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UPDATE! Apple, Microsoft and Adobe Front Australian Parliamentary Inquiry

Posted: April 11th, 2013 | Author: | Filed under: Technoid Computer News | Tags: , , , , , | Comments Off on UPDATE! Apple, Microsoft and Adobe Front Australian Parliamentary Inquiry

Australia's IT Price WarAustralia’s parliamentary inquiry into consumer electronics and IT pricing has heard testimony from Apple, Microsoft and Adobe, the testimony however failed to impress. Australia consumers pay up to 90 per cent more for some of the most commonly required IT products, the trap of course is that programs like Adobe’s Photoshop are essential, irreplaceable tools in many businesses. The price discrepancies rely heavily on an enthusiastic abuse of copyright and a heavy handed approach to geo-blocking.

The price gouging by some of the planets largest companies led the parliamentary inquiry to take the unusual step of forcing Apple, Microsoft and Adobe – The Big Three – to front up and explain their obscene pricing policies. The inquiry issued a threatening summons to the world’s technology behemoths, demanding they answer accusations.

Committee chairman Nick Champion says the inquiry has heard from many Australian consumers and organisations frustrated at the prices charged for digitally downloaded software, computer games, music, movies, and e-books. Matt Levey, head of campaigns for independent consumer organisation Choice, says Australian consumers should not have to pay so much more.

Microsoft, which employs 800 people in Australia, says attempts to compare absolute prices across different counties is of limited use because there are a range of regional factors that need to be taken into account. The company says it provides recommended retail prices for its products that take into account various market forces, such as the size of the market, and the consumers willingness to pay ::::

@m_a_silverman

Adobe, which sells a wide range of consumer and professional software packages, says most of its business in Australia is conducted through third parties which incur local costs. Adobe told the commission that it charges an extra $1,000 to download software in Australia because it offers a local, bespoke experience, while Apple blames local copyright holders for its iTunes prices, which are 50 per cent higher than in the United States. The inquiry heard examples of an Arctic Monkeys album costing $17.99 on iTunes in Australia but the equivalent of $13 overseas, and the movie Toy Story costing $24.99 in Australia but $10 overseas.

In March this year the European Union –  EU – fined Microsoft €561 million euros/$Au701 million for failing to offer users a choice of web browser, an unprecedented sanction that will act as a warning to other firms involved in EU antitrust disputes. The EU said the U.S. software company had broken a legally binding commitment made in 2009 to ensure that consumers had a choice of how they access the internet, rather than defaulting to Microsoft’s Explorer browser. And though Australia’s current look into the practices of ubercorporations is on a slightly different slant, the EU experience might indicate the lengths governments must go to create fair and equitable environments.

In Apples case, the company announced way back in 2008 that it would standardize pricing for iTunes across Europe. The company lowered the prices it charges for music on its UK iTunes to match the already standardized pricing on iTunes across the rest of Europe.

So what’s up down-under, why do these massive corporations get to charge Australian’s so much more than the rest of the globe? Because they can, seems to be the only answer that makes any sense. The UK faced a similar battle with Adobe five years ago. In 2008 the UK version of the company’s Adobe Photoshop retailed for $US1190, the same software sold in the US for $US689. The EU still hasn’t managed to put the squeeze on Adobe, and it’s unlikely the company will volunteer a decrease in prices throughout Europe.

Dr Matthew Rimmer from the Australian National University law school says the testimony of the IT giants failed to give any solid grounds for the ostentatious pricing policies of the tech-giants.

“I thought the inquiry hearing was like the theatre of the absurd,” Dr Rimmer told ABC. “The three companies put forward a range of justifications, defences, spin and evasion.  The Australian Competition and Consumer Commission (ACCC) needs to be unchained,” Dr Rimmer said. I think it’s really important the ACCC have the power to investigate where there is anti-competitive conduct involving intellectual property.”

Each IT Giant Gave Quite Different Reasons

Microsoft said its current prices are set, and customers can vote with their wallets.

Adobe said it charges an extra $1,000 to download software in Australia because it offers a local, bespoke experience.

Apple blames local copyright holders for its iTunes prices, which are 50 per cent higher than in the United States.

