaper legitimate goods". The report said that such education should look at the tools and techniques for circumvention, and inform users on how their rights under Australian Consumer Law may be affected by such actions.

Another proposal looked at voiding contracts and terms of service that aim to enforce geo-blocking. This would require amending the Competition and Consumer Act.

The committee said that the The Australian Competition and Consumer Commission (ACCC) should be allowed to operate in intellectual property markets, and recommended the repealing of Section 51(3) of the Competition and Consumer Act that prevents it from doing so. Another proposed amendment to the Competition and Consumer Act from the committee concerned the voiding contracts and terms of service that enforce geo-blocking.

It was advised that the parallel importation restrictions found in the Copyright Act and parallel importation defence Trade Marks Act be broadened to allow the importation of genuine goods.

Once the above proposals are enacted, the committee has left one bullet in the chamber: The wholesale banning of geo-blocking.

"The committee recommends that the Australian government consider enacting a ban on geo-blocking as an option of last resort, should persistent market failure exist in spite of the changes to the Competition and Consumer Act and the Copyright Act recommended in this report," said the report.

In order to gain proper statistics on online purchasing, it was recommended that the Australian Bureau of Statistics (ABS) develop a comprehensive program to monitor and report on IT purchases, both domestically and internationally, and to look at the size and volume of the online retail market.

The report said that the Australian government should address the issue of access to IT technology.

"In the committee's view, limited access to IT products in an increasingly interconnected society is a significant contributor to the social isolation and economic marginalisation of Australians, including those who are living with disability."

To this end, it was advised that a whole-of-government accessible IT procurement policy be developed to improve the quality of life for both people with disabilities and their carers.

Education was addressed, with the proposal that universities and the government pair up to conduct a study of future IT needs and costs to provide a financial foundation for future negotiations.

The report looked at IT hardware, software, games, consoles, ebooks, music, and videos sold in Australia, whether sold on the internet or from retail outlets, and found that it is in the online world that price discrimination is at its most prevalent.

"The committee is of the view that in many instances, these higher costs cannot, even cumulatively, explain the price differences consumers experience in relation to many IT products, and especially those delivered via the internet.

"In relation to games, for example, the committee has not received any evidence which explains why it is almost invariably cheaper for Australian gamers to purchase and ship physical media from the United Kingdom to Australia than it is to purchase a digital copy of the same game.

"Given the evidence presented to the committee of very large price differentials, it is difficult to avoid the conclusion that these practices amount to international price discrimination to the clear disadvantage of Australian consumers and businesses."

The committee proposed the creation of a "right of resale" for digital content and the clarification of fair use provisions in order to increase competition in mobile markets.

During the committee's public hearings in March, Adobe claimed that its higher costs for products in Australia are as a result of delivering a "personalised experience" for Australians, while evidence was provided by Microsoft that locally based channel partners are responsible for some of its costs.

In its report, the committee dismissed the claims when it came to digital content.

"The committee notes that despite industry claims that costs exist for the creation and marketing of digitally distributed content, vendors have not produced any evidence to explain why differentials are so high for such content.

"The committee is of the view that in many instances, these higher costs cannot, even cumulatively, explain the price differences consumers experience in relation to many IT products, and especially those delivered via the internet."

From evidence supplied to the inquiry, the committee determined that Adobe products are, on average, 42 percent more expensive within Australia, with Microsoft products being on average 66 percent more expensive.

Topics: Australia, Government AU, Microsoft

About

Chris started his journalistic adventure in 2006 as the Editor of Builder AU after originally joining CBS as a programmer. After a Canadian sojourn, he returned in 2011 as the Editor of TechRepublic Australia, and is now the Australian Editor of ZDNet.

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15 comments
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  • Geo-blocking is a form of extortion

    I think that Australia is commonly seen as a 'remote' land whose citizens are perceived as having few alternatives but to pay substantially more for the articles they want. This is patently absurd, however, in the case of digitally delivered goods and services. Corporations like Adobe apparently believe that Australians are so accustomed to 'paying more' that they will meekly keep paying an absurdly high surcharge for the same downloadable software that costs far less in the US or UK. It's time for this unjustifiable 'Australian premium' to end in one way or another, and I hope that the Australian government acts quickly to see that it does.
    preilly2@...
    • Thanks

      This poorly written article did not give one clear example of what they were talking about.
      stano360
  • Isn't it amazing ...

    ... that the same companies who pay no tax have higher regional prices? The same companies who promote the Internet ... keep all the money to themselves.

