Pricing of computer products not all equal

Are consumers getting a raw deal on the price of locally available computer products?
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03.Market forces

Different markets, different prices

Price tagsMost multinational companies group countries together into regions and sell their products to each region, sometimes at different prices. In economic terms, when a company sells identical goods or services for different prices in different markets, it’s called price discrimination. It’s not illegal and it’s a common practice across consumer markets like automotive and technology.

For example, when it comes to computer-related products, companies can use technological 'locks' such as region coding on DVDs, modified chips in games consoles and restricting consumers to local websites, to sell products at different prices in different markets because they hold the copyright.

Matthew Rimmer, senior law lecturer at the Australian National University Law College and author of Digital Copyright and the Consumer Revolution, says that "there’s been a long-standing tension between copyright law and consumer welfare and competition policy."

Consumer groups, such as CHOICE and Electronic Frontier Australia (EFA), a non-profit group that promotes internet users' freedoms and rights, have lobbied for fairer rights for consumers in relation to copyright. David Cake, EFA spokesperson, agrees that "technological means to enforce copyright tend to enforce the rights the copyright holder would like to think they have, and ignores the consumers' legal rights of fair dealing."

In recent years, there has been plenty of debate about the fairness of technological locks and several cases have even ended up in court. In a High Court case involving Sony PlayStation consoles and modified chips, Justice Kirby summed up the situation:

"By their line, the Popes of old divided the world into two spheres of influence. Sony, it appears, has divided the world (for the moment) into at least three spheres or markets. By the combined operation of the CD-ROM access code and the Boot ROM in the PlayStation consoles, Sony sought to impose restrictions on the ordinary rights of owners beyond those relevant to any copyright infringement.

"In effect, and apparently intentionally, those restrictions reduce global market competition. They inhibit rights ordinarily acquired by Australian owners of chattels to use and adapt the same to their advantage and for their use as they see fit."

What about parallel imports?

In 2003, the Howard Government amended the Copyright Act to allow parallel importation of software, including PC games and business programs. In effect, this means the copyright owner can no longer control who is allowed to import certain software.

This law has allowed more than one retailer, not just the exclusive owner of the copyright, to sell the same PC game or computer program. Retailers might source their products from the US, Asia or Europe in order to sell in Australia.

Copyright law was altered in this way to encourage competition and provide cheaper products for consumers. The parallel importation of software shouldn’t affect technical support services, which can be arranged through local companies or paid for by the user regardless of the origin of the product.

Copyright versus competition

The Australian Competition and Consumer Commission (ACCC) has been active in the area of price discrimination. David Cake says that the "EFA agrees with the position expressed by the ACCC that region coding (whether it is on DVDs or video games) is primarily a technological means to enforce price differentials that does not agree with Australia trade practices law."

Legal advocates, such as Matthew Rimmer, believe there is scope for the problem to be addressed, but it is a radical step. "There should be a complete lifting of all restrictions coupled with laws stopping companies using technological locks to get around those measures."

David Cake agrees:

"Australian law does need to be changed. EFA would like to see consumers enjoy their legitimate rights without artificial restrictions. Many recent changes to Australian law have been for the worst, in particular, the additional rules for enforcement of technological protection measures that were added to the Australian copyright law as a result of the Free Trade Agreement with the United States."
The question of technology pricing leads to the larger question of how far to go with liberalising barriers to trade. Calum Henderson warns that:

"Consumers are unlikely to see similar prices throughout the world unless there are no barriers to international trade. While this may include removal of technological restraints, like regional coding of DVDs, it also means free trade between countries for everything, including labour and products that are currently cheaper in Australia than other countries."
Copyright law and competition policy are complex and addressing inconsistencies is a difficult task. A review of law would give the opportunity to re-evaluate the current rules and the many inconsistencies. "There needs to be impetus for the intellectual property laws to be revised in line with competition policy," says Matthew Rimmer.


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