Chapter 2 Price discrimination and consumer impacts
The terms of reference for this inquiry ask the Committee to investigate
whether IT products sold in Australia are more expensive than those sold in
comparable overseas jurisdictions, and, if so, the reasons for these price
differences, and their impacts on Australian consumers.
This chapter will focus on the nature of price discrimination and how it
operates. Definitions will be followed by a brief discussion of increasing
consumer awareness of pricing, as well as changing technologies such as the
increasing cloud services offered, and means by which ‘geoblocking’ occurs. The
Committee then canvasses the incidence of price discrimination across various
product categories (including software, hardware, and products available as
digital downloads), as described in evidence to the inquiry, noting concerns
about the reliability of data on these issues. The Committee also considers the
impacts of higher prices on various groups in our community, including those on
low incomes, and those who live with disability.
What is International Price Discrimination?
The Treasury’s submission to the inquiry defined international price
discrimination in these terms:
Geographic price discrimination occurs when a business charges
different prices for the same product in two or more different locations.
International price discrimination is when geographic price discrimination
occurs across country borders.
To maximise profit, many businesses do not sell based simply
on a mark-up of what the product cost to produce, but rather price
according to what they consider the market can bear, that is,
according to the consumers’ marginal willingness to pay.
Mr Geoff Francis, General Manager of the Treasury’s Competition and
Consumer Policy Division, further noted that:
… there are two conditions that must be present for price
discrimination to be effective. Firstly, the willingness to pay for a
particular good or service must vary between different groups of consumers in
order for a business to benefit from price discrimination. Secondly, the
business must be able to separate these groups of consumers in order to prevent
them from arbitraging the price differential.
The Productivity Commission in its 2011 Retail Industry Report
described international price discrimination as:
...a common and generally legal business strategy to maximise
profits and performance. It is sustained through sufficient demand from
consumers, lack of competitive rivals, and the ability for market and/or
consumer segments to be kept separate (that is, there are often restrictions on
those that are charged a cheaper price to prevent them reselling their goods to
other consumers who are charged higher prices).
Price discrimination is not restricted to the IT sector, and is not a
new feature of the Australian economy. According to Mr Francis, Australians
have faced price discrimination for many years:
… price discrimination is not actually a new phenomenon, and
it is not surprising that Australians may find prices for products somewhere
else in the world that are lower than the prices they find in Australia. As you
know, it is common for people to shop overseas while on holiday because they
believe that the prices may well be lower on certain items when they are overseas.
Ms Suzanne Campbell, CEO of the Australian Information Industry
Association (AIIA), argued that variations in price are to be expected
…price comparisons across categories of consumer goods
clearly show price disparities are not technology industry-specific. To give an
indication of the range of price variation globally, the latest Big Mac index,
compiled by the Economist magazine, shows a difference of 426 per cent between
the lowest price of $1.89 in India and the highest of $8.06 in Switzerland.
Treasury observed in its submission that, in spite of any negative
connotations which may be associated with the term, price discrimination is not
necessarily objectionable in all cases:
[Price discrimination] allows businesses to maximise the
profits earned in each respective market – something that should not be
considered inherently ‘bad’, and which their shareholders would reasonably
expect in order to maximise the return on their investment.
Greater consumer awareness
Although arguably a feature of the Australian economy across many
markets and across many decades, international price discrimination has become
more of a concern for consumers and businesses in recent years.
Rising rates of internet use have increased Australians’ awareness of
overseas prices generally and of price differences for similar goods and
services in Australia. Many Australians purchase goods directly from overseas
suppliers with considerable savings even when distribution costs are taken into
At the same time, as the Australian currency rose to parity (and for a
time beyond) with the US dollar, Australian consumers became increasingly aware
of higher prices for essentially identical IT products.
In his evidence to the Committee Mr Francis noted the internet’s effect
on consumer purchasing habits:
Increasingly, price transparency due to the internet has made
such price differentials far more obvious than they were in the past, but it is
also giving Australian consumers access to international markets without having
to travel. I think these price differentials have always existed but they are
now far more obvious due to the availability of the internet and due to the
availability for consumers to potentially use the internet to effectively shop
overseas while at home.
Mr Les Andrews, Assistant Commissioner at the Productivity Commission,
noted the effect that the internet has had on consumer perceptions of value:
… people have always been aware of the fact that if you went
to Hong Kong or Singapore on holiday you could buy things more cheaply there
and come back with your bargains. But the internet every day exposes people to
different prices and I think that makes people far more aware of the
This growing awareness has featured prominently in the numerous
submissions by consumers to the Committee. Mr Dane Weber, to give one example,
gave his perspective on the increased access to markets and price transparency:
… many other consumers like myself have grown up with items
costing the way they do now. They were that way in the past, so it is natural
to assume they would be the same. The reason for this difference would be
taking advantage of the status quo: the Australian consumer has not known any
better. … We seem willing to pay this much, because that’s the way it has
always been. But now we have access to international prices, and purchases are
fast and simple. Our higher dollar has made savings of 50 per cent possible and
people are taking advantage of that.
The Committee acknowledges that added to increasing consumer awareness
of IT pricing is an increase in the means of delivery of services and products
to consumers. The Committee notes that the prospective shift towards digital
delivery, and subscription models, are discussed in many submissions to the
inquiry, and there has been extensive commentary suggesting that these
developments are changing the relationship between IT vendors and consumers in
significant ways. While consumer and industry perspectives on technology are
discussed throughout this report, the Committee presents a brief overview of
some of these issues, by way of introduction.
Cloud computing and subscription models
In the course of the Committee’s inquiry numerous references were made
to the development of cloud computing. Indeed one large IT vendor, Adobe,
announced a major shift to subscription-only delivery of its latest products. The term ‘cloud computing’ can refer to a broad range
of technological developments. Essentially, the ‘cloud’ is a network of
connected computers which can be used to provide shared computing resources for
specific applications (e.g. software services like email, web applications, or
synchronisation services) and which are accessed remotely, either through a web
browser or via a particular service’s application programming interface (API).
Cloud services may enable consumers and
businesses to reduce their up-front IT costs by paying for access to and use of
shared computing resources rather than purchasing IT assets outright. Customers
may benefit from the faster upgrades and cross-device synchronisation that the
cloud makes possible, while the growth of an access-oriented ‘subscription
economy’ can provide significant cost savings, and steadier revenue streams, to
The Australian Industry Group (Ai Group) noted that large numbers of
Australian businesses had already adopted or intended to use cloud services in
the near future. While industry groups
and major vendors are vigorously promoting the transition to cloud-based
services, the platform can involve significant disadvantages. Subscription
services may not be financially beneficial in the long term.
Cloud services are an integral part of digital ecosystems – they provide
the infrastructure through which information on multiple devices is
synchronised, they can be used for backups, and sharing of content. While some
cloud services are multi-platform, a large number are provided by specific
vendors as a means of deepening consumers’ dependence on a given ecosystem or
Cloud-based subscription services also have the potential disadvantage
that ongoing access to content acquired through them may depend on continuing
to pay the subscription fee, and on the ongoing existence of the provider.
Should a customer cease paying, or should its operator decide to cease
providing the service, access to content could be affected. The Committee also
heard evidence that cloud services can serve to increase a consumer’s
dependence on a given ecosystem or service, which can also affect pricing as
well as increasing a vendor’s or publisher’s control.
Issues concerning the control of intellectual property are discussed in chapter
As discussed earlier, Australian consumers are increasingly conscious of
differential pricing imposed by IT vendors and rights holders, and to avoid
international price discrimination, often prefer to purchase products,
particularly digitally delivered products, at cheaper overseas prices.
International price discrimination can only be effective when vendors are able
to maintain the separation of markets, and thereby prevent customers from
accessing cheaper prices elsewhere.
Historically, international markets were easily segmented by their
geography, trade barriers, and the comparatively high cost of transporting
goods. In the past two decades however, barriers to the formation of global markets
have been greatly eroded; the internet has provided direct access to overseas
markets without the need to travel; and as global communication networks have
matured, digital delivery of content and services has become commonplace.
