Government To Subpoena Tech Companies On IT Pricing

In Parliament today, the IT Pricing Inquiry reported back on the state of pricing in Australia, and discussed its disappointment with major tech distributors in this country. According to Paul Neville, the Deputy Chair of the committee, there has been a general "reluctance" amongst distributors to engage and discuss issues surrounding price, to the extent that the committee is now planning to Subpoena major tech companies in Australia.

"They have been difficult," said Neville. "There seems to be reluctance to get involved in the enquiry even after direct request.

"We're not going to accept that and we expect a better level of commitment from the industry."

Neville stated he was reluctant to use the committee's power of subpoena, but there was a catch-22 situation. The committee has been asked to report back on the issue of price, but very few companies are willing to discuss it openly.

More: Beating The Australia Tax: Can The Government Do Anything To Stop It?

According to the committee, many of the excuses being used by major tech companies — such as the geographical position of Australia relative to the rest of the Western world — are no longer acceptable, particularly when it comes to digitally distributed products. At this point, claimed Neville, we should be "taking a firm stand on it".

Neville also took aim at the act of geo-blocking, a practice he called "unacceptable".

Hopefully this will — at the very least — force local tech distributors to open up, with regards to their local pricing policies.

Image courtesy of Shutterstock.

Also: Why Everyone Is Deluded About The Australian IT Pricing Inquiry


Comments

    To be honest a lot of the tech pricing now compared to last year seems to be a reasonable difference to US pricing.

    Can we have an inquiry into petrol pricing? Now that's rediculous...

      Try comparing what we pay for petrol with other countries. The US, from memory is far higher.

        you are so wrong on that...current average US price is USD$3.20 a gallon...1 gallon = 3.7 litres = USD$0.86 a litre

          Where in the US is petrol $3.20 a gallon? It might be $3.20 before taxes but I was there about this time last year and I don't think we bought petrol for less than $4 a gallon anywhere in the south-west (California, Arizona, Nevada). And remember, their premium petrol has the same RON as our regular unleaded, so you need to compare the price of premium to our regular for an accurate comparison.

          We definitely have some of the cheapest petrol in the developed world. It's more than $2 a litre in Europe and not much cheaper than that in NZ, for example.

            That's incorrect. Our 98 RON is eqv to their 94...so basically they are only one point below.

            I'm actually from Canada originally and for RON 95...it's 1.19CAD/L including taxes. Where the CAD is actually lower than the AUD.

            I'd be more interested through in looking at car price differences.

            BMW M3 starts at 185K AUD...where in the US it starts at 60K USD...even with taxes it is still easily below 70-75K USD.

            Nissan 370Z is almost 2x the price in Australia compared to US, ditto Subaru STI, Mitsu Evos, Nissan GTRs, etc.

              +1 car prices in Australia are ridiculous compared to the US. The biggest scripe i have is how companies justify themselves by Australia's isolation when many of these products are now produced in Asia? Significantly closer to Aus than the US.

                We tax the crap out of import cars though with a pathetically low "luxury car tax" that puts a lot of pedestrian cars in the luxury bracket.

                Apparently a $60,000 car is a luxury item that needs to attract a higher tax rate, while you can buy a million dollar yacht and just pay regular old taxes.

                  the luxury car tax is only like 23% so that does NOT account for the price differences for most cars.

        The US might "sound" higher, but they pay per larger quantity.

        Current average petrol price in Washington for example is $3.567 a gallon.
        Given a gallon is 3.785L, that's $0.94 a Litre.

        Sure, their petrol is a bit crappier than ours because they use MON as a quality measurement instead of RON, but it's a hell of a lot cheaper. When was the last time petrol in Aus was below a dollar? 2003?

          You also have to factor in the average wage into that. The best way is how much of a percentage of the average wage in each country (in this case Australia vs US) would 50 litres cost.

          Can't remember what African country (was a long night last night, not much sleep) but there fuel price was < 50c a litre. But the average wage was < 100 a week. It's not difficult to see a larger proportion of your weekly wage would be directed to fuel in that country vs here.

