Friday, 19 August 2011 16:39

Apple by no means the worst Aussie price gouger, Mr Husic


On Wednesday evening, Federal MP Ed Husic spoke on the relatively high prices charged in Australia for IT products, saying he'd been "snubbed" by Apple Australia despite being promised a personal response from MD Tony King. That seems to have done the trick - a meeting is back on the cards. But is he talking to the worst culprit?

There's no question that some companies charge a lot more for some products in Australia than they do in other countries, especially the US. It's also clear that the widespread use of the Internet has made these price differentials obvious to a larger proportion of the population.

Mr Husic provided several examples in his speech to the House of Representatives on Wednesday evening, highlighting products from Apple, Lenovo, Microsoft and Adobe. He described as "incredible" the way Adobe Creative Suite costs $US699 or $A1200.

Australian small businesses and families "should not be fleeced for the sake of Silicon Valley's bottom line," he said, and called for a formal enquiry by the ACCC.

The Sydney Morning Herald now reports that Mr Husic has been contacted by Apple Australia, and is trying to find a mutually convenient time for him to meet with Mr King.

While there are cases where Apple's local prices seem out of whack with those charged in the US, the MacBook Air is not the best example to cite. The US price for the basic configuration is $US999. Convert that to Australian dollars and add GST (sales tax isn't included in prices quoted by US retailers), and the result is $A1060. The local price is $1099, which is a lot closer to $A30 extra rather than $A300.

How do other Apple prices compare? See page 2.

And the same exercise applied to the US price of the top-end MacBook Air configuration gives $A1698 compared with the actual local price of $A1799.

Then there's the iPad 2. The US price is $US499 ($A530), compared with $A579 locally. So we're talking about differences of less than 10%

Part of the problem appears to be that companies are reluctant to vary prices in line with exchange rates, which have seen some fairly wide and sudden fluctuations recently. That makes some sense - while we're used to the price of fruit and veg changing from week to week, I'm not sure that buyers or retailers would be especially happy if that happened with hardware and software.

Also, it seems to me that there is a reasonable case to be made for some prices being slightly higher here than in the US. After all, retail wages and various other costs do seem to be higher in Australia.

Mr Husic quoted the Productivity Commission's recent report on retailing as saying that the arguments for international price discrimination as being "not persuasive, especially in the case of downloaded music, software and videos".

It's hard to argue with that, but as far as music and videos are concerned, Mr Husic seems to be pointing the finger in the wrong direction. The problem appears to be the way rights are parcelled up for different geographic markets, which effectively prevents international retailers like Apple and Amazon from charging consistent prices around the world.

After all, Apple does effectively control relative prices in the App Store and Mac App Store, as it sets the price tiers that developers can nominate. So the highly popular Angry Birds costs $A0.99 or $US0.99 (equivalent to $A1.05). Nothing there for Australians to complain about.

What about more expensive software sold by Apple, and prices charged by the other companies Mr Husic mentioned? Please read on.

It's the same story at the other end of the price range. Final Cut Pro X costs $A319 from the Australian Mac App Store, and $US299 (equivalent to $A289 $A316) in the US.

So let's take a look at a couple of Mr Husic's other examples.

Microsoft Office 365 costs Australian subscribers $A7.90 per user per month for Plan P (the basic personal and small business offering). Americans pay $US6 (equivalent to $A6.38). That's for exactly the same service delivered from the same company's data centres (and Microsoft has no data centres in Australia).

The higher-end E3 plan is $A40.10 in Australia and $US24 ($A25.53) in America. Now that is a serious difference. What changes if you buy Office 365 here rather than in the US? Instead of paying Microsoft directly, you have to use Telstra as a middleman.

While Google Apps isn't directly comparable with Office 365, at least Australian customers can deal direct with Google and pay the same prices as their US counterparts.

As for Adobe Creative Suite, it's really hard to account for the difference. CS5.5 Master Collection is priced at $US2599 ($A2763) in the US, but a whopping $A4344 in Australia. Some costs may be higher here, but it seems to be that there's at least $1000 of vigorish being trousered by Adobe's local operation, and presumably a good chunk of that finds its way back to the parent company - or is it going into one of those offshore accounts that US companies want to be able to repatriate without paying the usual taxes?



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Stephen Withers

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Stephen Withers is one of Australia¹s most experienced IT journalists, having begun his career in the days of 8-bit 'microcomputers'. He covers the gamut from gadgets to enterprise systems. In previous lives he has been an academic, a systems programmer, an IT support manager, and an online services manager. Stephen holds an honours degree in Management Sciences and a PhD in Industrial and Business Studies.



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