In response, global IT firms and content providers have erected virtual
barriers between markets, which permit different prices to be set in different
locations. The methods vendors have adopted to differentiate between regions
and keep customers separate are broadly referred to as ‘geoblocking’, defined
by the Department of Broadband, Communications and the Digital Economy (DBCDE)
… the name for a variety of techniques used to verify a user’s
location and provide related content on that basis. It is most commonly used
for content delivery, such as films and television programs, and to verify a
purchaser’s location at point of sale. A person’s location can generally be
derived from their computer’s IP address, but at the sale stage can be verified
using the person’s credit card details or mailing address.
Mr Hamish McCormick, First Assistant Secretary of the Office of Trade
Negotiations in the Department of Foreign Affairs and Trade (DFAT), described
… the use of internet addresses, credit card numbers or other
means of electronic identification to block internet sales and downloads of
electronic products—for example music, games and computer programs—based on the
geographic location of the consumer.
Geoblocking may effectively restrict consumers’ ability to compare
prices and accordingly make purchases. The Committee is aware of cases in which
firms include conditions in their product’s terms of service (which customers
must consent to in order to use the product) that prevent customers from using
the product outside the region in which it was sold.
The Committee heard that geoblocking can be enforced by onerous, multilayered
conditions. In the case of IT hardware, geoblocking may be the result of
exclusive distribution agreements, in which manufacturers assign the rights to
distribute their products in a given territory.
The practical effect of geoblocking from the Australian consumer’s
perspective is to restrict access to a cheaper global marketplace. According to
views expressed in submissions, many Australian consumers see themselves as
limited to a national market characterised by markedly higher prices for IT
products and services. Consumers’ perspectives on geoblocking are discussed
later in this chapter; responses from industry are considered in chapter 3; and
proposed remedies are canvassed in chapter 4 of this report.
The issue of warranties for IT products arose in various contexts in the
course of the Committee’s inquiry. Australia’s national warranty regime was
raised as a factor in explanations for the higher cost of IT products in
Australia, and it was also suggested that overseas IT purchasing can involve
inadequate or no warranty protection for consumers. Warranties in the sense of
consumer protection are examined in this section. Warranties are cited by
business as a cost, and this is considered in chapter 3. Options for
international warranty harmonisation are considered in chapter 4.
Australia has a national consumer protection regime. Under the
Australian Consumer Law (ACL) which is located in schedule 2 to the Competition
and Consumer Act 2010, consumers have the same protections, and businesses
the same obligations and responsibilities, across Australia. The ACL, in effect
from 1 January 2011, provides consumers with a comprehensive set of rights in
relation to the goods and services they acquire.DBCDE told the Committee that:
Warranties in Australia can be
more rigorous and provide greater protections than those in other countries.
The Australian Consumer Law, a schedule of the Competition and Consumer Act
2010, can provide different and in some cases stronger protections than that
found in US or UK law.
Mr Matthew Levey of consumer organisation Choice noted that some
importers of IT products maintained ‘extremely strong refund/return polic[ies]’
and that such practices show that ‘it is quite possible to operate here
profitably, sell a lot of products and still offer significant price savings’.
Some concerns were expressed in submissions about the limitations of warranties
for products purchased overseas, in terms of consumer risk and the provision of
service and repair for such goods, and a need to provide a greater degree of
certainty and security for consumers.
The Australian Communications Consumer Action Network (ACCAN), a
consumer organisation focussed on the communications sector, argued that
uncertainties about warranty protection inhibited consumers from seeking to
access lower prices overseas and was consequently a factor in maintaining
higher IT product prices in Australia:
I think it is something that can prevent consumers from
shopping overseas and accessing those lower prices, which we know that some
people are doing anyway. … The more businesses realise that Australians are
doing this, I think that could have an impact in terms of competition and
bringing prices down. However, we are concerned about whether Australian
Consumer Law or any consumer law will apply to those purchases. It is very
hard; there are no legal examples we can really refer to, to our knowledge, in
these cases. Not every consumer at
the moment feels competent about shopping online. … Knowing that there is an
international warranty for a purchase can go to help ease some of that stress
The Committee is also aware of consumers’ concerns about warranties for
the increasing variety of goods (physical and digital) bought online, including
for example the devices and software upgrades bought by Australians living with
disability. The Committee acknowledges that consumer concerns about warranty
and ongoing servicing costs can have a role in purchasing decisions.
Evidence about price differences
As noted in chapter 1, of the submissions received, more than half were
from consumers or consumer groups, and a significant proportion were from small
businesses. The vast majority of these submissions expressed concern at the
high price of IT hardware and software. Since calling for submissions in May
2012, the Committee has received information on more than 500 products. Given
the fluidity of the IT market, many price comparisons discussed may no longer
The Committee understands that, for thorough and statistically valid conclusions
on IT pricing, data would need to cover reasonable time periods and cross
multiple jurisdictions. The Committee notes the views of Mr Les Andrews from
the Productivity Commission that even if such data were available, it is likely
that some of it would be commercially sensitive and therefore unlikely to be
The Committee considers, however, that the examples received in submissions,
many of which contain detailed lists of products compared over time, represent
a series of ‘snapshots’ of IT prices, providing an indication of Australian
consumers’ recent experience in purchasing IT products.
Some submissions provided price comparisons across a range of products, while
others focused on a particular IT product or vendor. The Committee’s analysis
of the evidence received across all product categories revealed the following
software: submissions compared more than 150 products. The comparisons
showed an average price difference of 50 per cent, with a median price difference
of 49 per cent. Of the major vendors:
Adobe products showed an average difference of 42 per
cent, with a median difference of 49 per cent
Microsoft products were on average 66 per cent more
expensive, with a median difference of 67 per cent, and
Autodesk products were on average 51 per cent more
expensive, with a median difference of 46 per cent.
n Hardware: more
than 50 products were compared. On average Australian prices were 46 per cent
more expensive than the US, while the median difference was 26 per cent.
n Music: more
than 70 products were compared. Australian prices were, on average, 52 per cent
more expensive, while the median difference was 67 per cent.
submissions compared the prices of more than 70 products. The average price
difference was 84 per cent, while the median difference was 61 per cent.
submitters compared the prices of more than 120 e-books. Price comparisons of
books sold both in Australia and the US revealed average price differences of
16 per cent, while the median difference was 13 per cent.
In addition to the Committee’s own analysis of material included in
submissions, a submission from Choice compared the prices of more than 200
products in several categories, finding that Australian consumers experience an
average price difference of more than 50 per cent (compared to US customers) when
purchasing IT hardware, software, music, and games. Before looking at the
examples provided in many submissions across a range of different products, the
Committee notes that other submissions raised concerns about the validity and
reliability of such comparisons.
The Committee acknowledges that drawing conclusions on the basis of
simple price comparisons can be problematic. The Productivity Commission 2011
report on The Economic Structure and Performance of the Australian Retail Industry,
noted that price comparisons may fail to capture ‘many aspects of the product
and retailer-specific considerations that are valued by consumers’. These
aspects may include:
n the time it takes for
a consumer to receive the product (i.e. delivery times)
n the potential for
consumers to negotiate final prices in-store, often using online retailers’
prices as leverage
n the level of
after-sales service available on the product
n compatibility in
n the extent of close
substitutes for products.
The Productivity Commission’s observations were supported by Treasury in
its submission to this inquiry:
… there may be other aspects of the product and the
consumer’s experience that may not be captured by price comparisons.
In submissions and in appearances before the Committee, industry
representatives have questioned the utility of price comparisons and identified
a range of non-financial factors that are not captured by price alone. Ms
Campbell expressed doubts about the utility of ‘snapshot’ or ‘spot’ price
… spot comparisons are not useful, as prices differ from one
country to another for a range of reasons and across channels for many
In its submission, the Ai Group also expressed concerns about price
comparisons, arguing that snapshot price comparisons:
n do not capture prices
paid by consumers who ‘negotiate a lower price in store compared to advertised
n ‘do not take into
account price discounts from the sale of bundled goods’ or discounts obtained
during contractual negotiations, and
n do not capture
‘non-price’ factors like after-sales service, convenience or reliability, that
may affect a consumer’s decision to make a purchase.
