Australians are paying about twice as much as they should for a range of tech products including computers, software and digital downloads.

It’s time for the government to act to bring this shameful situation to an end, to stop foreign multinationals from ripping us off. But until then, people should take steps to lower the cost of buying tech products. How? Read on.

Choice report into high IT prices

The Australian consumer watchdog Choice made a submission to the Parliamentary Inquiry into IT Pricing last week. It found the cost of IT products to Australian consumers could not be justified and that price discrimination was a systemic problem.

The Choice report highlights that the high cost of IT products disadvantages all consumers and prevents Australian companies from competing in the digital economy. The flow-on effect was higher prices for everyone in Australia.

Choice reported that for one product – Microsoft’s Visual Studio 2010 Ultimate with MSDN (New Subscription) – it would be cheaper to fly an employee to the US and back twice, and for this employee to purchase the product while overseas. The product’s retail monetary price difference is US$8,665.29 between Australia and the US.

Excuses made for high prices

Multinationals have argued that rental, labour and transportation costs, and the associated GST, cause the disparity. Another gem of a reason was the argument by foreign companies that Australia was a small market and therefore the cost of selling products here would be higher due to marketing costs.

The excuses are flimsy and transparently false. The Choice report states that these cumulative costs do not account for the doubling in prices for IT hardware and software. Digital downloads from some foreign multinationals are sold to Australians more than 50% higher than to US consumers.

Choice spokesman Matt Levey said:

Global companies [are] pricing these products at a point where they think people are going to buy it, regardless if that’s at parity with other countries.

They use a number of technological barriers to actually prevent Australians from accessing these products from parallel importing them and direct importing them from cheaper markets.

How to purchase directly from the USA

Many large US based online stores such as Lands End and L.L. Bean offer similar products to those available in Australia at quite amazing prices and provide international shipping.

But some companies utilise a range of practices to prevent international customers from purchasing directly from the USA. The company might reject the purchase based on the shipping address, the type of credit card used or because your computer is located in Australia.

Other factors you need to check on before making an international purchase are whether the product will work here and if the warranty will be supported.

To purchase directly from the USA it’s important to only use reputable mail forwarding companies and to read the fine print before any purchase. Mail forwarding has become a very competitive market so check competitor prices often.

To purchase directly from the USA follow these steps:

• Register with a company that provides a USA address and mail forwarding. Examples are Shipito, MyUS, ForwardIt, and the Australian-based PriceUSA.

• Register with an international payment provider that provides purchase insurance, such as PayPal.

• If you wish to purchase on a site such as Ebay USA, set the USA address you have been provided with by the shipping company as your registered PayPal address and current shipping address.

Another hurdle to overcome is the use of geo blocking by websites such as Apple iTunes. Geo blocking is a recent move by global online stores to segment the world into markets and control access to products and pricing.

A recent article by Dan Warne on Australian Business Traveller provides a step by step guide on how to create a US iTunes account in Australia. Unfortunately if you also have an Australian iTunes account or sync over multiple devices, you may need to log out of one account and in to the other when carrying out updates or making purchases.

Another approach is to purchase US iTunes gift cards and have them shipped to you from the USA. You cannot use Australian iTunes gift cards (available from stores such as Coles and Woolworths) on the US iTunes website.

Why the Australian government has to act

I have written in the past about the mobile phone data plan rip-off and the international roaming rip-off. The common theme here is that international multinationals consider Australia to be affluent and therefore a target for overpricing.

The Australian political mantra that free trade and low tariffs will be to the Australian consumer’s benefit is obviously not working.

Choice’s three recommendations to combat international price discrimination are:

1) Educate consumers through government initiatives so people know their rights when shopping online – particularly in relation to returns and refunds, accessing legitimate parallel imports from foreign markets, as well as privacy and security.

2) Investigation by the Federal Government into whether technological measures enabling suppliers to discriminate against Australian consumers, such as region-coding or identifying IP addresses, should continue to be allowed.

3) Keep the low-value threshold (LVT) exemption for GST and duty on imported goods unchanged at A$1,000.

It seems Choice has advocated a softly-softly approach to solving the problem of high IT prices in the hope that the Australian government may take baby steps toward solving this problem. I fully support what Choice is advocating, but Australians need to demand more urgent and immediate steps to stop multinationals from price gouging.

Further Reading:

• Verizon Wireless vs Telstra: the great mobile rip-off continues
• Are Australian international roaming charges the greatest rip-off in history?