Don't ban Australian pricing discrimination: AIIA

The industry group representing Apple, Microsoft, HP and IBM has argued that if Australian competition law is changed to ban the so-called Australia tax on technology, it might drive companies out of the country.
Written by Josh Taylor, Contributor

Companies should be allowed to charge more for tech products sold in Australia than they do overseas, according to the Australian Information Industry Association (AIIA).

Paying more for software, or the latest smartphone or computer in Australia compared to the cost for buying it elsewhere in the world has been a sore spot for many over the last few years, particularly as the Australia dollar reached parity with the US dollar, with some reporting a price difference of up to 50 or 100 percent more in Australia.

The parliament in 2013 conducted a review into the so-called Australia Tax for IT products, and in July 2013 the House of Representatives Standing Committee reported that ACCC powers should be extended to force global companies to offer Australians access to prices they would receive in other territories.

The election of a new government in September last year has meant that the government has yet to respond to the report, but the Competition Policy Review commenced in March this year specifically highlighted IT pricing discrimination referenced in the report as one issue worth assessing, and asked whether there was a case to regulate international pricing discrimination.

While consumer organisations such as Choice and the Australian Communications Consumer Action Network have backed regulation, the AIIA and the Australian Recording Industry Association have argued strongly against any changes to regulation.

In its submission (PDF) to the review, the AIIA — which represents companies such as Apple, Microsoft, HP, IBM, Oracle, Telstra, and Intel — said that the price differences faced by Australians are reflective of "different market and competitive conditions".

"Each market 'bears' a price that reflects relative levels of demand and supply, as influenced by consumers' willingness to pay and levels of demand/supply side substitution," the AIIA said.

"Different geographic markets have different supply and demand characteristics, different customer and consumer demographics, and different competitive conditions, independent of costs, which affect price."

In addition to the cost of labour, rent, marketing and other expenses differing in each market, the AIIA said that companies market their products differently in different countries. So in one place, a product might be considered the "premium" service, but might be the "budget-friendly" option in another country.

The AIIA said that any moves to ban price discrimination might lead to international companies abandoning the Australian market.

"In short there are efficient reasons that firms charge different prices in different geographies. To prohibit this practice risks banning legitimate price differences and forcing multinational firms towards uniform global pricing, thereby denying the very conduct that previous reviews of Australian competition policy deemed beneficial," the AIIA said.

"Reversing those earlier policy decisions via new legislation that limits firms' ability to control prices could also cause foreign suppliers to abandon or decide not to enter the Australian market, resulting in less competition and less choice for consumers in Australia.

"Likewise, Australian suppliers could also be discouraged from entering overseas markets, or be constrained from pricing competitively in an overseas market — putting them at a disadvantage vis-à-vis their overseas competitors."

ARIA and the AIIA agreed that changing the Competition and Consumer Act to ban geo-blocking services online would put Australia in breach of international trade agreements such as the Australia-United States Free Trade Agreement.

The Shopping, Distributive, and Allied Employees' Association (SDA) argued that retailers in Australia faced an unfair advantage to online retailers, with the Goods and Services Tax (GST) not being applied to goods worth less than AU$1,000 purchased online from overseas outlets.

The government is currently considering lowering the threshold, and this move would be supported by the union.

"Many countries deliberately protect domestic companies from overseas competition. Here, we are doing the opposite. Government policy actually penalises Australian retailers against their overseas online competitors," the SDA said in its submission (PDF).

"Overseas online retailers should pay the same taxes and duties as their Australian-based competitors."

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