In its submission, Microsoft expressed reservations about the utility of
price comparisons of its products:
We note that the Committee’s inquiry is based upon an effort
to compare absolute prices for particular product lines offered in different
jurisdictions. Microsoft respectfully submits that any such attempted
comparisons are of limited use, as prices differ from country-to-country and
across channels due to a range of factors. There is a need to compare like with
In relation to comparisons of prices for digitally downloaded music, the
Australian Recording Industry Association argued that:
… the methodology required to be able to make an informed and
useful comparison of retail prices for recorded music in Australia and other
countries raises significant design issues and collecting the necessary data is
a considerable challenge.
Availability of data
The Committee accepts that its inquiry has not been assisted by statistical
data which would allow for a systematic analysis of comparative IT pricing, and
notes that the Productivity Commission experienced a similar problem in the
course of its 2011 report on the Australian retail industry. The Commission
noted that while the United States had been collecting official data for
e-commerce retail sales for over a decade, and while the United Kingdom had
been collecting official data on internet retail sales since late 2006, no
comparable statistics are available in Australia. The Commission observed that,
‘given the growing importance of this part of the retail industry, it is important
that more precise statistics are available’.
The Commission’s 2011 report recommended that the Australian Bureau of
Statistics (ABS) monitor and report online expenditure both domestically and
overseas by Australian consumers. The Commission further recommended the ABS
consider options to enable the disaggregation of online spending and employment
associated with ‘multi-channel’ establishments (i.e. retailers that sell
products through physical shopfronts and via the internet) and ‘pure play’
The Committee followed up this issue with the ABS, which advised that it
does not measure prices paid for IT goods and services which are purchased
overseas and that consequently ‘does not have the data required to enable a
comparison of prices paid for IT products in Australia and overseas’. The ABS
acknowledged the Productivity Commission’s concerns that the ABS’ data
collection and statistical analysis ‘do not accurately cover the importation of
products purchased from overseas retailers’. The ABS advised that it has been working
with the Australian Customs and Border Protection Service to develop indicators
for this activity ‘based on Customs audits and numbers of parcels’.
The Committee also wrote to the Australian Customs and Border Protection
Service which responded that detailed data is provided to the ABS on imported
goods valued in excess of A$1000:
This data includes information on such things as the tariff
classification, value and origin of the goods but does not include any information
on the method of the purchase, for example, whether the goods were purchased online.
The ABS will have information provided by Customs and Border Protection that
will enable them to provide information on the value of IT purchases above the
Given the growing importance of IT products and the online economy more
broadly, the Committee is of the view that there is a need for more precise and
comprehensive statistics that provide government, business and consumers a
better understanding of Australia’s digital economy.
The Committee recommends that the ABS develop a
comprehensive program to monitor and report expenditure on IT products,
hardware and software, both domestically and overseas, as well as the size
and volume of the online retail market.
Evidence by product category
While the Committee acknowledges views that ‘snapshot’ comparisons can
be of limited use, it does not accept Microsoft’s claim that the inquiry is
‘based on an effort to compare absolute prices’. The Committee has made every
effort to seek information from a range of sources (including repeatedly, from
large IT vendors, as noted in chapter 1) to provide a thorough foundation on
which to base its observations and conclusions. The Committee has not sought to
make generalisations, or accept all evidence without question. The Committee
accepts that the wide range of personal accounts from consumers, as well as
evidence from peak bodies and consumer advocacy organisations, demonstrates a
level of concern which should be reflected fairly in this report. The following
sections consider hardware, software, and digital downloads, including games,
music, and books, before looking at impacts on consumers across Australian
The Committee did not receive extensive examples of price differences
for IT hardware, but notes the submission from Choice which compared the prices
of twenty-five computers manufactured by Apple and Dell. The Dell products – a
range of laptop and desktop computers – were on average 41 per cent more
expensive in Australia than in the US, with differences ranging from 18 per
cent to more than 80 per cent.
The prices for Apple products were much closer to parity – the majority
of Apple’s iPad, iMac and Macbook lines were generally 10 to 15 per cent more
expensive in Australia. As Choice noted:
The average price difference for Apple’s computer products is
12 per cent. This is only marginally higher than the 10 per cent GST rate,
and therefore it could be claimed that Apple’s Australian hardware prices are
more or less at parity with the US.
The Committee heard of several examples of specialist consumer
electronic products, and also various ‘consumables’ which also appear to be
subject to significant price differences. Mr Douglas Linacre compared the costs
for Epson printers and printer cartridges and found differences of more than
100 per cent. Mr Phil Festa described
a price difference of between 40 and 50 per cent on a brand of electronic ‘fish
finders’, suggesting that this is because only one Australian wholesaler holds
distribution rights. The Committee also
received several inquiries from consumers who wished to provide submissions
describing their experiences of price discrimination with purchasing electronic
goods, including cameras and electrical equipment, but the Committee has
maintained its focus on IT-specific goods.
In his submission, Australian web developer Mr Daniel Myles stated that
price differences exist in IT and gaming hardware. For Lenovo and Alienware
laptops, Mr Myles claims there are price differences from 60 to 100 per cent;
for Sony’s PlayStation Vita or the PlayStation 3 console, there are price
differences of 40 per cent; and the Nintendo 3DS costs 45 per cent more in
Australia than in the US.
As noted earlier in this chapter, ‘geoblocking’ is a term which
can be applied to the means by which Australian consumers are restricted from
accessing a cheaper global marketplace. The Committee heard several examples of
geoblocking in sales of IT hardware and software products. In the case of IT
hardware, geoblocking may be the result of exclusive distribution agreements,
in which manufacturers assign the rights to distribute their products in a
given territory. Evidence suggests that Australian consumers’ access to global
markets for IT hardware may in fact be shrinking as more manufacturers
implement such agreements. Competition issues are
considered in chapter 4 of this report.
Software and digital downloads
Evidence presented to the Committee suggests that price discrimination
is most acute in the case of digitally delivered content – including software, music,
games, and books. In these sectors the products delivered are essentially
identical when downloaded in Australia, the United States or elsewhere. Digital
delivery also means that there are no costs for packaging, shipping and
physical delivery, and many consumers question the reasons for large price
differentials between Australian and overseas markets. This section therefore
reflects evidence received on software pricing in general, as well as products
available as digital downloads.
Choice compared the prices of more than fifty software products,
focusing on Microsoft and Adobe, comparing Australian and US prices, using data
collected in 2008 and in mid-2012. Across more than thirty Microsoft software
products, Choice data showed consistently higher prices in Australia for
substantially identical products, with Australians paying an average 49 per
cent more than US customers. According to Choice, Microsoft Office products,
including Microsoft Word, Excel, and Access were more than 30 per cent more
expensive in Australia, while the various iterations of Microsoft’s popular
Windows 7 operating system were 40 to 50 per cent more expensive.
In relation to Adobe software, the Choice submission also revealed
significant price differences, although Adobe’s prices displayed more
variability. Adobe’s standard Creative Suite 6 products showed a relatively
consistent price differential of 60 to 65 per cent.
ACCAN also noted price disparities for Adobe products, finding that, on average
and assuming the Australian dollar is at parity with the US dollar, Adobe’s
range of standard, perpetual-license products were 48 per cent more expensive
Choice noted that Adobe also sells discounted ‘student edition’ licenses
which permit tertiary students to purchase its software at substantially
reduced prices. When student editions were taken into account, Choice data
showed a price difference of only 17 per cent.
Many consumer submissions raised the issue of geoblocking practised by
Apple, both in relation to its own hardware and for content licensed through
its iTunes store. To maintain the
separation of national markets, Apple requires a mailing address and credit
card at the point of purchase.