The reasons given to the inquiry failed to impress Matt Levey, of the consumer advocate organisation Choice.

“You’re talking about a business that’s as large as Apple saying essentially they don’t have any influence over the price that an iTunes product appears in their store,” Mr Levey said.

Calls for action are focused on copyright law and geo-blocking, where a company uses measures like assessing a consumer’s computer location, to ensure they cannot buy the same product more cheaply from the company’s offshore website.

Skating Around Geo-blocking

Some Australians already circumvent the geo-blocks, but there are questions over the legality of the practice. Skating around geo-blocking is a fairly easy thing to do, the European experience indicates that most software developers don’t prosecute those that indicate a specious or false region/address. Where they do get those who choose to purchase outside their won region is on warranty and support.

Adobe Forums is littered with the question “Can I legally use a US version in the EU?” …and the answer is also pretty universal: You can activate and use a US version that you properly purchased anywhere on this planet. You’ll just be in all sorts of trouble once you try to buy an upgrade for it or indeed may require technical or sales support, since you will have to exchange the serial numbers and e.g. applying a European upgrade on top of a US serial won’t work.

Sydney Law School associate professor Kimberlee Weatherall says the Government would have to be cautious about how it amended legislation regarding circumvention.

“You would have to be careful because there are copyright restrictions in the Australia Free Trade Agreement with the US, but I think there are ways that you could draft an exclusion so that circumventing geo-blocking wouldn’t be illegal,” she said.

Whatever reforms are being considered, they are in the shadow of negotiations for a new trade agreement, the Trans-Pacific Partnership. Leaks suggest the US wants to retain parallel importation restrictions and anti-circumvention laws.

Associate professor Weatherall says often when the government is negotiating a free trade agreement, their position is based on current law.

“So if they’re thinking they might need to change that current law in order to allow consumers to access material, they would need to take that position into the negotiations,” Ms Weatherall said. “It’s raised discussion about the issue. Perhaps publicising the extent of the pricing differences might operate to embarrass some of the US companies.”

Despite their reservations, critics of the global cyber giants agree the inquiry has been worthwhile.

“It actually compelled Apple, Microsoft and Adobe to give evidence which is something that’s rarely done in the committee system in Australia,” Choice’s Matt Levey said. “There’s obviously a legitimate place for copyright … but when that extends further to simply the exclusive rights of copyright owners we think that’s when it raises issues for other consumers.”

Big Three Defend High Australian Product Pricing

March 23 2013: The three technology giants have defended the high prices that Australian consumers pay for their products. Representatives of Apple, along with fellow technology firms Microsoft and Adobe, appeared before a federal parliamentary committee hearing into the pricing of their products in Australia.

The investigation was set up by following a long campaign by Labor backbencher Ed Husic, who has accused some information technology companies of “ripping off” Australian consumers.

Last year the inquiry heard examples of an Arctic Monkeys album costing $17.99 on iTunes in Australia but the equivalent of $13 overseas, and the movie Toy Story costing $24.99 in Australia but about $10 overseas.

Apple’s Tony King defended his company’s Australian prices when he fronted the committee today. He said part of the reason was higher costs charged by the entertainment industry for content destined for the Australian market.

“Price considerations must go well beyond simply looking up a currency exchange rate,” Mr King said. “For example, Apple must consider differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices.”

Microsoft representative Pip Marlow told the hearing it charges consumers varying prices for the same products in different countries.

“We don’t believe that every market is the same,” Ms Marlow said. “If you are selling into an emerging market for example, where the cost of living and the availability of technology and the availability of customer perception there, the competition might be completely different [compared] to a different market. If we price our products too high, then our customers will make different choices.”

The flaw in these belligerent statements is that many industries utilise specific software as standards, MS Word, Photoshop and on…

Adobe’s Paul Robson admitted it charges more for some products bought from its Australian website and blocks customers from buying cheaper products from its overseas sites. “I run a local operation, that operation has costs, those costs include the salaries of our staff, the leases on our buildings,” Mr Robson said. In justifying the higher prices he said the Australian website provides a customised retail experience.

Quantifying The Australian “Apple Tax”

Committee chairman Nick Champion says the inquiry has heard from many Australian consumers and organisations frustrated at the prices charged for digitally downloaded software, computer games, music, movies, and e-books.

