Ask LH: Why Doesn't Everyone Sell Phones Outright?

Dear Lifehacker, I had to buy an iPhone 6 for work the other day, but I kept running into brick and mortar stores that refused to sell me an iPhone 6 unless I bought one on a plan. Are they allowed to restrict the sales of a hardware device unless they strong-arm me into a contract? Thanks, No Plans For Plans

Picture: Getty Images

Dear NPFP,

Here at Lifehacker, we're generally advocates of buying phones outright and using a prepaid plan rather than tying yourself into a contract. For the iPhone 6 and 6 Plus, we carefully calculated how much more you'd spend if you signed up for a contract, and concluded that buying outright was generally a better deal. But just because we favour that way of buying doesn't mean that it's always going to be available.

In legal terms in Australia, stores are broadly entitled to sell you an iPhone 6 (or any other phone) on whatever terms they like and for whatever price they like. If you don't like the terms on offer, your choice is simple: shop somewhere else. That becomes challenging with a highly popular device like the iPhone 6, where supplies to every retailer were limited. Under those circumstances, it's not surprising that many outlets choose to favour selling on a plan rather than selling outright -- they make more money that way, since they receive a cut of each monthly plan payment, not just the margin on the device itself.

Selling a device on a plan does create some different consumer obligations for the retailer -- for example, if you're signed up to a 24-month contract, you can absolutely expect warranty service for the life of that contract. However, there's no absolute "right" to purchase a phone outright in Australia, and individual stores can elect not to do so. All you can do is keep hunting for another store, or order online and accept you'll wait a while (Apple's own store is currently specifying 3-4 weeks for delivery)

There are plenty of examples of hardware products that you never own outright, but simply rent month-to-month (Foxtel is one obvious example). The consumer regulator will intervene if it suspects that pricing is being unfairly rigged -- say, if competitors tacitly agree to charge a given amount -- but it won't dictate the way in which products will be sold.

Cheers Lifehacker

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Comments

    JB Hi Fi happily sells phones outright - it's great for people like me wanting to salary sacrifice the phone and stay on a cheaper plan

    You can buy outright by purchasing from Apple direct. They will do the transfer of the SIM and setting everything up on the new phone for you from the old one, irrespective if the old phone is still on a plan. Just ask them to help you. Then once the incumbent plan has expired if not already, then you go on pre-pay as Angus suggests or some other BYO plan

    All phones can be sold outright, just ask for their outright price. Or buy them online (just make sure they work with Australian networks)

    The main reason why telcos don't is because they can charge you more for the privalige to be locked into their network for 2 years.

    Just curious, but wouldn't that fall under the description of third line forcing?

    Exclusive Dealing
    Third line forcing occurs when a business will only supply goods or services, or give a particular price or discount on the condition that the purchaser buys goods or services from a particular third party. If the buyer refuses to comply with this condition, the business will refuse to supply them with goods or services.

    The retailer will only supply you with goods (an iPhone 6) on the condition that the purchaser buys services (e.g. 24 months) from a particular third party (e.g. Telstra/Optus/Vodafone etc)? Or am I misunderstanding the situation?

    Last edited 22/09/14 3:25 pm

      My understanding is that third line enforcing would be something more like: Apple will only sell you an iPhone IF you agree to sign up to a Telstra contract for 2 years, and won't allow any other network plan.

        Which they use to do in America but could never do here for that exact reason, so yeah you are right!

    A Telstra Shop was more than happy to sell me a LG-G3 outright. Not only was it slightly cheaper than JB Hi-Fi at the time, I got a free G Watch with it. (via redemption)

    Why were they keen: Because there is actually a reasonable margin on the phone. On an iPhone the store would be lucky to make $20 from the handset itself. So every unit they sell outright means it's one less on plan they can sell (where they actually make some money)

    It's not like you can't buy the iPhone elsewhere (i.e. you can buy it other than Telstra/Optus/Voda dealers) so its no big deal, especially because its the same price everywhere.

    what happened to me was I bought outright a USB 3G modem and a plan. Telstra then credited me with $300 cost of the device in the plan which then included the device cost.
    I wondered if that was normal practice or did the store sell me the modem by mistake and I was then reimbursed in the plan.

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