When the price is not right: technology price gouging in Australia

Apple Inc. has often portrayed itself as the champion of consumers, with its advertising campaigns on “1984”, “Think Different”, and “Rip, Mix, Burn”. However, this reputation has been called into question…

When it comes to IT products, Australian consumers pay more than their American counterparts. AAP

Apple Inc. has often portrayed itself as the champion of consumers, with its advertising campaigns on “1984”, “Think Different”, and “Rip, Mix, Burn”. However, this reputation has been called into question after Apple refused to appear before the Parliament’s inquiry into IT Pricing in Australia and explain its pricing policies in Australia.

Apple is not alone. Adobe, Amazon.com, Nintendo, Lenovo, and others have come under criticism for price discrimination in Australia. Furthermore, there has been a concern that information technology companies have engaged in a deliberate strategy of stonewalling the Australian Parliament. CHOICE Australia has provided compelling evidence to the inquiry that Australian consumers suffer from significant and unjustified price discrimination - particularly in respect of music downloads from iTunes, PC games, console games and computer software. For instance, Apple has been selling AC/DC’s complete collection on iTunes for $229.99 in Australia - but only $149 in the United States.

Given the evidence presented to the inquiry, there is a need for a range of legislative and regulatory changes to help stop unjustified price discrimination against Australian consumers of digital products. In particular, there is a need for reforms to copyright law and disability law, as well as action under Australian consumer law and competition law.

Copyright law and consumer rights

Ed Husic MP discusses the IT pricing inquiry on The Drum

Since Federation, Australian consumers have suffered the indignity and the tragedy of price discrimination. From the time of imperial publishing networks, Australia has been suffering from cultural colonialism. John Keating complained in the Australian Parliament that import monopolies resulted in “blackmail”.

In respect of pricing of copyright works, Australian consumers have been gouged, ripped-off, and exploited. In the Cook Books case, Justice Lionel Murphy lamented that parallel importation restrictions were being used to raise the prices of copyright works: “Copyright is being used to manipulate the Australian market.”

Digital technologies have not necessarily brought an end to such price discrimination. Australian consumers have been locked out by technological protection measures; subject to surveillance, privacy intrusions and security breaches; locked into walled gardens by digital rights management systems; and geo-blocked.

In the Sony Mod-Chip case, Justice Michael Kirby feared that digital rights management systems also had an anti-competitive effect:

“In effect, and apparently intentionally, those [technological] restrictions reduce global market competition. They inhibit rights ordinarily acquired by Australian owners of chattels to use and adapt the same, once acquired, to their advantage and for their use as they see fit.”

The Australian Recording Industry Association appeared before the Committee, and made an emotional case about the threat posed to the music industry by copyright piracy.

In response, Ed Husic MP observed: “If you are on the one hand trying to pitch at an emotional level to stop piracy, what do you reckon consumers think when you then use price discrimination to justify the way the costs are structured here in Australia?”

Amazon.com and access to knowledge

Cory Doctorow discusses E-Book Pricing at Bloomsbury’s London Office

There has been much concern about the ownership of digital products bought from Amazon.com. Linda Morris captured this sentiment with her piece, “No such thing as ownership when it’s an e-book.”, in which the position of readers was compared to that of tenant farmers.

In a pithy submission, Andrew Leigh MP lamented the technological restrictions on the Amazon Kindle. He emphasised the need to take into account larger considerations about access to knowledge: “Access to the world’s knowledge is as important as access to the world’s music, and Australians have a right to be treated equitably by Amazon.com.”

The author Cory Doctorow commented upon the problem of digital rights management (DRM) in respect of Amazon: “The Kindle is a “roach motel” device: its license terms and DRM ensure that books can check in, but they can’t check out”. He laments: “Readers are contractually prohibited from moving their books to competing devices; DRM makes that technically challenging; and competitors are legally enjoined from offering tools that would allow readers to break Kindle’s DRM and move their books to other devices.”

