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Aussies Charged 50% MORE For Tech: IT Inquiry

By Oonagh Reidy | Monday | 29/07/2013

The 'Australia Tax': Aussies charged 50% MORE for tech gear, says parliamentary report.

That's according to the findings of  a 12-month parliamentary inquiry into IT Pricing in Australia, conducted by The House of Representatives Infrastructure and Communications Committee, released today. 

Big tech companies like Apple, Microsoft and Dell are charging up to 50% more for products like iTunes, PC's and software like Windows 7, than consumers in the US and elsewhere. 

In fact, "in many cases Australians pay 50 to 100 per cent more for the same product" the 146-page report into information technology pricing, entitled 'At what cost? IT Pricing and the Australia Tax', shows. 

Higher prices were attributed to Australia's geographical remoteness and traditional weakness of the dollar.

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."

"The committee found that big IT companies and copyright holders charge Australians, on average, an extra 50 per cent, a practice consumers call the 'Australia Tax,'" said Committee chair Nick Champion MP.

The IT inquiry quizzed senior execs from Apple, Microsoft and Adobe, all of who denied price gouging, and used excuses including copyright issues, 'channel partners', higher business costs, taxes in Australia, for the massive price discrepancies.

However, these excuses didn't wash. 

"In many cases prices are significantly higher than what might be expected as a consequence of any costs arising from delivery in the Australian market," the parliamentary report stated.

The Blame Game

The report noted Microsoft Managing Director, Pip Marlow, sought to attribute some of the higher prices to locally-based channel partners, which includes the likes of Harvey Norman or JB Hi-Fi. 

"Microsoft provides guidance on recommended retail pricing. Microsoft does not, however, set the final 'to-the-customer' price," she told the Inquiry earlier this year.

"The channel and value-added partners who deliver those products to customers ultimately determine retail pricing." 

Some members of Australian Information Industry Association, which includes many big tech names, told the Inquiry they do not set the retail price of their products, locally. 

"These are set through their partner channel and hence are also influenced by channel specific market factors and cost pressures," the report noted. 

The Committee, comprising of Federal MP's, also condemned "geo blocking" practiced by giants including Apple, Adobe, which permit different prices in different markets.   

These "erected virtual barriers" are preventing Aussie consumers from comparing prices and purchasing online, via the "use of internet addresses, credit card numbers to block internet sales." 

"In the case of IT hardware, geoblocking may be the result of exclusive distribution agreements" with local companies.

Champion also noted: "many consumers have also become aware of, and frustrated by, regional pricing strategies". The internet has allowed price sensitive consumers become increasingly aware of prices overseas.  

The Rip Off, By Numbers

Adobe products showed an average difference of 42 per cent. One product, Adobe's standard Creative Suite 6 products showed "consistent price differential of 60 to 65 per cent," evidence presented to the Inquiry showed. 

Dell products including laptops, desktops in particular were on average 41 per cent more expensive, while Apple iPad, Macs pricing in OZ were "much closer to parity" with the US. Other hardware like Sony's PlayStation Vita or the PlayStation 3 were also cited as being far pricier - over 40 percent.  

But worryingly, prices of digitally delivered content, like iTunes or online software like Microsoft Windows, where there is no local delivery costs, were also massively inflated down under. Microsoft products were on average 66 per cent more expensive.  

Digital content like iTunes, games were found to be a shocking 70 percent and 84 per cent more expensive, respectively 

What Next?

The Inquiry now recommends kicking off a campaign, to help consumers find cheaper goods online and reforms to the Competition and Consumer Act and the Copyright Act to "remove barriers to competition" and "ensure consumer rights are not lost in the transition to digital content."

"High IT prices can have significant impacts given the critical role [it] plays in many areas of Australian life," Champion said. 

"Price discrimination is not actually a new phenomenon, and it is not surprising that Australians may find prices for products somewhere else in the world that are lower than the prices they find in Australia," Geoff Francis, General Manager of the Treasury's Competition and Consumer Policy Division, told the Inquiry, in a submission.  

"As you know, it is common for people to shop overseas while on holiday because they believe that the prices may well be lower on certain items when they are overseas." 

In practice, Aussie consumers should vote with their fingers and refuse to pay higher prices, until the appalling Australia Tax stops. 

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