Now, you may think that Australians are being ripped off, gouged, exploited and mocked by overseas companies grossly overcharging us for IT products that sell for far less in the United States. But you’d be mistaken.
Very much mistaken. About a great many things.
You may foolishly think Apple charges several hundred dollars more for a MacBook after tax here than in US, and at least 50-60% more for the same stream of zeroes and ones purchased on iTunes. You may delude yourself that Microsoft charges Australians 40-50% more for Office products even when downloaded. You might labour under the misapprehension that Adobe charges Australians over $1000 more for some of its software than it does American customers.
But according to submissions to the House Standing Committee on Infrastructure and Communications inquiry into IT pricing, initiated by Labor MP Ed Husic, which kicked off public hearings this morning, all of those differences can be explained away.
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We don’t know what Apple has told the committee in its confidential submission. Apple prefers not to discuss the blatant gouging that goes on on iTunes, even to indicate whether it’s the responsibility of copyright owners or Apple and the music industry. But Microsoft made a brief submission. For a start, Microsoft pooh-poohed the entire idea of international comparisons: “Any such attempted comparisons are of limited use, as prices differ from country-to-country and across channels doe to a range of factors.” Or to rephrase, you shouldn’t compare different prices because, you know, they’re different.
Microsoft always quotes the GST for Australian consumers, it says, but it doesn’t quote sales tax in the US. Fair enough, but doesn’t quite explain a price differential of 50%. Particularly when the Australian dollar is above parity with the US dollar. What about that? “Microsoft’s global policy is to provide consistent and predictable local pricing while maintaining reasonable alignment of local currencies relative to the US dollar.”
So, Microsoft might grossly overcharge Australians, but it’s consistent and predictable gross overcharging.
But if Microsoft is plainly self-interested on this issue, surely local business groups can be relied on stand up for us and for Aussie businesses that pay too much for imported software and IT hardware?
Let’s turn to the submission from the Australian Industry Group, an organisation invariably quick to nail anything that is driving up costs for business. What does the AiG say about IT prices that never seem to fall to reflect the strength of the Australian dollar? Well, it’s a “complex relationship”, you see. There might be pre-existing contracts. And there’s a lag between orders being place and the retail sale of products. And some costs are purely domestic. All good reasons.
But really, it’s about convenience. The reason prices of imported goods don’t fall when the dollar rises is that “as suppliers and retailers generally offer a large number of individual products it would be impractical to constantly reset these prices based on frequent movements in the spot price”.
But lest you think this is just about convenience for suppliers and retailers who might be forced to alter the prices on their shelves, it’s about consumers as well. “The desirability for consumers, suppliers and retailers of having relatively consistent pricing of goods, smoothing out fluctuations in the exchange rate,” the AiG wrote.
Ah there’s that consistency again. I think we all agree — we’d much rather pay more than be upset by the horror of inconsistent prices. How often have you gone to buy an electronic product only to be sent reeling from the store by the fact that the price has dropped 5% since you were last there? You wouldn’t be able to take the kids shopping for fear of them getting upset by the alarming volatility of prices.
Like Microsoft, AiG is keen to note that simply running a business in Australia is so much more expensive. There are higher labour costs, of course. And higher rental costs. And higher regulatory costs. And higher taxes. On it goes.
The AiG is big on this idea that ultimately consumers really just prefer to pay a lot more. “Price is not the only factor influencing IT hardware and software purchasing decisions. Customers are also influenced by reliability and warranty considerations, convenience and after-sales care,” concludes the AiG. None of which of course are available in the United States. That’s of course assuming that we are paying more. Like Microsoft, AiG doesn’t think “snapshot price comparisons” are very helpful. After all, we might not be paying so much “if the consumer negotiates a lower price in store compared with the advertised price.”
Try that next time you’re buying an iMac. Tell ’em AiG sent you.
And then there’s the submission of the Australian Information Industry Association, the peak group for IT companies in Australia. By this stage, the industry submissions are starting to blur. “Snapshot comparisons not useful” — check. “GST” — check. “Rental costs” — check. Costly labour market — check. The AIIA reckons “training and marketing costs” are extra-expensive in Australia as well. Training and marketing — that’d be your 50% differential right there, I reckon.
But then, strangely, the AIIA gives the game away:
“At a more general level — and across a range of markets — the practice of price differentiation is a common business strategy necessary to maximise performance in a specific high-cost market such as Australia.”
Uh-oh, wait. So price differentiation does exist, and it’s common, and the point is to “maximise performance” by which, presumably, the AIIA means profit.
None of this of course explains why downloading software from the servers of an American company can costs 50% or more after tax. Again, the AIIA gives the game away.
“… it is important to understand that whilst transportation, distribution and manufacturing costs may be reduced, other costs such as advertising, marketing, administration and support still apply and will be based on that specific countries cost of doing business. The price of downloads will still reflect the margins required to ensure the locally based arm of the business is able to maintain its presence in that country.”
So there you have it — even when you buy something online and incur no costs whatsoever associated with the country in which your computer is based, you’re required to subsidise the in-country operations of that firm, as a sort of bricks-and-mortar tax.
Shorter AIIA: yes you’re being gouged, and it’s to “maximise performance” and subsidise the local operations of companies regardless of whether they have any role whatsoever in your transaction.
Well, at least it’s better than the can’t-be-arsed explanations of Microsoft and its local apologists.