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Stopping IT price gouging would risk SOCIALIST DYSTOPIA!

Vendor-land tells Australian competition probe to leave it alone with the pricing gun

In March 2013, Australia conducted a Parliamentary Inquiry into IT Pricing, in part to figure out why kit and content costs more down under than elsewhere. The Inquiry compelled representatives of Apple, Adobe and Microsoft to appear.

The latter two squirmed uncomfortably as they articulated arguments that they charge what the market will bear, as is their right even if it means local punters inexplicably pay twice as much as customers in comparably-wealthy nations.

Nothing came of that inquiry, partly because Australia's government changed. But the new government is pursuing similar issues with a Review of Competition Policy, to which the Australian Information Industry Association (AIIA) has made a submission on behalf of its members (which include Microsoft, Apple, HP, Adobe and others).

The submission (PDF) makes for interesting reading. As one would expect, the submission makes a case for exactly no more regulation of the IT industries than currently exists. Once discussion turns to international price differences, the submission says their cause can be entirely legitimate factors like local costs, be they for inputs or derived from regulation. The depth of local pockets also gets a mention, with an admission that prices can vary between nations due to “consumers’ willingness to pay and levels of demand/supply side substitution. Different geographic markets have different supply and demand characteristics, different customer and consumer demographics, and different competitive conditions, independent of costs, which affect price ...”.

The paper goes on to imagine what would happen if vendors were not permitted to set the prices they deem reasonable in Australia, in the following terms:

“ … there are efficient reasons that firms charge different prices in different geographies. To prohibit this practice risks banning legitimate price differences and forcing multinational firms towards uniform global pricing ...”.

It's not quite explained how little old Australia, population 24 million, could wag the dog for other larger economies. But let's move on to the next bit, about the other possible effects of regulations aimed at stopping price gouging:

“... new legislation that limits firms’ ability to control prices could also cause foreign suppliers to abandon or decide not to enter the Australian market, resulting in less competition and less choice for consumers in Australia. Likewise, Australian suppliers could also be discouraged from entering overseas markets, or be constrained from pricing competitively in an overseas market – putting them at a disadvantage vis-à-vis their overseas competitor”.

The next paragraph suggests that even if, by some twisted reasoning, government came to the conclusion that it was a good idea to clamp down on price gouging, it would be too much bother to do so. Her's the argument:

“Even legislation targeted at ‘unjustified’ international price discrimination would likely deter legitimate and pro-competitive conduct. Such a provision would be inherently difficult to implement and enforce, due to the many factors affecting price levels in any geography. The resulting uncertainty and the perceived risk of having to provide sensitive and voluminous business records to the government could deter firms from implementing legitimate and pro-competitive price differences, or from participating in the Australian market at all.”

In other words, let us charge what we want or your industry gets it, or thrives in the robust way that would happen beneath the heel of an oppressive one-world government.

Australia is not the only jurisdiction where punters are charged more than counterparts in similarly-wealthy jurisdictions and while some variations are fair enough due to local variations in costs, the differences are often startling and/or inexplicable. Throw in the fact that many vendors operate legal-but-galling tax minimisation practices and it is not hard to see why consumers and business buyers alike are angry.

The AIIA's submission will do little to quell those emotions. ®

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