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

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.
Written by Chris Duckett, Contributor

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.

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