Industry defends IT price differences

Technology industry has predictable reaction to IT pricing inquiry.
 
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01.Nothing we haven't heard before

CN_ITprice_disrimination

Technology industry organisations are defending large price differences in IT hardware and software products between the Australian and US markets, following CHOICE’s submission to the parliamentary inquiry on price discrimination.

CHOICE research showed price differences of approximately 50% on average across computer, software, gaming and music products, compared to US consumers. The research also found that factors such as retail rents, wages, logistic costs and GST could not fully explain these differences.

Despite this, industry continue to make arguments about extra costs, just as they have done following similar inquiries in the past. However, with such costs contributing to just 22-27% of the final retail price, CHOICE maintains that international price discrimination is the main culprit.

Big companies throw up a firewall

Big name tech companies such as Apple, Microsoft and Adobe have so far refused to attend the inquiry's public hearings to answer allegations of price discrimination. Microsoft and Adobe have made short 1-3 page submissions while Apple has only made a confidential submission. 

However the industry has been represented by the Australian Information Industry Association (AIIA) throughout the inquiry.

This has prompted heavy criticism from committee members, particularly Labor MP Ed Husic who has accused the companies of treating Parliament with contempt. While the AIIA attended the public hearings it has refused to give information on specific companies. 

This has prompted Mr Husic to ask the committee to subpoena the correspondence between Apple, Microsoft, Adobe and the AIIA. The committee has already written to the companies twice asking for them to appear before the inquiry, however they have so far refused. 

The subpoena will include email and other information exchanged between the AIIA and the tech giants while the industry group was preparing its submission. 

Warranties to blame?

The AIIA has claimed that the costs of doing business in Australia are driving up prices. In particular it singles out the allegedly higher costs of honouring warranties under Australia Consumer Law. The Australian Industry Group (AIG) also made this argument

However CHOICE rejects these claims. Firstly, neither the AIIA nor the AIG have substantiated these claims. Secondly, CHOICE does not believe that Australian Consumer Law is onerous.

The Australian Consumer Law includes guarantees that a product will be of acceptable quality for a reasonable period of time with reference to factors like the type of good and the price paid. CHOICE believes that if companies find such an obligation too onerous, they may want to reassess the quality of their products.

iMac or Big Mac?

The AIIA also made familiar arguments that GST and payroll taxes, superannuation, workers' compensation, wages, tariffs, importation and transport costs were also to blame. However it provided little evidence to substantiate these claims.

AIIA chief executive Suzanne Campbell argued that the Big Mac Index compiled by The Economist magazine showed “a difference of 426 per cent between the lowest price of $1.89 in India versus the highest of $8.06 in Switzerland”. This was used to illustrate how prices tend to vary across national borders for many products.

However, unlike Big Macs, which are made onsite in Australia by Australian staff, IT products are usually developed in America, manufactured in America or Asia, and distributed at very limited expense.

CHOICE argues that major tech companies such as Apple and Microsoft also have limited assets and employees in Australia, and therefore these costs cannot contribute significantly to retail or wholesale prices. All other costs, such as retail wages, retail rents and transport costs, are incurred by retailers and are included the 22-27% which represents the retailers' mark up.

CHOICE maintains that international price discrimination remains the most plausible reason for Australia high IT prices.

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