Price Gouging: Where Are Adobe & Microsoft Profits Going?

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COMMENT: As Microsoft and Adobe face a Federal Government probe into their pricing practises in Australia, one has to question why the Australian Competition and Consumer Commission has not called for an investigation into the monopoly that both Companies have in the Australian market in the past.With over 85% of business and home PCs running Microsoft Office and over 90% of creative designers using Adobe products, it’s no wonder these two companies choose to price gouge Australian businesses and consumers.

The other big issue that is set to be investigated by the Federal Government is why large Australian IT and consumer electronics companies fail to declare profits from their Australian operations despite years of price gouging.

In Microsoft’s case, the company is asking Australians to pay up to 145% more for their professional Office Suite which includes the likes of Word, Excel, Outlook and PowerPoint. Despite having millions of installed seats of software, they still struggle to make a profit in Australia.

At Adobe the company is selling their Photoshop, Illustrator, InDesign and Flash products at up to $1,300 more than what they sell the same product to a US user.

The deliberate discrimination has been going on for years for the simple reason that both companies know that there are no real alternatives to their products.

It is only recently Microsoft has come under pressure from Google who is now offering their Google Docs and their new data storage service as an alternative. 

Last week Adobe moved to launch their new Creative Suite 6 as a cloud based service.

How the system works is that the Adobe software is hosted from a mainframe server, users from both the USA and Australia come into the same server to access the same software. There is no packaging and there is no shipping or distribution costs unlike the packaged versions that are currently being sold in Australia.

In the USA users of the service are being asked to pay $49.95 a month or $29.00 a month if you are an existing Adobe Creative Suite Customer. In Australia users are being asked to pay $67.95 a month and $37 for existing users.

This is despite the software being the same and served from the same server.

In Australia Adobe will have to collect 10% GST while in the USA Adobe has to pay between 5 & 7% State taxes.

Even with 10% added to the US price, Adobe Australia is asking Australians to pay more than what an US user pays.

 

Recently JB Hi Fi took on the major digital camera brands in Australia by sourcing Canon and Nikon products from overseas suppliers. At the time locally sourced Canon and Nikon cameras were up to 60% more expensive than the grey imported products that JB Hi Fi were sourcing from Asia. 

Within weeks Nikon moved to match the overseas pricing, while Canon Australia has refused to do so resulting in their products in Australia being significantly dearer than the grey imported models.

The decision by the Federal Labor Government to investigate IT and consumer electronics price gouging in Australia, could open up an investigation into parallel importing where vendors deliberately import products at an inflated price so they can repatriate profits back to a tax haven, thus avoiding local taxes.

In some cases IT and consumers electronic companies in Australia are turning over hundreds of millions of dollars but only declaring small profits.

LG in the 2010 -2011 financial year turned over more than $900 Million dollars but only declared a profit of $13,000 dollars.

Adobe, Microsoft and Google all declare their revenues to tax havens. In many cases, IT companies are declaring losses, despite price gouging consumers in Australia. This has to stop.

 

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