Adobe Australia managing director Paul Robson fronts the inquiry. Photo: Alex Ellinghausen
The Australian bosses of Microsoft and Adobe have been accused of being “evasive” by MPs conducting an inquiry into why Australians pay in some cases hundreds of dollars more than those in the US for identical products.
Microsoft Australia managing director Pip Marlow and Adobe Australia managing director Paul Robson on Friday afternoon both struggled to convince the MPs conducting the inquiry that added costs of doing business in Australia justified charging up to 70 per cent more for their software.
The content industry still runs with perhaps old-fashioned notions of country borders or territories or markets.
Apple Australia boss Tony King
Both companies pointed to prices of newer web-based subscription versions of their software, which are priced more fairly in Australia. But they could not justify why huge premiums were warranted for the full physical and downloadable versions of the software.
Tony King: Apple’s vice president for Australia, New Zealand and South Asia. Photo: Matthew Jc. Powell
Labor MP Stephen Jones suggested the move to subscription software was placing “digital handcuffs” on users, forcing them to keep paying to continue accessing their files.
“You’ll charge as much as the market can bear,” said Mr Jones, rejecting Ms Marlow’s assertions that the market was highly competitive.
Microsoft Office Professional 2013 costs $599 in Australia and $US399.99 ($A383.54) in the US, for instance. “Microsoft can charge what it likes and the small businesses of this country have to pay because there is little alternative,” said Mr Jones.
Pip Marlow: Microsoft Australia managing director.
Ms Marlow said: “If we price our products too high our customers will vote with their wallets and we will see our sales decline.”
Earlier on Friday at the IT pricing inquiry in Canberra, Apple Australia boss Tony King blamed “old-fashioned notions” of record labels, movie studios and TV networks for inflated prices of digital media paid by Australians on the iTunes store.
Apple, Microsoft and Adobe were summonsed to appear after being accused of stonewalling the inquiry into why Australians pay more for equivalent goods than those in the US.
Labor MP Ed Husic at the inquiry. Photo: Alex Ellinghausen
While claiming prices of Apple’s products were largely comparable with the US, for digital media Mr King said rights holders were to blame for mark-ups that can be over 70 per cent.
“The pricing of this digital content is based on the wholesale prices which are set through negotiated contracts with the record labels, movie studios and TV networks,” said Mr King, who is Apple’s vice president for Australia, New Zealand and South Asia.
“In Australia, they have often set a higher wholesale price than the price of similar content in the United States.”
Mr King said in the digital age “the content industry still runs with perhaps old-fashioned notions of country borders or territories or markets”. He said this “creates confusion for customers” and Apple had pushed in meetings with content owners for lower Australian pricing.
He said the price of digital content sold on iTunes in Australia was “comparable to other Australian physical and online stores” and this indicated competitors were offered similar wholesale pricing.
Labor MP Ed Husic, part of the committee conducting the inquiry, questioned whether it was true that Apple, one of the largest companies in the world, was unable to influence the price of digital content in Australia. Mr King maintained “the cards are in the hands of the folks who own the content”.
Consumer group Choice looked at more than 200 hardware and software products and found Australians pay on average 50 per cent more. This includes a 70 per cent mark-up on AC/DC album Back in Black on iTunes, while a copy of Adobe’s CS6 Design and Web Premium suite costs $3175 in Australia versus $US1899 ($A1820).
“There is no justification for Australians paying more than consumers in the United States for identical products,” said Choice head of campaigns Matt Levey.
Mr King said Apple’s goal was to offer equivalent pricing around the world, and taking into account daily exchange rate volatility he did not believe Apple product prices in Australia were materially different from Apple products sold in the US.
MacStories blogger Graham Spencer has calculated that Macs, iPads, iPods and iPhones are marked up between 3-10 per cent on average between the US and Australia, with some iPhone models marked up closer to 20 per cent. The calculations account for tax and currency differences between the countries.
But movies, music and film sold through the iTunes store are marked up from 30 to more than 70 per cent.
Mr King said it would be “unduly complex” and “confusing” to continuously adjust product prices in line with currency movements. He said based on last week’s exchange rates the average difference in price on Apple’s entire range of Mac, iPhone, iPad and iPod products was on average just 5 per cent.
Mr King said in addition to currency and tax differences, when setting prices Apple also had to consider “differences between countries in product costs, freight charges, local sales taxes, levies, import duties, channel economics, competition and local laws regarding advertised prices”.
The Productivity Commission and Choice have previously said none of these factors justify such significant price differences generally across the industry. Mr Husic, part of the committee conducting the inquiry, has accused multinational technology companies of gouging Australians simply because they can.
The Department of Broadband of Broadband, Communications and the Digital Economy said in its submission that the primary cause of higher prices paid by Australians were “decisions by international distributors”.
Apple sold its first computer in Australia more than 30 years ago and now employs 2600 people here, including staff in its 18 Australian retail stores. Apple said there were now more than 160,000 app developers in Australia.