          Off the top of my head (read a study on this that was published a year ago approximitely) Australia was actually more affordable for fuel vs the US and several other European Nations.

          Can't be stuffed doing the math right now. Just look at average wage, devise by 52 to get your weekly wage. Look at average fuel price and multiply by 50. You then have the average weekly wage and average price for 50 litres of fuel. From that find the percentage of your weekly wage devoted to fuel and presto. You have an easy measure on the affordability of fuel in each country.

          P.S in Australia the average wage is something like $72,000 (approx) and America it is $36,000 (from memory)

            Given the price is actually dictated by global demand, the wage argument has nothing to do with it. Our supply is basically contstrained by a cartel.

              If that were true then countries where it is stupidly expensive or cheap would not exist. Wages play a huge roll, as it determines a business's operating expenses as well as determines the buying power of the consumer

              The housing market is a perfect example. It is driven by supply and demand and priced largely off what the consumer has the spend. In times of economic down turn prices go down as purchases have less money available to spend

              The Crude oil price is dictated by global demand, and influences. The retail price of fuel is driven by national demand and influences!!

              Last edited 29/10/12 1:43 pm

                Also, there are more hills in America.

                  And more snow in Greenland. And more lions in Africa.

                  Point being?

            That's BS.
            Explain to me why Portugal has one of the lowest average wages in Europe and the gas price is around 1.5 Euro per Litre.
            It's cheaper to drive to Spain to fill your tank.
            Also cheaper to buy a car in Spain, and pretty much all over Europe.

              As a guess Spain is cheaper due to low taxes and/or low demand. Just look at the state of the Spanish economy. It's in ruins with unemployment up at 25%. Even higher for younger adults.

              The amount of tax plays a roll as well. In Australia we pay more tax per litre then the US yet out petrol is cheaper per litre as a percentage of your wage. Would you rather spend 4.9% or 6.2% of your wage?

              You will also find in Germany that Petrol is more expensive then Desiel. Also it's commonly cheaper across the border in Holland vs Germany.

              The price of fuel is a complex issue. It comes down to tax, subsidies, business operating expenses, customer demand, customers disposable income and the national economic situation. Then that is influenced by the oil prices and exchange rates. Which those are influnced by international supply and demand, strength of the global economy and ability to produce the oil.

              Having a quick look at http://www.fuel-prices-europe.info/ it seems Spain are very unique comparitive to other Western Europe nations (especially those in the European Union). Not surprising seeing their economic state. It shows Portugal at €1.809 a litre.

              Also surprisingly Germany is now cheaper then holland. Last time I was over there it was the opposite (had been for some time according to locals). Looks like holland may of raised their taxes or something.

              The fuel prices seem relatively simmilar across most nations. Europe is a bit different to Australia in the terms of pricing due to so many neighbouring countries. This effects the buying power as well as the wages (across most of the EU the average wage is similar) and the way a business would factor in all the external influences for pricing.

              My point was comparing Australia to America. I will tonight look at Australia vs Europe (mainly the EU member countries) and apply the same formula.

              As I said the price of fuel has many many external and internal factors to consider.

      I think the price of petrol is a bad example because its a highly taxed product like booze or smokes.

      Yes, how about we do just that and then see the GLUT of a tax the Australian Government has per litre. I work in the industry and the local refiners are lucky to make 1.5c per litre profit (after manufacturing costs), while the Fed Government takes home a whopping 62c/ltr inc GST at the pump...

      The tax on fuel is an absolute FARCE.

        Very true. Our fuel is stupidly taxed vs what we pay vs the rest of the world. To be perfectly honest I'm surprised the prices aren't higher considering the amount of tax paid per litre.

    This seems at odd with the desire of the government to allow smaller online purchases from overseas to attract gst...

      Easy. Force big business to sell for less, and force overseas prices up (via GST) to make local resellers competitive. Not the best policy, as we will loose out overall...

      This request is from a special federal Senate committee, which has members from the government and the opposition, which is why it could be inconsistent. That being said, the federal government (aside from the Productivity Commission) DOESN'T appear to want to do this. The NSW Government, on the other hand:

      http://www.gizmodo.com.au/2012/09/nsw-wants-to-increase-online-shopping-taxes/

    Good luck enforcing overseas company price gouging. Hows that going to work then..?