“We’ve received evidence that big IT companies and copyright holders charge Australians, on average, an extra 50 per cent just because we live here, a practice referred to by consumers as the ‘Australia Tax’,”‘ Mr Champion said.

Matt Levey says Australian consumers should not have to pay so much more.

“In Australia, you pay on average 52 per cent more than an American consumer for the same top 50 iTunes songs,” Mr Levey said. “We’re talking about a product here which doesn’t have the same sorts of overheads that industry often talk about in terms of rent, in terms of logistics and distribution. It’s the same file being downloaded more or less from the same server, but a 52 per cent price difference if you happen to be Australian.”

The editor of technology blog Gizmodo, Luke Hopewell, says Adobe is one of the worst offenders.

“They’ve been selling a piece of software called Photoshop – Photoshop was selling for $2,500 more in Australia than it was selling for in the US and that’s even when it’s being distributed online,” Mr Hopewell said. “You don’t even get a physical disk, you actually have to download it online there’s no shipping cost, there’s no hardware costs. It’s really interesting to see why they are charging that and the Government wants to know what’s going on.”

Mr Hopewell says he hopes the inquiry brings change.

“Mostly I’m looking forward to seeing a bit of transparency and if we can’t get a bit of transparency, at least we can get a bit of squirm from the companies who try and dodge the MPs questions.” Mr Hopewellsaid. He’s been running a concerted campaign against over-charging by the big-three. And he’s not alone, as Apple faces the IT Pricing Inquiry, one Aussie blogger has crunched the numbers on Apple’s pricing strategy in Australia.

Graham Spencer from MacStories has done the analysis, and it makes for interesting reading, although relatively few of the conclusions are all that surprising if you’ve been following Apple’s hardware and software pricing strategies over the past few years. From Spencer’s analysis, Mac hardware is 6.6 per cent more costly here, iPads are 3.6 per cent, iPhones 10.3 per cent and iPods 5.2 per cent. Apple doesn’t really charge an “Apple Tax” for its hardware products down under to any excessive degree, unlike it’s iTunes pricing regime.

On the Upside

The Parliamentary inquiry has recieved 115 submissions, ranging from groups like the Australian Publishers Association, Commercial and Media Photographers to concerned citizens. The rhetoric is universally in one direction, We’re being gouged, however, The Department of Broadband, Communication and the Digital Economy says that there has traditionally been a delay between foreign markets and downward movements in Australia. In recent years there has been ‘price harmonisation’, for example, the cost of Apple hardware has become much more globally consistent over the past decade.

In one submission it was noted that the pricve of Mass Effect 3 was listed on both US and Australian sites at $59.99 …a rarity? The digital economy in Australia is estimated at $AU50 billion, or 3.5 per cent of GDP annually.

The downside of skirting around Australian sales to avoid higher prices locally, is that it may shrink the Australian market, reinforcing the view of the Big Three.

11 February 2013: Australians are among the biggest users of IT. A recent study by ipsos.com found that 52 per cent of Australians own a smartphone, and more than half of those smartphone owners access the internet daily via their device. 

Technology giants Microsoft, Apple and Adobe were forced – by summons – to appear before the federal parliamentary committee to explain why Australians are forced to pay more for some of their products compared with other countries, with all three companies to appear before a public hearing on March 22.

If they fail to front-up they could be held in contempt of Parliament, which carries a range of possible penalties including fines or jail time.

The companies have provided written submissions to the committee but have to date declined several requests for them to appear in person. The investigation was set up after a long campaign by Labor backbencher Ed Husic, who has accused some information technology companies of “ripping off” Australian consumers.

“We had to issue the summons because after countless attempts to get the major players to actually appear, they’d declined to voluntarily do so and in the end we were left with very little choice because people do want to get answers on this question about price differences,” Mr Husic told ABC News Online. “It’s pretty rare. It’s not a power that’s been used too often. It’s unfortunate that we’ve had to come to this point, but if we’re asking questions legitimately about how these price differences impact on businesses and consumers, we should be able to get those answers.”

Australia is small but significant in the global packaged software market. The packaged software market is worth around $AU7 billion a year, and unlike bricks-and-mortar retail, it has solid growth of around 7 per cent annually.