    No. What's amazing is that Governments around the world are so inept that they can't rectify the situation and obtain a fair deal for consumers.
    jacksonjohn
    • That's not the answer

      The answer is don't buy their products, or force your local government to allow more ISP's that let you buy from international vendors. If this is strictly digital purchases, this is a non-issue. It's the same price to buy the physical as digital for most products in the US.
      stano360
  • whatever happened to the Free Trade Agreement? ?

    Obviously it isnt there any longer or possibly it was ONLY meant to make things better for Americans. I tried to download a free app from Amazon only to be told the seller doesn't want Australians to be able to get it. I contacted the author who told me that was Amazon who controlled that, not him. He pointed me to Google Play Store where he had just put it and I got it there just fine.

    The evidence of what amounts to racism by charging Australians more has been around for years. Maybe we ought to tear up the FTA and go back to tariffs. After all, isn't this Australia price the same thing by another name?

    That way maybe we will finally start buying Australian only!
    greg-w-h
    • Agreed

      (except I'd avoid using the term "racism" here. try "discrimination")
      hmmm,
    • Ironically

      People say the same thing in the US. A huge "tariff" already exists in Australia, it's the hugely expensive shipping costs, 20-30% higher than surrounding regions. I don't know why, but they're outlandish.
      stano360
      • Shipping =! Digital Product

        How does shipping costs come into a digital product, that is downloaded, most likely from a CDN?

        I think you missed the point entirely
        Spanner_Man
  • Recommendations..

    How much weight do these 'recommendations' have? people have been making 'recommendations' for a long time but nothing has come of it.
    Frenz9
  • Digital providers are not the only culprits

    I have two copies of a CD that would, at first glance, appear to be identical. One is the Australian pressing, the other is an import. The Australian pressing was more expensive and has three tracks FEWER than the import.

    Music and Video products have demonstrated "geo-blocking" for decades and only now, when downloadable product demonstrates the same discrimination does the government decide that it's time to get serious?

    I'll believe it when I see it.
    Treknology
  • This is just ridiculous.

    I honestly can't believe this stuff is still going on. And it's not just digital goods that this effects either. I went to go buy a laptop after some careful consideration into which one I wanted only to find out that the version of the laptop I wanted to get had a special Australian version that not only cost more but had less RAM and a slower CPU in it.

    I keep hearing about people in the US getting songs for 99 cents on iTunes. But whenever I go to buy a sing it's either $1.69 or $2.19. The fact that we get shafted on prices just because we're in Australia is just stupid. I can understand some website's not being able to ship here or charging extra to ship here but these are digital goods and that still doesn't make up for changing hardware just for Australian audiences.

    Now I'm really interested in knowing what the Liberal and Labour parties stand on this issue is. Because it's about time that these shenanigans stopped and we finally got fair prices for products on-line.
    David Katalinic
    • Is this true

      on Google Play and Amazon too? Wait . . . people still buy songs?

      And good luck trying to force foreign companies via government. "Fair" prices are prices that people are willing to pay and vendors are willing to sell for.

      Comparing your prices to the US is a fools errand. We usually have the lowest prices in the world on most products. You're a country of 20 million(?) that's physically remote. With a government no doubt that creates all kinds of hassles for importers.
      stano360
  • No more price gouging.

    There really is no reason the "Australia Tax" to even exist. Corporate practices of what I think should be termed "geo-gouging" (that is price gouging based on geographical location), particularly on digital content which relies only on cables and transmission protocols to get to anywhere in the world, is completely unsuitable.

    Good on our government to see about rectifying this. It is not often that I actually praise government actions, but this time they seem to be doing something RIGHT.
    dmh_paul
  • Not always cheaper overseas....

    With the latest change to the exchange rate, here is an interesting comparison:
    Cheapest MacBookAir on the US Apple store: $999
    Current exchange rate: 0.90 equivalent to A$1,110
    Add GST (included in the Australian Apple Store): A$1,221
    Cheapest MacBookAir on the Australian Apple store (same config): $1,099.
    Though I am sure that Apple will adjust their prices soon.
    whoknows-47819
  • prices differ wherever you are

    Living on the mainland in Europe its good advide to check out the prices (with shipping) for US and UK first. Usually its (a lot)cheaper. When I was in India I noticed when accessing websites from a local pc that prices were a lot cheaper than what I was used to (like 40/50% reduction). It seems they just decided australia should be more expensive.
    mad-man