The Committee was advised that, in addition to requiring its resellers
to verify a customer’s location at the time of purchase, Autodesk, a leading 3D
design software vendor, requires customers to make contact after purchase to
obtain a license key. In this way geoblocking is maintained even if a customer
initially circumvents the reseller’s efforts at market segmentation.
In relation to professional software, Mr Myles’ submission shared concerns
expressed by Choice and ACCAN: significant price differences exist in
relation to Adobe software, Microsoft software and some Apple products,
although Apple’s move toward more equitable prices for its hardware is noted.
Impacts of geoblocking apply in this sector, as indicated in submissions.
Mr Nic Watt, Creative Director of Nnooo, an Australian video game
developer, drew the Committee’s attention to significantly higher prices for
Autodesk’s Maya 2013 3D visualisation software. Nnooo must also purchase Adobe
software to create and edit images and vector graphics:
As a games developer for PlayStation (Sony), Wii U (Nintendo)
and Nintendo 3DS we have to use one of these packages to be able to create and
export our 3D artwork into our games.
Like Autodesk there are no serious competitors and so for
making textures (images to put onto a 3D model) for use in games we are
required to use their products… 
According to Mr Watt, Australian businesses must pay nearly 45 per cent
more for Autodesk software, in an industry without significant competition.
[Autodesk] have in the last 7 years purchased the three main
3D visualisation packages used for making films, TV and video games … the net
result of this is that we have to buy the software from [Autodesk] Australia
and they control the pricing. We cannot buy a competing product as in our
industry they own the major ones.
Mr Ron Rennex characterised the price differential for Autodesk’s computer
assisted design software AutoCAD as ‘appalling’.
Mr Paul Bicknell noted the price differentials for a digitally downloaded copy
of Autodesk’s computer-aided-design software Autocad LT:
I have recently bought 5 licences for Autocad LT. Again
delivered over the net Australian price $1775.00 per licence. Yet if I was in
America I could buy these licences for $1200. The cost of me doing business in
Australia was nearly $3000 based on the location of where I was clicking the
buy button from.
Cybertext Consulting, a specialist technical writing and online
documentation firm based in Western Australia, uses Adobe products. According
to Managing Director, Ms Rhonda Bracey:
As someone living in Australia, I cannot buy these
downloadable products from the Adobe store at the US prices –Adobe will not
take my Australian credit card, nor will it accept my Australian address. When
I try to enter these details, the Adobe website forces me to the Australian
Adobe online store webpages, where the prices are incredibly inflated over
those available to US customers.
The Choice submission highlighted the largest price difference unearthed
in the course of the inquiry. Australian software developers who wished to
purchase Visual Studio Ultimate software with full Microsoft Developer Network
membership were charged A$20,775, whereas American developers could obtain the
same products for US$11,899, a difference of more than $8,600. Choice noted
that ‘[f]or this amount, it would be cheaper to employ someone for 46 hours at
the price of $21.30 per hour and fly them the US and back at your expense –
Other specialist software
ACCAN noted price disparities in products designed to facilitate
disabled access (braille readers, assistive devices, etc.). ACCAN examined
prices for HumanWare assistive devices, noting:
BrailleNote range of products showed consistent increases of 20 to 30 per cent,
with prices difference of up to $2,300.
n SmartView video
magnifiers ranged from 4 per cent more expensive (i.e. close to parity) to
nearly 30 per cent more expensive.
n The DeafBlind Communicator
products were approximately 25 per cent more expensive in Australia.
Mr Barry Napthine drew the Committee’s attention to price disparities
faced by Australians who wish to purchase software to assist the visually
impaired. Mr Napthine’s screen reading JAWS (Job Access with Speech) software
is regularly updated with new features. To gain access to these updates, JAWS
customers may purchase a ‘Software Maintenance Agreement (SMA) which permits
them to access a number of updates. Mr Napthine said:
My complaint is very simple. If I lived in America the cost
would be considerably less. In America the cost of an SMA was in December last
year $120, I paid to Vision Australia $205. Given that at the time the
Australian dollar was about parity with the American dollar I find the price
difference hard to accept.
Submitters also drew the Committee’s attention to large price
differences faced by businesses which use geographical information system (GIS)
software. GIS software is used by a wide range of businesses, including mining
companies, engineers, local councils, environmental organisations, and various
other institutions. Submissions from users of GIS software noted that prices
for ArcView, a leading GIS software package sold by ESRI, are
significantly higher for Australian businesses. According to Mr Pierre
In April 2012 I was quoted $4000 for a package (ArcView) that
is sold for $1500 in the U.S. When I queried the sales person on the matter he
was clear that it was a matter of regional pricing and that their license
conditions do not permit me to buy the software in the United States, which
compelled me to pay the asking price.
Mr Greg Keeley noted that similar price discrepancies exist for users of
other GIS software:
Good examples are MapInfo and ArcInfo ….common GIS software
used for example by most mining companies, local councils and planners in
Australia…In the case of MapInfo, it is only available from Pitney Bowes in
Australia and at much higher prices than elsewhere on the planet. If you attempt
to buy it from outside Australia the supplier will refuse to send it to an
J Mahuika drew the Committee’s attention to price differentials charged
by the providers of online training courses:
As an alternative to classroom-based training, many training
courses can be purchased online, including training provided by companies for
their own software products.
I have found examples of public courses where the Australian
price is higher than the US price by between 27 per cent and 50 per cent. In
these examples, the courses appear to be the same delivery format, topics and
duration, but are displayed on ‘Country’ specific web pages with differences in
the course code (where the Australia course code has the suffix ‘AU’) and
Price differences were also noted for software and hardware for
children’s use. Mr Greg Bell described products by Leapfrog, which sells
portable gaming devices and downloadable applications for them, which can be
accessed through its proprietary gateway Leapfrog Connect. Mr Bell said:
I recently purchased an app called ‘Explorer™ Game App:
Globe: Earth Adventures’ for $45, by nominating Australia as my country during
the checkout procedure. A quick internet search for the same app shows it is
$25 in the United States.
Ongoing subscription costs
Submissions to the inquiry also drew the Committee’s attention to price
differentials in a range of product categories where subscriptions must be
purchased. Mr James Rudd, for example, highlighted large price differences
faced by software developers when purchasing subscriptions to Microsoft’s
TechNet and the Microsoft Developer Network (MSDN). A Microsoft TechNet
subscription provides licenses to nearly all Microsoft applications. IT
professionals may require such a subscription to develop or maintain
professional skills; businesses may require one for use in creating a
‘development environment’ to safely test new software or changes to their IT
Mr Rudd found that TechNet subscriptions cost approximately 75 per cent
more in Australia when compared to the equivalent US price.
In relation to MSDN subscriptions, which provide access to Microsoft
programming tools for software developers, Mr Rudd said:
The prices of MSDN subscriptions are significantly higher
than that of TechNet subscriptions, but the price difference of paying 75 per
cent more than the USA remains the same. This means for Visual Studio Ultimate
2010 with MSDN, you will be paying A$20,775 in Australia and US$11,899 in the
United States, or US$10,518 through Amazon.
Mr David Poole highlighted the fact that Australian consumers of digital
news content can face significantly higher costs. Mr Poole noted that
Australian subscribers to The Economist magazine pay 23 per cent more than subscribers
in the UK, and 77 per cent more than subscribers in the US. Although The
Economist produces several regional editions, Mr Poole notes that they
contain substantially identical content. Mr Leonard Cronin
raised similar concerns in relation to New Scientist magazine subscription
Downloadable music was a prominent theme of complaints about price
discrimination. It is undisputed that the internet has transformed the way in
which consumers can buy, store and listen to music. Although many of the
consumer concerns described in submissions focus on Apple iTunes, the Committee
extended its consideration to other suppliers of digital music, in recognition
of the fact that the contemporary music market is diverse and rapidly expanding.
After canvassing consumer concerns, responses from music industry and IT
representatives will be considered in chapter 3.
