news One of Australia’s peak consumer groups has recommended the Federal Government investigate whether region-coding and charging Australians higher prices for products based on Internet IP address should be banned, in the context of an investigation which has found little justification for average Australian price hikes of 50 percent on technology goods.

In May, following a public campaign on the issue by Labor MP Ed Husic, the House of Representatives Standing Committee on Infrastructure and Communications called for submissions to help inform an inquiry into pricing of technology goods and services in Australia, publishing the terms of reference for the initiative on its web site. The results have so far demonstrated a strong groundswell of public anger about ongoing markups on technology goods sold in Australia.

Many of the submissions from users focused on the fact that online stores such as Apple’s iTunes, Valve’s Steam, Microsoft’s Xbox Live, Sony’s PlayStation Network, Amazon’s Kindle store and Adobe’s software store charged Australians higher prices for the exact same software and content than residents of other countries, particularly countries such as the US. Companies such as Microsoft have justified the charges based on the increased cost of doing business in Australia, but in its own submission to the inquiry (PDF here), consumer watchdog organisation CHOICE said there was in fact little justification for the price rises and that the legality of geo-IP blocking should be investigated.

“CHOICE recommends that the Federal Government investigate whether technological measures that allow suppliers to discriminate against Australian consumers such as region-coding or the identifying of IP addresses should continue to be allowed,” the organisation wrote. “CHOICE considers these measures to be anti-competitive when they result in significant price differentials for Australian consumers.”

“These restrictions keep prices in national markets artificially high to benefit international copyright holders,” CHOICE added. ” … Given the rapid growth of online retailing and the increasingly global market for IT hardware and software, Australian consumers should not be disadvantaged through restrictive, anti-competitive practices that sustain international price discrimination.”

In its submission, CHOICE examined a number of online stores such as the ones mentioned above, and found that the average price difference between Australian prices and US prices of the same products was approximately 50 percent, with all products affected by price differences “to various degrees”.

CHOICE noted that cost factors related to labour, occupancy and rent, GST, retail profit margins, logistics and transportation had been cited by many stakeholders in the retail environment as being behind the local price rises. However, the organisation noted, “it is clear that these costs, even cumulatively, cannot account for the 50 percent price differences identified in IT hardware and software products”.

The organisation noted that price differences in software products used in business and education could also have more wide-ranging effects than just denying some users access to entertainment content.

“From operating systems such as Windows to highly specialised graphic design and production products, software is now a necessity for many businesses and students,” the organisation wrote. “Products users for applications such as databases, word processing and accounting make businesses more efficient, productive and dynamic. If Australian businesses must pay more for these, they will be unfairly disadvantaged in the digital economy.”

CHOICE particularly singled out major companies such as Microsoft and Adobe for criticism in its submission.

“Some of the price differences appear particularly unreasonable,” it wrote. “For example, the product Visual Studio 2010 Ultimate with MSDN (New Subscription) has a monetary price difference of $8,665.29. For this amount, it would be cheaper to employ someone for 46 hours at the price of $21.30 per hour and fly them to the US and back at your expense – twice.”

The issue of more traditional forms of blocking Australians from purchasing international products — such as region-blocking of content — also came under fire, with CHOICE fingering Japanese game giant Nintendo as one offender. “Unlike PC games, Wii console games are region locked,” the organisation wrote. “This means that the consoles sold in certain regions will only play the games sold in those regions. For example, a game bought in the US will not work on a console bought in Australia.”

“Console locking makes it easier for companies to enforce price discrimination as it restricts the flow of goods across international borders. It prohibits consumers from circumventing domestic markets and buying goods online from websites like Amazon or eBay. Other products which are region locked include DVDs and Blu Ray films … CHOICE believes that it is unrealistic and unfair to continue region locking in light of the rise of online purchasing which enables consumers to access international marketplaces.”

The organisation didn’t believe that changing the low value threshold for imports, where products purchased online from overseas retailers for less than $1,000 would be exempt from the GST and other government charges, would have an impact on the situation, despite a great deal of commentary on the issue by local retailers such as Harvey Norman.

However, one way which CHOICE argued could assist in the situation was for the Federal Government to help educate Australians more with respect to the availability of parallel importers such as consumer electronics retailer Kogan and online bookseller the Book Depository.

“CHOICE believes the Federal Government should play a greater role in educating consumers on the protections and rights they have when shopping online,” the organisation wrote. “This includes their right to return products that do not comply with the Australian Consumer Law, their right to access legitimate parallel imports from foreign markets, and their rights to privacy and security. This is justified given the significant increase in online retailing, and the clear benefits to consumers from participating in the digital economy. Importantly, increasing the level of confidence that consumers have in the online marketplace will also help increase competitive pressure on those businesses that engage in international price discrimination.”

opinion/analysis

I fully agree, as I’m sure most consumers would, that it should be illegal for organisations such as Valve, Microsoft, Sony, Amazon, Apple and so on to use geo-IP blocking and region locking to restrict the free flow of goods between countries such as the US and Australia with the aim of charging different prices for different markets.

And this isn’t only an issue of price. It also applies to the basic availability of some content. Last week I attempted to download a popular book from Amazon’s Kindle Store to my Kindle in Australia, only to be told that the book wasn’t available in Australia in eBook form. I couldn’t find that book either through Apple’s iBooks store, or Google’s Play store. And yet, it is available readily in paper form through many Australian retailers — for a substantially higher price.

As Labor MP Husic has realised, this issue is just not going to go away until Australians get a fairer go from these companies. A 50 percent average price hike across the board is just not good enough from these incredibly rich multinational groups. Australian consumers and the Government should stick up for themselves on this issue and continue to demand solutions from the offending companies.

Image credit: Valve