IT Pricing Inquiry: A Recap Of Excuses

Apple, Adobe and Microsoft faced off against the IT Pricing Committee in parliament today to explain why they routinely overcharge Australians for products and services. Their litany of excuses makes for some amusing — and enraging — reading.

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Last year, the IT Pricing Committee resolved to inquire into IT price discrimination in Australia in a bid to find out if consumers are being unfairly gouged on the prices they pay. After much toing and froing, the vendors involved have finally fronted up to a parliamentary committee to explain why they overcharge Australians. Here’s a recap of the explanations made by each company: you be the judge.

Apple: Talk to the content owners

The first company to face Federal Parliament today was Apple. Apple’s local MD Tony King pointed the finger squarely at content owners for the pricing disparity of music and video downloads in Australia:

Apple must pay the rights holders to distribute content in each of the territories in which the iTunes store exist. The pricing of this digital content is based on the wholesale prices. They have often set a higher wholesale price than the price of similar content in the US . . . The retail pricing of digital content is based on many factors and foreign exchange is not a major factor. The main differentiator is the wholesale price.

“We would love to see lower prices for content on the Australian store, but we’d urge the community to talk to the folk who own the content to lower the price,” he added.

When asked whether content owners should appear before the inquiry, King reluctantly agreed:

It’s difficult for me to walk in and talk on behalf of the labels, but a balance does need to be struck… Everyone should get their day in the sun, so to speak. If further questions come out of that, then we’ll be happy to reappear.

Apple was also questioned about its failure to appear before the Committee until now. King claimed the company’s previous closed-door briefing to the inquiry had already been sufficiently productive.

On the hardware side of things, King pointed out that the price of its latest products in Australia were roughly comparable to the US (when factoring in US sales taxes which are not listed in the RRP). The physical size and shipping logistics of Australia also made it more expensive to transport products compared to other Asia-Pacific countries, King claimed.

King also noted that Apple doesn’t actually set the price for its channel retailers — it only pushes a recommended retail price.

Interestingly, King also revealed that Apple’s Australian business represents approximately three per cent of its worldwide revenue.

Adobe: Stiff prices translate to “personalised” experience

Next to face the question-firing squad was Adobe, which has arguably received the most heat from the media due to its massive pricing disparities. As noted by our colleagues at Gizmodo, it’s more expensive to buy certain pieces of Adobe software in Australia than it is to fly to the US and buy it there — return flight included.

Adobe Australia’s MD Paul Robson fronted the inquiry. According to Robson, Adobe has difficulty setting uniform pricing across the world due to the risks of developing software. The company’s policy of restricting access to international online stores (AKA ‘geoblocking’) also came under the microscope. Somewhat weakly, Robson passed this off as an attempt to provide a “personalised” local experience.

At Adobe, we do redirect people to local sites to recover the cost of local operations and point them to information customised to their local market… The personalisation is relevant to the experience you get when online. One of our key interactions is to allow [customers] to talk among themselves and ask them to contribute to the future of our product.

Naturally, this excuse didn’t fly too well with the Committee, which continued to grill Robson about the level of personalisation Adobe provides in its website and products. Robson added that the company does provide charity support and scholarship support to local communities.

More from Robson on forced website redirection:

If you purchase your Adobe product in the US, we’re not obligated to provide you a warranty. We want you to buy from us. The cost of running a business is high. That’s why we redirect customers to the local market page.

When asked whether the removal of geoblocking would have any affect on the company, Robson stated it would damage the contribution the ICT sector has on the local economy. Bold words.

Microsoft: If our product prices were unfair, people wouldn’t buy them

The last cab off the rank was Microsoft, fronted by Australian managing director Pip Marlow.

Marlow acknowledged that the company had not polled Australian customers about the fairness of its local pricing, but went on to argue that different markets require different prices and the sales figures speak for themselves:

We don’t set a global price for our products. We don’t believe that every market is the same. Emerging markets where the cost of living and the availability of technology is different has to be priced differently. At the end of the day, if we make a price too high in a particular market, customers will look elsewhere.

The Committee then confronted Marlow with a pricing sample of 47 Microsoft products, of which nearly 66 per cent are more expensive in Australia than the US.

Again, Marlow cited Microsoft’s sales success in the country, claiming “if they don’t like it, they vote with their wallets”. Under repeated questioning, Marlow all but dismissed the main thrust of the inquiry, claiming: “You’re looking for one simple silver bullet. There isn’t one.”

The Committee then rattled off some Microsoft price comparisons between US and Australia. When lumped together, the evidence is pretty sobering:

  • Windows 7 Professional (US: $326, AU: $469)
  • Office 2010 (US: $356, AU: $499)
  • Word 2010 (US: $142, AU: $189)
  • Visio Pro (US: $570, AU: $900)
  • Visual Studio 2012 with MSDN membership (US: $12,000, AU: $21,000)

As the questions drew to a close, Marlow claimed Microsoft would “consider” using different pricing strategies as the company moves deeper into the cloud.

Closing thoughts

It doesn’t appear much was resolved at today’s hearing — but the Committee did drop some interesting hints as to what remedies they’re looking for when the inquiry concludes.

It’s possible that the Committee may recommend a need for uniform prices for hardware and software by IT vendors, along with the prohibiting of geoblocking from online stores — though whether any of these recommendations will be picked up as legislation remains another story. Meanwhile, the Australian public continue to get rorted. Such is life.

Additional reporting by Luke Hopewell.

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