Launched in 2003, iTunes, an online digital media storefront developed
by Apple, has been the biggest music vendor in the US since April 2008, and the
biggest music vendor in the world since February 2010.
By February 2013, the store had sold
over 25 billion songs. On average
15,000 songs are downloaded per minute from a catalogue of over 26 million
songs that are available in 119 countries.
Individual songs are priced at several ‘tiers’ in the Australian and US
iTunes stores. In the US store, songs can be priced at US$0.69, $0.99, or
$1.29. In Australia, the equivalent tiers are A$1.19, $1.69 and $2.19. The
majority of the price comparisons for individual tracks sold through the iTunes
store showed prices of US$1.29 and A$2.19 respectively – a mark-up of 67 per
Choice compared the prices of 50 individual songs and 20 ‘classic’
albums in the Australian and US iTunes stores. The data showed that songs were,
on average, 51 per cent more expensive in Australia, while the median price
difference for the songs was 67 per cent. The Choice data showed a similar
mark-up for a selection of 20 ‘classic’ albums. Prices in the Australian iTunes
store ranged from A$8.99 to $29.99, though the majority of albums were priced
at $16.99. In the US store, prices ranged from US$7.99 to $16.99, with a
majority of albums priced at or around the $9.99 mark. On average Australians
were charged 51 per cent more for an album.
Choice’s Mr Matthew Levey referred to the ‘dominance of iTunes in the
Australian market, as in any market that has a player of that size, is a factor
[influencing prices], but we would also suggest that prices for recorded music
have been artificially high in Australia for a long time’.
The Committee is aware of music subscription services, from free music
access (i.e. advertising supported models) to paid subscriptions which deliver
music to multiple platforms (i.e. mobile devices and computers). Further, a
plethora of web and streaming services such as YouTube, Soundcloud and
Bandcamp, offer access to music in various forms.
A common theme of these consumer complaints was incredulity as to the
size of price differences between Australia and the United States for identical
music downloaded from a digital shopfront. This perspective was summed up by
Choice which, in its written submission, observed that:
It is important to note that these products are identical and
are delivered directly to consumers through a means which bypasses many
production and overhead costs, such as rent, distribution and labour…. Choice
does not believe that a price difference of 50 per cent is justifiable.
Scepticism is not confined to consumer advocacy groups. The Committee
also noted the Productivity Commissions’ conclusion in its retail industry
report that argues justifying higher prices for digitally delivered content are
Choice compared the prices for a number of computer games, again finding
substantial price differentials. The submission compared the prices of 20
recent and new-release games sold on EB Games’ Australian website against the
same company’s US website. Only one game – The Elder Scrolls V: Skyrim –
was at parity with the US, while the majority of games were between 40 per cent
to 90 per cent more expensive on the Australian website.
Digitally distributed games showed even larger price differences. The
Choice submission highlighted price differentials for games sold through
‘Steam’, a popular online-only games platform, and showed consistently higher
prices in Australia compared to the US for substantially identical digitally delivered
content. The worst price differentials on Steam can be 200 to 300 per cent more
expensive in Australia. Choice highlighted the ten products with the biggest
The average price difference for these 10 games is 232 per
cent, even though, like the iTunes products, they can be delivered with minimal
rental, labour and distribution costs.
Mr Myles’ submission echoed Choice’s concerns, identifying price differences
in digitally downloaded games, particularly those distributed through the Steam
store and through Electronic Arts’ competing Origin store.
Mr Dane Weber observes that:
… ‘Steam’ …provides a virtual storefront and service for
publishers to sell their content. Publishers are allowed to set their price,
and given different currencies, can price their products accordingly. As such,
the Australian Steam store frequently suffers extreme price discrimination by
publishers, occasionally having games pulled to be re-priced higher.
Valve Corporation, the US-based company which owns Steam, does not set
game prices on Steam (except for games it publishes itself). As Mr Dmitry
Valve, the owners of Steam, are not directly responsible for
these prices. Instead, they allow the publisher of the game to choose what
price they want the game to be sold at. In particular, games that Valve itself
publishes are always sold at fair prices in the US and in Australia. It is also
worth noting that Steam prices are unaffected by GST and it costs almost
nothing to produce a purely digital copy, so it makes even less sense for them
to be higher.
Steam is not the only digital delivery platform that charges Australian
consumers more for games. Mr Scott Sutherland pointed out that Australian
consumers buying direct from the publishers’ website can also be forced to pay
higher prices. The price disparities
for digitally delivered content are, as Mr Matthew Kermeen observed, ‘highly
perplexing’ to many consumers:
… purchasing games online via a service such as Steam
(http://www.steampowered.com) or console-based marketplace platforms such as
Microsoft’s Xbox Live or Sony’s Playstation Network Store, the localisation and
distribution costs should be void. However in a recent example, the game Max
Payne 3 launched at US$49.99, available via download from Steam. An Australian
customer purchasing this exact same game via Steam is expected to pay A$89.99,
almost double the price for the exact same product, delivered in the exact same
In some cases price disparities in relation to digitally delivered games
are so large that it can be substantially cheaper for Australian consumers to
purchase a physical copy of new release games from a UK-based online store and
have it shipped 15,000km to Australia. Mr Scott Nelson, for example, recounts
finding a then new-release game, Mass Effect 3, on sale at Electronic
Arts’ ‘Origin’ digital store for A$79.99, while a physical copy could be
purchased and shipped to Australia from the UK-based ozgameshop.com for A$38.99.
The Steam store displays Australian prices based on a customer’s IP
address, so that by default Australians will not see cheaper US prices. Steam
enforces regional pricing through the use of credit card information so that
Australian consumers cannot easily circumvent their geoblocking by using a
virtual private network (VPN) to obscure their geographical location. Steam
also uses its Terms of Service agreement as the basis for blocking the accounts
of consumers who circumvent its geoblocking mechanisms.
Mr Scott Sutherland outlines a different kind of geoblocking experience with:
I tried to buy a copy of a new game in May called ‘Diablo 3’.
The fastest way to get this game is to purchase it from their website. On the
US website the game is advertised for US$60 = A$58. But when I go to buy I am
redirected to the Australian website and the game is A$80.
While impacts on library users are considered in a later section of this
chapter, this section describes some general observations made in evidence
about e-books, which are also susceptible to price discrimination. Many
submissions highlighted higher costs faced by Australian consumers. The
Australian Digital Alliance and the Australian Libraries Copyright Committee (ADA/ALCC),
for example, compared the prices of a random sample of 48 books. It found that:
On average, it appears Australian libraries pay approximately
58 per cent more for print books than they are priced in the US, and 44
per cent more for e-books. For some e-books, libraries in Australia may be
charged as much as 191 per cent more than that e-book is priced in the US.
After analysing the price of 35 titles from the New York Times best
seller list, Mr Jeff Burgess noted that:
… there is good evidence of a pattern of price discrimination
against e-book buyers in Australia…. many of the Australian e‑book prices
are substantially higher than the e-book price in other countries/regions. This
is despite the fact that the e-book is listed, sold on, and downloaded from the
same USA-based website and servers for every country/region.
Mr John Dulley, on behalf of a group of Australian customers of the
American e-book vendor Amazon, compared the prices of 100 popular e‑book
titles sold on Amazon.com. He found that when all publishers were taken
together, Australians paid 16 per cent more than consumers in the US, and 32
per cent more than consumers in the UK. His results showed high variability
between publishers: Harper Collins books were cheaper in Australia, while
Penguin and Pan Macmillan books were 38 per cent and 26 per cent more
expensive respectively. Independently published books – known as ‘indies’ –
were significantly cheaper, according to Mr Dulley, with prices ‘virtually the
same in all countries’.
Ms Julie Jester noted that e-book prices have risen significantly faster
in Australia, subsequent to the ‘agency agreement’ which gave publishers
Initially average e-book prices in the Australian region were
close to prices in most other regions in the world. The Agency Agreement,
introduced in April 2010, caused minor price increases, particularly on new
The Australian region price increases, in December 2011, took
e‑book prices to well above most of the other regional prices, making
Australian e-books the highest priced e-books in the world. Furthermore many
e-books are now priced higher than the paper editions.
