Australia to look at IT price gouging, but what can it do?

Listen for the single hand clap ...

After a year of lobbying by MP Ed Husic, the Australia government decided over the weekend that it will hold a parliamentary inquiry into retail pricing in the IT sector.

The art of plucking the Australian goose has been laid bare ever since the Australian dollar overtook the greenback – and suddenly, faced by products that were still offered at a premium over US retail rack prices, the goose began hissing. But it’s taken more than a year for the ruckus to draw a direct response from Canberra.

In part, consumers can blame themselves for this: if you’re at the back of a four-hour queue for the newest device-with-an-i-in-its-name, complaining that it costs too much seems a little contrarian.

But mostly, Canberra’s inaction probably reflects the grim truth that there’s almost nothing the government can do about vendors’ international price discrimination.

It became even more notorious in Australia last week when Adobe took the wrappers off its new Creative Cloud offering: $US50 per month for Americans, $AU62.99 on this side of the Pacific. Part of the justification for this was, as told to ZDNet Australia, that the company had conducted “research that assesses the value of the product in the local market.”

Read that statement again: it succinctly – and perhaps with unwise honesty – backs up what any economist will tell you, that the price of the product is whatever a market will bear.

While the inquiry can’t change how vendors price their products, there is one way in which government could improve protection of consumers here.

It boils down to competition. The reason that Gerry Harvey is hanging around the parliamentary doorstep is that in the world of physical products, the Internet is bringing competition.

Software is, however, troublesome: control of the market isn’t merely a matter of controlling the channels, it’s also expressed by controlling the T&Cs. Parallel importation of nearly everything is explicitly protected in the Australian Competition and Consumer Act – including software.

But the Act was framed a long time ago; the provisions protecting the parallel market in software are more than a decade old, written in the days when software arrived on a CD in a box.

When, however, the product is a stream of bits, the Act offers very little protection against a vendor geo-locking its product, and enforcing that in its license.

The Australian government can’t forbid a vendor from writing its own terms and conditions – but, as we know from warranty law, the government can pass laws that limit the force of a vendor’s license.

If the inquiry can reveal or suggest any way to protect Australians that circumvent the geographic strangleholds that enable price discrimination, it will not be a waste of time. ®

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