Little hope for Australian IT pricing remedy

Apple, Adobe, and Microsoft can legally charge exorbitant prices for their IT wares in Australia and the Federal government has very little power to stop them. So what exactly did we achieve by forcing these companies to appear before the IT pricing inquiry?
Written by Spandas Lui, Contributor

When Apple, Adobe, and Microsoft were forced to face the music on over-charging Australians for their IT goods, it was meant to be a momentous occasion for the Federal government's IT pricing inquiry. But it's hard to shake off the feeling that the whole exercise achieved very little in the way of making prices fairer in this country.

After playing an extended game of hide-and-seek, all three vendors fronted the IT pricing inquiry on March 22, giving reasons as to why prices for their wares are much higher in Australia compared to other countries. Particularly, the high cost of running a business in Australia was a common theme between the companies, but none of them gave acceptable justifications for their actions, according to Choice head of campaigns Mark Levey.

Apple blamed copyright owners for charging more for iTunes content in Australia. Adobe said its notorious geoblocking of Australians from accessing its US website, which has cheaper software prices, was to offer a "personalised experience". Meanwhile, Microsoft claimed that if its prices weren't fair, then consumers would "vote with their wallets" and look for alternatives.

But much like these IT giants exploiting loopholes in the Australian taxation system to avoid paying a large chunk of tax, it is completely legal for them to charge through the nose for their products in Australia. They have the right to charge consumers whatever they want to maximise profits so long as it is not anti-competitive. That's capitalism for you. Conversely, consumers have the right to buy or not buy certain products.

They have the right to charge consumers whatever they want to maximise profits so long as it is not anti-competitive. That's capitalism for you.

To this end, Microsoft has a point: Consumers do have the right to vote with their wallets and buy from its competitors if they don't think the company's prices are reasonable.

"Unless consumers make a shift to something else and companies see any lower revenues, then they won't have the impetus to do anything," IBIS World senior industry analyst Narem Sivasiliam told ZDNet.

Considering there has been little action from those vendors so far, it is safe to assume that most consumers are sucking it up and paying marked up prices for products sold by the IT companies in question. That is partly because alternative offerings just can't compete with those being offered by these technology juggernauts. In other cases, consumers and businesses are being "soft locked-in" with some of their technology only working with particular operating systems, according to IBRS analyst Guy Cranswick.

"You can work on Linux and customise everything yourself, but let's face it, 90 percent of consumers, we're talking in volume mass-market terms, aren't going to do that," he told ZDNet.

So if we're not willing to or simply can't stop buying because we are dependent on products such as Microsoft Office or Adobe Photoshop, what can the Federal government do to ensure we are not being ripped off by these technology giants just because we live in a specific location?

The answer is: Very little.

The Federal government can't dictate how much these companies charge for their offerings. That's the basis of a free market.

"We have Competition Law that applies across industries, but it doesn't give the ACCC, or indeed the government, the power to set prices generally," Ben Hamilton, partner for IP and technology at law firm Hall & Wilcox, told ZDNet.

Considering these IT companies are not colluding on pricing, which would be considered anti-competitive, the Competition Law has very little impact on how vendors charge Australian consumers since there is no longer a provision in the Law concerning anti-discriminatory pricing, he said.

During the IT pricing inquiry, there were also hints from the presiding committee that it might recommend banning companies from geoblocking, which would give Australian online shoppers access to cheaper prices for IT goods on their US websites.

Sounds like an awesome idea if it weren't nigh impossible for the Australian government to do that on its own.

"When we're dealing with the internet, we're dealing with other jurisdictions," Hamilton said. "There is a query as to how the Australian government might be able to exercise jurisdiction over websites which are hosted overseas, and to me, it is possibly the biggest challenge in this area.

"The multijurisdictional aspect presents significant challenges."

"There is a query as to how the Australian government might be able to exercise jurisdiction over websites which are hosted overseas and ... it is possibly the biggest challenge in this area."

— Ben Hamilton, Hall & Wilcox

But this whole IT pricing inquiry hasn't been a complete waste of taxpayers' money.

As the inquiry rages on, these IT companies' brand reputation is at stake, as their unfair pricing practices in Australia are put under a national spotlight, according to Choice.

"These are very public facing companies, and millions of people interact with them on a daily basis," Levey said. "For them to come under intense scrutiny and increased pressure, you'd hope that would put some weight in their future decisions around pricing."

Indeed Adobe rather astutely lowered the price of its Creative Cloud offering ahead of its appearance before the IT pricing inquiry, but most of its other product pricing remained unchanged.

It is evident that consumer pressure is the biggest motivator for big corporations. Choice is even prompting consumers to circumvent geoblocked websites en masse to get cheaper digitally downloaded products from these vendors.

"Are Australian consumers a little too passive, and should they be a little more cross about paying prices they don't have to? Yes," Cranswick told ZDNet. "But people are now better informed about it, and perhaps people will be more aware and shop elsewhere, or demand more from particular vendors."

So if you're an Australian consumer or business that is sick of paying more for IT goods that are half the price in the US, then make some noise or take action. Because the prices certainly won't drop if you just sit on your hands.

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