Dr Andrew Leigh MP noted in his submission that there are also
significant limitations on Australian consumers’ ability to purchase e-book
readers, and, further, that Australian consumers can access a more limited
selection of titles than consumers in other jurisdictions.
Impacts on consumers
This chapter has noted the enormous impact of the internet and other IT
developments on Australians’ lives. It has also discussed aspects of
international price discrimination, which while not new, are continuing to
impact on charges levied on Australian consumers for a range of products and
services. This section will review evidence from individuals and community
organisations which suggests that the price differences described above have
tangible, and negative, impacts on people’s lives.
The Committee notes the irony inherent in digital development, an area
identified and discussed at length in other forums.
While Australians are aware that the internet, including the National Broadband
Network (NBN), will have a transformative impact on the economy and society, including
the circumstances of the most isolated and socially disadvantaged people, access
to web-based services is all-important. If people are experiencing isolation,
social disadvantage, financial difficulties, or other challenges, perhaps even
relating to their business, and are not able to access affordable IT, their
situation is likely to get worse.
The Committee notes that its terms of reference ask it to consider the
impacts of IT pricing on business, government and households; but there are
many other groups within the community who have expressed their interest in the
issues considered by the inquiry. The Committee acknowledges the input from
those groups, including those who have presented the Committee with personal
experiences to clearly illustrate the challenges faced by many in our
Consumers with low incomes
ACCAN’s submission to the Committee observed that:
Hardware and software has become essential to participation
in a modern society. A computer and additional software is often needed to
search for a job and self-administration for government income support payments
is being moved online. Australians who cannot afford high prices for IT
products will be restricted in the way they participate in our increasingly
Care Inc, a Canberra-based financial counselling service, observed in
its submission that its clients who are experiencing financial hardship have
little capacity to access IT products. ‘A new computer’ (even second hand) is
often stated by clients of financial counselling as something on the ‘wish list’.
Care Inc noted that access to IT products can be a barrier for people
experiencing financial hardship, and particularly for those consumers who have medical
and other health issues. While some people are able to access the internet
through their local library or employment service providers, these environments
are shared, often require ‘bookings’ and the organisation of transportation and
‘do not reflect the way that technology is used in our community’.
Care Inc notes that low income earners or people who cannot
access credit through the mainstream market may attempt to avoid expensive
upfront IT costs by resorting to rental or lease agreements; contracts which
are ‘enormously expensive’, thereby paying significantly more in the longer
The Committee acknowledges ACCAN’s observation that ‘the cost of
hardware and software is a major concern for not-for-profits’,
organisations with limited and often low income who seek to provide services to
support individuals in need of assistance. Connecting Up is an Australian
not-for-profit organisation which seeks to build the capacity of the
not-for-profit sector by ‘reducing their IT costs, providing educational
material and practical workshops and events’.
Connecting Up draws on partnerships with key IT product providers to
provide, subject to eligibility criteria, ‘industry-standard software and
hardware at a greatly reduced cost’. The products are provided through existing
Charity Licensing schemes or through direct negotiations with technology
vendors, including Microsoft, Adobe and Symantec. Connecting Up note that
through this discount program, ‘not-for-profit [organisations] can save up to 50 per cent off their products’.
According to Connecting Up, not-for-profit organisations would benefit
from a greater awareness that they can potentially access free or discounted
technology. Connecting Up also notes the increasing importance of access to
high-speed broadband as cloud services develop, and further argues that
not-for-profits may need government grants to assist in the acquisition of IT
Higher education sector
Australia’s 39 universities have a combined enrolment of more than one
million students, and employ more than 100,000 staff. ‘University expenditure
accounts for 1.6 per cent of GDP, which in turn benefits students, staff,
industry, and the wider community.’ Over the past few
decades, the education sector has become ever more reliant on information
technology. Monash University noted that, for higher education institutions and
the students that they educate, IT is of increasing importance to daily
It is estimated by the Council of Australian University Directors of
Information Technology (CAUDIT) that ‘collectively, CAUDIT member institutions
spend approximately A$1.5 billion on ICT products and services annually’.
The Committee would have liked to have heard more from the Australian higher
education sector in relation to IT procurement, to provide a greater range of
views, but is aware of some reluctance to participate in this inquiry for fear
of jeopardising ongoing and future contract negotiations with major IT vendors.
According to Monash University’s Annual Report 2012, Monash University spends
approximately $32 million each year on IT products and services.
Of this IT operations budget, approximately 10 per cent is spent on software from
some 100 suppliers. Monash stated that there is ‘clear anecdotal evidence’ that
software costs are higher for the Australian higher education sector than for
comparable institutions overseas. Monash described how it
had ‘carried out some sample price assessments with a UK comparator university
and concluded that, on average and on current exchange rates and eliminating
sales tax difference, our underlying unit costs for hardware are 20 to 30 per
In explaining why IT costs for higher educational institutions in
Australia might be more expensive the Monash University submission stated that:
From the perspective of the individual student or indeed
individual university, these differentials are created by well-known commercial
forces. These forces add up to asymmetry of information and bargaining power
between the vendor and the consumer.
As noted earlier in this chapter, the presence of cloud computing has
impacts for users. Monash University noted that while cloud services can indeed
offer flexibility for consumers and IT vendors, subscription services may have
The emergence of cloud approaches has increased the range of
options available to customers and at the same time created new opportunities
for vendors to achieve step changes in their value proposition. It would be
naïve not to recognise that although cloud solutions may reduce headline costs
to the customer, vendors would not pursue the approach if it did not improve
their returns (creating artificially high costs to customer).
Impacts on students
Monash University’s submission to the Committee also highlighted
financial pressures on university students who ‘manage finite and often limited
resources whilst studying’:
At Monash, approximately 12 per cent of the domestic
undergraduate student population come from a low socio-economic background. For
this cohort, meeting living and study-related costs can be very challenging.
Monash noted that universities are increasingly using ‘… electronic
delivery of content and collaboration environments. In light of these changes,
the need for students to have easy access to contemporary IT tools increases,
as do the attendant financial challenges.’ Monash further noted:
The proportion of students affected by difficulty in paying
for communications costs is higher than one might imagine, with 43 per
cent of respondents to a recent National Union of Student survey stated that
they struggle to pay communication costs from their normal income.
Monash University is concerned that for ‘…some talented prospective
students from low socio-economic backgrounds, the costs of IT in Australia will
add to their decision not to take up Higher Education’.
The Committee notes Monash’s suggestion that options be examined to allow
students to purchase necessary IT equipment through an arrangement such as
Higher Education Loan Program, and would be interested to see any progress in
Considering the importance of IT products to education, and
in the interests of greater transparency in this area, the Committee
recommends that the Australian Government, in consultation with Universities
Australia and CAUDIT, conduct a comprehensive study of the future IT needs of
and costs faced by Australian Universities, in order to provide clearer
financial parameters for negotiations.
People living with disability
While the evidence provided to the Committee is largely anecdotal, the
Committee accepts that concerns expressed by individuals were genuine, and
reflect a growing awareness that many IT products, hardware and software,
designed for people with disability are expensive, and often cost significantly
more in Australia than overseas. Mr Wayne Hawkins of
ACCAN told the Committee that:
… the higher price that consumers in Australia pay is
detrimental to all consumers, but there is a significantly higher impact on
vulnerable consumers and particularly consumers with disability. The research
that is available shows us that Australians living with disability are
overrepresented in the low income socioeconomic groupings, and these higher
prices significantly impede their access to all of the vital services that are
now being provided online with telecommunications.
