04.The final word
Is it fair?
The question of whether different pricing is fair depends on your point of view. Consumers want the best price and don’t want to pay more than they should, while companies want to maximise profits and cover the costs of selling into different markets around the world.
Companies must also deal with different dynamics in each market — costs, profit, standards compliance and distribution.
Calum Henderson, competition law partner at Deacons, said that companies will often charge different comparative prices in different markets because different pricing factors apply.
"In Australia, there are less potential sales so, generally speaking, people have to pay more, whereas in America there are a larger number of potential sales so they can have a lower price ... These companies also need to maximise revenue to attract and retain good employees and investors and to re-invest in the development of new technologies."
Software is also subject to copyright and other laws that are designed to allow creators to control distribution in different markets. Calum Henderson again:
"Any business will have more direct control over its prices when it owns the software copyright and consumers can’t conveniently get it from elsewhere in the world. The question is whether that is always a bad thing."
David Cake concurs, stating that pricing issues like this need to be judged on a case-by-case basis.
"There certainly seem to be some cases where there are real issues that make the Australian market distinct; for example, there were issues with compliance with Australian modem safety standards in the 1990s. There are other cases where it seems as if Australian consumers are paying a higher price for exactly the same product."
There are many excuses for the higher prices that Australian consumers pay, however we question the validity of these when the same price discrimination carries over to identical digital goods delivered via internet download. Likewise, tax and standards compliance do not have a significant impact on many products showing this price differential.
If there are problems in international market segmentations that lead to higher prices then it is imperative that companies fix this and not leave it up to Australian consumers to pay for their outdated business models.
While Australians are legally able to circumvent region coding, it can be very difficult or impossible for many consumers in practice. Even though parallel importing is legal, companies can use other technological methods such as banning international IP addresses and credit card numbers to create barriers for consumers attempting to purchase cheaper items over the internet.
CHOICE believes that companies should not be able to use technological methods to price discriminate against Australians, and we are campaigning for better policies. For more details, read about our Communications campaigns.
What you can do
You don’t have to put up with exorbitant pricing — vote with your wallet. Look for alternative cheaper products or if this isn’t possible, consider purchasing from overseas and pay for shipment to Australia. In many cases, even with shipping costs, doing this is cheaper than purchasing these products locally at 'Australian' prices.
Using just one example from the products we’ve covered in this report — Call of Duty 4 can be purchased from www.play-asia.com for $AU38 with a shipping cost of $8 — a total under $50. Compare this to the local price of $99.95. That’s a half price saving, and delivered to your door.
It's generally easy to save money on software (including operating systems), as the packages are small for shipping. Shipping hardware can be a little more pricey, especially if you pay for insurance, but even so it can still be cheaper than buying locally.
But there are a few caveats to be aware of — check that products are suitable for you. For example:
- If purchasing DVD movies overseas, you can buy both PAL and NTSC versions. Be sure to buy the one that suits your player and TV (some will happily accept both formats, but check first).
- For console games (such as for the Xbox 360 or Nintendo Wii) be aware that while some games can be purchased region-free, others are restricted.
- For hardware check that a device will handle Australia’s 240V mains voltage, and if you’re going for expensive goods consider how the warranty applies to overseas purchases. Some products have worldwide warranties, but others don’t.
- Shop around. Some online shops will charge an excessive shipping fee as a means to make more money which could eat up the savings, while others ship at cost. There’s no hard and fast rule here, so spent a little time browsing for the best deal.
- Also note that when the products arrive in Australia you could be charged GST, though small value items are usually ignored.
All up, the easiest way to send the message to companies that local products are overpriced is to use market forces: either don’t buy them, buy cheaper alternatives, or purchase from overseas. Not only will you put pressure on these companies, but you may save yourself money too.