The book famine and disability rights

Ruth Okediji interviews Chris Friend of the World Blind Union (WBU)

Article 30 (3) of the United Nations Convention on the Rights of Persons with Disabilities (2006) provides that ‘States Parties shall take all appropriate steps, in accordance with international law, to ensure that laws protecting intellectual property rights do not constitute an unreasonable or discriminatory barrier to access by persons with disabilities to cultural materials’.

In June 2012, the disability commissioner Graeme Innes encouraged the Australian Government to address this issue. He observed that only 5% of all books produced in Australia are published in accessible formats such as large print, audio or braille, while in developing countries it is just 1%. He commented: “People with a print disability throughout the world are currently experiencing a "book famine”, yet the Australian government has failed to take action that could change the situation.“ He observed: "Australia could lead the change to international law in this area and, at little cost to us, provide the opportunity to read to millions more people with print disability throughout the world.”

Wayne Hawkins, the disability policy advisor for ACCAN, appeared before the committee. He commented that “there is a significantly higher impact on vulnerable consumers and particularly consumers with disability”.

He observed that “the assistive technology that people like myself—people who are blind—use such as the braille readers, braille displays, are considerably more expensive in Australia”.

It is time the legislation was introduced to put an end to these discriminatory practices under copyright law, and related fields.

There needs to be greater effort to pass a Copyright Treaty for the Blind at the World Intellectual Property Organization.

Consumer law and the digital economy

Rod Sims of the ACCC on consumers, competition, and regulatory issues

In 2012, the current chairman of the Australian Competition and Consumer Commission Rod Sims emphasised that one of his key priorities was addressing the challenges of the digital and online economy.

Sims observed: “The two main challenges – for the ACCC - are: 1. Ensuring consumers enjoy the same protections in the digital and online economy as they do elsewhere; and 2. And, crucially for competition, ensuring the digital and online economy produces the benefits of new and innovative competitors to challenge incumbents that it promises, and that this promise is not eroded by anti-competitive conduct.”

The ACCC have been involved in a number of high-profile consumer law disputes with Apple, Google, and Optus. The Commission also made some cautionary remarks about Facebook and advertising standards. The ACCC has also taken firm action against companies engaging in misleading and deceptive carbon price hikes.

The ACCC should build upon its success investigating cases of misleading and deceptive advertising by IT companies by also considering issues of price, the terms of access to a particular product or a particular service and the need for international warranties.

Rod Sims has warned that the ACCC will take legal action if vendors lie about the reasons for price discrimination against Australian consumers.

Competition Law, Mergers, and Conspiracies

In light of alleged overseas conspiracies involving price fixing by Apple and large multinational publishers, there is clearly a need for the ACCC to investigate whether there have been any such restrictive trade practices in respect of information technology products in Australia.

On the 11th April 2012, the United States Department of Justice filed an antitrust lawsuit against Hachette, HarperCollins, Macmillan, Penguin and Apple Inc. over the pricing of e-Books. The Department alleged that the defendants had conspired to raise retail prices of E-Books in violation of Section 1 of the Sherman Act. United States Attorney-General Eric Holder noted: “As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”

There is also a need to consider the impact upon consumers and competition of mergers of large content providers - such as that between the record companies Universal and EMI; the publishers Penguin and Random House; and Disney and Lucasfilm.

The Trans-Pacific Partnership and Parallel Trade

The Trans-Pacific Partnership

Parliament should make reforms to copyright law, disability law, consumer law, and competition law in order to address the problem of discriminatory IT pricing in Australia.

In addition, there is a need to ensure that trade agreements such as the proposed Trans-Pacific Partnership do not harm the interests of Australian consumers in obtaining a fair price for digital products.

Sean Flynn of Information Justice has warned that the United States Trade Representative has been pushing for parallel importation restrictions. He notes: “The issue of parallel trade arises because rights owners desire the ability to segment markets and determine their own prices and policies for entry into each market”.

There is a need to ensure that the Australian Parliament’s IT Pricing inquiry is not undermined or subverted by the Trans-Pacific Partnership.