Such products include optical character recognition software systems
used to scan printed materials, screen readers that provide either speech or braille
output, magnification software to enlarge text, adapted keyboards, on-screen
keyboards and voice recognition software and alternative communication
programs. The way in which Ms
Faye Galbraith described the importance of modern IT hardware and software to
support children with disability to communicate, play games, and participate in
education, showed the Committee the necessity of such assistive devices:
There are a multitude of apps available to assist kids with
disabilities, to communicate, play and learn. … It’s important to mention that
for some of us, technology isn’t a desirable object, it’s an absolute
necessity. It promotes communication, inclusion and independence.
Mr Hawkins outlined his own experiences arising from the comparatively
high cost of IT products to assist people with disability, describing vastly
different prices for screen reading software which is available as a digital
ACCAN argued in its submission that many people with disabilities are
amongst the most economically disadvantaged members in our community. The
requirement for specialist equipment to support their disability makes it more
likely that they will be unemployed and on a Disability Support Pension.
A member of Blind Citizens Australia contributing to the ACCAN submission to
the inquiry noted that:
It is not unreasonable to conclude that high prices for
disability IT equipment has contributed to the high levels of unemployment
experienced by people with disability and made social interaction and study
more difficult. Any effort to align prices to the lower rates seen in other
markets could play a role in increasing employment or social inclusion for this
IT products are important, indeed essential, to people with disability.
However ACCAN pointed out that:
Unlike other countries, there is no legislated right for
people with disabilities to have access to technology they require for daily
living that can assist them in participating in the community.
The Committee heard from ACCAN that even where IT products are purchased
overseas, local warranty and service arrangements are important considerations:
If [consumers with disability] can save a couple of thousand
dollars from what the price is in Australia by buying it overseas then that is
fantastic, but when they do that they do not have backup warranty and service
agreements, so then they are disadvantaged if something goes wrong with the
The submission of the ADA/ALCC urged the Committee to ‘take into account
not only the prohibitive costs of IT hardware and software for Australians with
disabilities, but other ways in which digital content providers may restrict
(or exclude outright) their enjoyment of content’.
ACCAN argued that Australia’s small domestic market disadvantages
individual consumers who need specialised IT products:
In most cases consumers lack any choice when shopping for
disability specific hardware and software … This is also the case for other
disability specific pieces of hardware and software and is likely due to the
fact that specialised equipment is aimed at a small section of the market in
Australia, which is a small domestic market compared to the USA or UK.
Similarly Ms Galbraith expressed concerns:
We hear many excuses for anti-competitive practice by
disability equipment suppliers and IT retailers alike: a narrower market by
nature of a smaller population; higher shipping costs; a virtually non-existent
Legal considerations and international obligations
ACCAN suggested to the Committee that employment opportunities can be
lost for people with disability because of the high
cost to employers of making modifications to IT systems in the workplace:
Unfortunately, the high cost of much disability related
equipment means that potential employers, educational institutions and service
providers may be able to claim ‘unjustifiable hardship’ under the Disability
Discrimination Act 1992 and therefore attempt to legally refuse to hire,
educate or provide services to people with disability.
In their evidence to the Committee both ACCAN and Dr Matthew Rimmer of
the Australian National University highlighted Australia’s obligations under
the United Nations Convention on the Rights of Persons with Disabilities. Dr Rimmer observed in his submission to the
Lamentably, Australia’s copyright regime fails to adequately
address the problem of disability discrimination, particularly in respect of
copyright works in a digital form.
Dr Rimmer in his submission pointed out that ‘those with disabilities
and their carers suffer problems in respect of access to knowledge’. He argues
that under the United Nations Convention on the Rights of Persons with
Disabilities, Australia has an obligation to ensure disabled persons are not
discriminated against by copyright law and have access to ‘cultural materials’.
Dr Rimmer noted the estimation by Disability Discrimination Commissioner Graeme
Innes that ‘only 5 per cent of all books in Australia are published in
accessible formats such as large print, audio or braille, while in developing
countries it is just 1 per cent’.
ACCAN noted that while the Australian Government is committed to its own
National Disability Strategy and a whole-of-government Social Inclusion Agenda,
it does not have a comprehensive public procurement policy for accessible IT
and that this undermines Australia’s commitment to its obligations under the
United Nations Convention on the Rights of Persons with Disabilities.
Public Procurement Policy
ACCAN noted that public procurement of IT products, especially hardware
and specialised software, would greatly assist people with disabilities, both
in terms of affordability and access, and claimed that ‘Australia lags behind
the majority of OECD countries, which have included IT accessibility criteria
in their public procurement regimes.’ At the present
time the Australian Government has no such policy in place, and ACCAN has
called for its introduction. Such a policy, ACCAN claims, could be accessed by
eligible persons, especially people with disability, either at discounted
prices or as a benefit.
ACCAN argued that this program would also ultimately encourage more
employers to hire disabled persons. Currently the price of the IT
infrastructure required for disabled persons can in some instances be
prohibitive for employers thus disadvantaging the disabled.
Although the Committee was not able to fully explore the issue of public
procurement as a remedy for reducing the costs of accessible IT products for
persons with disabilities, the Committee recommends that the Australian
Government give consideration to adopting a whole-of-government accessible IT
procurement policy to improve the quality of life for people with disabilities
and their carers. Noting the report Accessible Communications Tapping the
Potential in Public ICT Procurement Policy, by the University of Wollongong
and GSA Information Consultants in consultation with ACCAN,
the Committee considers that such a scheme should be undertaken by relevant
agencies including AGIMO (the Australian Government Information Management
Office) and involve consultation with relevant stakeholder groups including
The Committee recommends that the Australian Government
consider a whole-of-government accessible IT procurement policy, to be
developed by relevant agencies including AGIMO, and in consultation with
relevant stakeholder groups including ACCAN.
As the ADA/ALCC noted, almost half of all Australians are members of
public libraries, with some 114 million visits to libraries registered in
2009-2010. Libraries often cater for low income earners such as the unemployed,
students, pensioners, persons with disabilities, as well as people from non-English
speaking backgrounds. Most public libraries
in Australia now offer internet access, providing access to digital
information, government services, and subscription-only publications.
The ADA/ALCC submission explained that the provision of e-books presents
many challenges for libraries, including the contracting away of rights
available under Australian copyright law, lack of ability to access new release
material, evolving business models that see pricing regimes changing regularly
and lack of certainty about long term access to material.
The ADA/ALCC observed that:
… there are few publishers offering an outright purchase
model for e-book titles, and that in early 2012, Penguin Books without notice withdrew
licensing for its e-book catalogue to Australian libraries via the aggregator
As well as noting the higher costs for e-books, discussed earlier in
this chapter, the ADA/ALCC highlighted problems with access. Publishers may
refuse to license e-books to libraries, or may withdraw access to their e-book
catalogue. ADA/ALCC also highlighted recent licensing agreements that force libraries
to purchase multiple copies of an e-book, even if they require fewer copies.
According to the ADA/ALCC submission:
Some publishers currently refuse to license/sell e-books to
Australian libraries at all – at any price. Further, e-books are generally only
available to Australian libraries for as long as the publisher is willing to
license them (or until the publisher goes out of business…) …
Australian publisher Allen & Unwin recently amended their
e‑book licensing arrangements with large public library services and
library consortia, mandating the purchase of multiple copies of any e-book,
even where only one copy is desired. Until recently, the State Library of
Western Australia (SLWA) could license one copy of an Allen & Unwin title
for the WA public library network (restricted to single user access). The
amended licensing arrangements mean SLWA would have to purchase 12 copies of
any e-book (current release or backlist title), with a resultant impact on
budget. Even if SLWA only wanted one copy of a particular e-book title, they
would effectively pay 12 times the list price. These price differentials will
adversely affect acquisitions policy in libraries; in particular, the breadth
of e-books available to library users.
Representatives of the Australian publishing industry acknowledged that
the availability of e-book licences to Australian libraries, costs and
associated terms and conditions governing access to content by library users is
in a state of flux. According to Mr Ross Gibb of Macmillan Australia:
We are still trying to come up with the model for libraries.