Several public submissions have focused on Apple’s pricing policy, with some computer products costing hundreds of dollars more in Australia than they do in the United States. In July, Apple’s director of government affairs, Ann Rollins, made a confidential submission to the inquiry which was recently made public by the committee. She said Apple tried to set “equivalent pricing” around the world when a new product was introduced, but argued that a number of factors affected the final cost to consumers.

“When setting pricing on the Apple Online Store and at Apple Retail Stores, Apple considers differences among regions in product cost, freight, local sales taxes, levies, import duties, competitive price points and local laws regarding advertised prices,” Ms Rollins wrote. “Foreign currency is an important variable in how product prices are compared between countries. It is not uncommon for macroeconomic factors to cause foreign currencies to fluctuate dramatically during a product’s life cycle. Over the period of time a particular Apple product is in the market, it may appear to be either priced higher or lower in a local market when compared to the price in the US or elsewhere.”

Choice Endorses Ditching Geo-blocking

Choice has called on Australians to circumvent geo-blocking technology that has allowed the major software companies like Microsoft and Apple to charge higher prices for their products. The three  IT companies – Microsoft, Apple and Adobe – gave evidence to a Senate inquiry on Friday as to why their goods are more expensive in Australia compared to other markets.

Matt Levey says the consumer group has published guidelines to help consumers circumvent geo-blocking, which prevents people from buying the cheaper, identical products available in other countries.

“There’s one particular creative suite product from Adobe which currently has a $1,200 price difference between the US price and the Australian price,” Mr Levey said. “Similarly with Microsoft, there was one infamous product where you could actually pay someone… to fly to the US and back twice, buy the product when they’re there, and still come out ahead.”

One of the reasons given by the companies to explain price differences is that they maintain separate websites and servers for Australian customers.

Apple’s Tony King defended his company’s Australian prices when he fronted the Senate committee.He said part of the reason was higher costs charged by the entertainment industry for content destined for the Australian market.

“Price considerations must go well beyond simply looking up a currency exchange rate,” Mr King said. “For example, Apple must consider differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices.”

Mr Levey says this is not enough to justify what he describes as price gouging.

“There were quite frankly some bizarre statements from Adobe relating to the ‘bespoke and personalised nature’ of their website,” Mr Levey said. “You only had to look at social media very quickly to understand there were many creatives out there who were finding it quite an impersonal experience to be charged $1,200 more. Its attempts to try and sustain an outdated business model, which … [carves] the world up into different regions, [charges] people in Australia way more than people in the US even though [consumers are] just a few mouse clicks away from actually identifying the price gouge.”

Choice has published a guide to circumvent the geo-block that prevents Australians from accessing a cheaper price overseas: www.choice.com.au

“Geo-blocking is the measure which forces you to the Australian part of Microsoft’s or Adobe’s site, rather than the cheaper identical products in the US part of the site,” Mr Levey said. “We’d argue there’s a strong case that geo-blocking is anti-competitive so we certainly think there’s a case for the committee to make a recommendation around that and for that to lead to some sort of government action.”

Mr Levey says circumventing geo-blocks is still a “grey area”.

“We’re not talking about pirated products here,” he said. “We’re suggesting that people buy entirely legitimate official products from places where they’re cheaper. We’re talking about measures like virtual private network (VPN) services which people use … so that [they] don’t actually get directed to the Australian part of the website. Some of these things may violate the terms of service of a business … and that’s something that consumers need to be conscious of and take into account, but in no way is this stealing, it’s just accessing them at a cheaper rate.”

The Choice report warns the legality of circumventing geo-blocking is a grey area. Some copyright experts claim those who promote devices or programs that encourage people to infringe copyright are breaking the law. However, Choice believes consumers who circumvent measures used to protect copyrighted content should be exempt from what could be construed as a breach of copyright simply because they’re accessing products and services that are being provided knowingly and willingly by the copyright holder. The organisation is is calling for the Attorney General’s department to protect consumers who bypass online geo-blocks.

source: parliament of australia

source: abc

source: reuters

source: choice

source: apple

source: adobe forums

source: gizmodo

source: macstories

source: ipsos


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