There are various products out there. The US have been struggling with this
one—does the library buy the book once, have it forever and lend it as many
times as it wants? That is not going to create much income for the publisher,
nor particularly for the author. So we are trying to look at subscription
models or models that allow a reasonable amount of usage and wherever it might
go from there. There are time periods being set and different models being
experimented with. I do not think there is an answer anywhere yet.
For those who prefer to keep their reading collections on their own
devices, rather than access them via a public library, the Committee noted with
concern comments made by Mr Gibb, of Macmillan Australia, about ongoing access
to cloud-based e-book services: access to a consumer’s e-book library would
continue for, ‘[a]s long as your e-reseller is going to maintain your
library—so hopefully they stay in business’.
Small business owners
As with many other sectors of society, business has become increasingly
reliant on the use of IT products over the last few decades. Evidence presented
to the Committee suggests that certain types of small businesses, such as those
using niche software, may be significantly impacted by the higher cost of IT
products, and particularly disadvantaged when ‘locked in’ to a particular suite
of products. While large companies and governments may be able to negotiate
more competitive prices for IT products, small business may be less able to shop
around for alternative cheaper IT products; submissions expressed concern about
barriers to choice and competition, and noted the consequent impact of higher
prices on their international competitiveness.
Mr Nic Watt, Nnooo’s Creative Director, argued that the layer of costs
the company is forced to absorb significantly affects its international
Australian [companies] in the film, TV and video games
business are being unfairly financially penalised in comparison with their American
counterparts. This makes it more expensive to do business in Australia and
makes it hard to compete on a global stage.
Other software developers face similar problems and are obliged to
absorb higher input costs. Mr James Rudd, an IT professional, noted in his
submission that the suite of development tools provided to business by
Microsoft can be significantly more expensive in Australia. Mr Rudd concluded
These differences in price can significantly raise the cost
of becoming an IT Professional or Developer and staying up to date on current
technology. They disadvantage Australian businesses that use Visual Studio and
MSDN to develop software by having a much higher yearly fee for their
development software compared to similar US businesses.
Freelance web designer Mr Peter Larkin argued that the competitive
impact of higher IT prices is felt quite widely:
A major impact is felt within the multimedia/web design
community here, as local businesses find it hard to compete with our US
counterparts given the tools (Adobe software) is so much more expensive for us
to buy than it is for US-based companies…our ability to compete on a global
level is compromised.
Australian Commercial and Media Photographers (ACMP) noted that many
small businesses in the photographic industry consider they have no choice
other than to purchase Adobe software and consequently have a keen sense of
international price discrimination :
Adobe provides an easily documentable but single example of
how price differences, changed policies and new delivery models can create an
added financial burden to our industry, which is significantly higher than our
We believe that in an ever tightening market the price
differences across the entire spectrum of equipment, software and consumables
is making it increasingly difficult for the Australian photographic industry to
operate their micro or small businesses and potentially affects the industry’s
ability to compete equally on the world stage.
The ACMP position was supported by submissions from individual
photographers, including Mr Christopher Shain:
The photographs I produce are used all over the world and I
compete with similar photographic businesses from other parts of the world, I’m
not sure why my business costs are higher in Australia when the product and
service are identical.
Mr Russell Zimmerman, Executive Director of the Australian Retail
Association, acknowledged that it was possible for small businesses to source
cheaper products overseas. However, as discussed earlier in this chapter,
warranty and support issues arise that are potentially more important for business
than for individual consumers:
If [business] know they can get something at a cheaper price
from overseas rather than buying it [here] and providing they feel that they
can get some support services on it, they would. But then you have to
understand that retailers also depend upon those kinds of products to make
their businesses operate. So they would make sure there are some kinds of
support services available before buying it. … If you have bought from overseas and
no-one is going to help you then you would be reluctant to go down that path. …
The consumer out there would say, ‘I am prepared to take the risk on those
goods. I'll buy them from overseas and bring them in. I'll have to risk the
warranty.’ It is a very valid selling point, and it is a
point that we emphasise to our members, but it does not always work.
In terms of cloud computing costs, architect Mr Nicholas Fox noted in
his submission that subscription-based cloud services are not an economical
proposition for every customer, even when sold at a favourable introductory
I generally upgrade the Adobe product every two or three
years. This is a common practise among other users I know. Adobe are trying to
get all of their users onto the Cloud, which will cost almost as much per year
as a subscription or about three times the cost of my usual upgrades. For me
this is not a fair or equitable solution.
The Committee notes recent media reports indicating that customers
wishing to access Adobe’s full Creative Suite will not be permitted to purchase
perpetual licenses as of its next release. The only way to access the range of
products will be via a Creative Cloud subscription.
Media reports indicate that consumer reaction to the decision has been mixed.
Impacts for Government procurement
The Committee received evidence that the Australian Government also
faces comparatively high prices for its IT products. AGIMO, part of the
Department of Finance and Deregulation, coordinates whole-of-government
procurement of IT hardware and software. AGIMO’s submission to the inquiry
explained that ‘[e]xpenditure on procurement by departments and agencies is
optimised by aggregating the volumes of goods and services purchased to attract
better prices and value for money’.
In 2009 AGIMO entered into the Microsoft Volume Sourcing Arrangement
(VSA) that provided pricing and licensing conditions for the supply of
Microsoft products to the Australian Government over a four year period. The VSA
provides for a volume discount from Microsoft’s government retail price in
Australia. AGIMO advised that there are over 250,000 users and 290,000 devices
covered by the VSA and that the arrangement was projected to achieve cost
savings in excess of $90 million over its life.
AGIMO also emphasised that the Australian Government has nonetheless
been obliged to pay significantly higher prices than counterparts overseas:
At the time of signature, the exchange rate from the
Australian dollar to the US dollar was $0.64. … At that time, the base
Microsoft Australian Government prices were calculated as being about 13 per
cent higher than equivalent US prices. Given variations between the US and
Australian situations, this appeared reasonable.
Following the improvement in the exchange rate over the past
three years …the difference in the base government price means that the US
Government is paying some 50 per cent less than the base government price in
Australia. The Singapore Government prices also appear to be some 50 per cent below
those charged to the Australian Government.
After reviewing the evidence in submissions from consumers and industry
groups, the Committee is of the view that in many cases Australian consumers
are paying much more for IT products than consumers overseas. While the
Committee notes the concerns of industry groups that price comparisons may not
capture elements of consumers’ experience in purchasing IT products, the
Committee is of the view that the evidence before it is strongly indicative of
a pattern of higher prices paid by Australian consumers.
The Committee would have liked to have received more input from industry
groups and IT providers in order to more effectively address the specific
concerns expressed by consumers, however it notes that the evidence it received
is consistent with other studies and inquiries where IT pricing has been considered.
In particular the Committee notes Choice price comparisons conducted in 2008
and 2011, the Productivity
Commission’s 2009 review of parallel import restrictions on books,
and its 2011 report into the retail industry.
The Committee also notes that there is a range of reasons and methods by
which Australian consumers are forced to pay higher prices for identical goods
sold more cheaply in international markets. Some claim there is a lack of
competition (either a limited range of purchasing options, or a limited range
of distributors or licenses), and some describe price increases based on
location, identified via credit card or other details which indicate that the
purchase is being made in Australia. Submissions indicate that many consumers are
acutely aware that they are being forced to pay higher prices for IT products
based on their geographical location alone.
In the Committee’s view, limited access to IT products in an
increasingly interconnected society is a significant contributor to the social
isolation and economic marginalisation of Australians, including those who are
living with disability.
Many submissions from consumer groups and individual consumers have
argued that higher Australian IT prices reflect deliberate regional pricing
strategies employed by major IT companies and content rights holders to
maximise profit in the relatively small but affluent Australian market. Unsurprisingly,
alert consumers have adopted various strategies to circumvent geoblocking and
access lower prices overseas. While these are discussed in chapter 4, the Committee
acknowledges that most, if not all, of these circumvention methods may violate
the terms of service put in place by vendors and service providers. Some of
them may even breach copyright, which may expose Australian consumers to civil
and even criminal sanctions.