      Parallel importing. Break up the tech company's distribution rights. There will be a few enterprising individuals who can do something without the threat of legal injunction.

      But a lot of hardware these days is pretty comparable. We just need to break down the software distribution racket.

    Games pricing is actually gettign better these days.

    JB rasrely sells a new release above $79 now. Even Halo 4 is coming out at $69. Which after you add taxes to the US pricing, that's pretty much what they pay.

    Petrol pricing is a MAJOR issue though. We pay almost double what the US does.

      No we don't, we pay a little more but the US has the lowest petrol prices of any developed country. The price difference is grossly distorted by the excise rates in each country. In the US they pay less tax on a gallon than we pay on a litre. Depending on what source you read, we are either paying about 72c a litre in excise and tax or 38c+GST, whereas in the US they pay only about 5c a litre in excise, plus state taxes, which would add no more than another 10c or so. So we are probably paying 50c-60c a litre more overall in taxes, ye tour fuel is only marginally more expensive.

      Last edited 29/10/12 12:48 pm

        I'm sorry, but your actually really wrong on this. US fuel is actually heavily subsidised by the Govt over there and works out to being just under a $1 a litre (on the East and West coasts). Obviously because its subsidised, its not comparable to here, so your overall point stands.

    Agreed with above: by and large tech has dropped to reasonably acceptable pricing, at least for consumers. I don't know about corporate pricing though, maybe that's different?

    However the prices for digitally distributed material such as software, music and video are absolutely ridiculous.

      Not surprising, oil is a primary industry for the US, they have/had a number of established major oil companies and they have treaties/agreements in the middle east to import oil and low costs. Aus have to buy through the middle men.

        The majority of refineries in Australia (eg. caltex) do not buy middle east bitter crudes. They buy west africa and pacific rim crudes (sweet) - so, no there's no middle man

          Wouldn't the oil producers be the middle men since we are only refining?

    While the argument is that US also pays taxes and the price we see, for comparison, does not include that tax; often the tax addition is less than the amount being put on top of our "tech". Besides.. these are taxes on goods.. not an avenue for extra profit that is taxed as income, as has been happening for years.

    The other argument is that Australia is a small market and we only are capable of buying a small amount.. yadda, yadda yadda.. but this is not true when it comes to digital.

    One thing I realised recently about region-locking is that it's not about the consumers buying it.. it's about distributors buying it. Take movies and tv shows for example. As a consumer, you will only buy it once.. whether you buy it from the US (e.g. Netflix subscription) or from Australia (Bigpond subscription, quickflix subscription etc), you're only going to buy it once. At the consumer level, there is no difference. However, at the distributor level, they've made two or more sales. They've sold it once to Netflix and again to Quickflix.. and again to Telstra and so on.. that's what it is all about. Not the consumer.

      So you would rather they entered into monopolistic agreements with just one distributor? And you think that would lower the cost to the consumer?

        Not at all.. I'm just pointing out that this has nothing to do with the reasons that they always give or the reasons that many people seem to think it is (that's a tax thing or a small market thing or some other thing).. in the retail space those arguments make sense.. but they're still not the whole picture..

    More lies and smokescreens from the Gillard Government to hide that fact that petrol is twice as dear, wages are twice as high, electricty and gas are twice as high. I had to return something to the USA by post a couple of weeks ago, cost me FIVE times what it cost the guy in the USA to post it to me. We get screwed deep in the a.. by Australian Government policy. High tech stuff generally isn't that much more expensive. More red herrings with an enquiry that will deliver nothing. How about petrol, electricity, gas, wages, rent..........nah, no action on those, but let's make a big fuss about $20 extra on an $400 ipod says Gillard.

    Did you not read my post at all?

    Will do the math for you

    Average weekly Australia wage according to the ABS is $1057. The average price of ULP in Sydney right now is 138.8. So 50 litres is $69.40. Now that works out to be 6.56% of your weekly income.

    For America the average weekly wage is $758. The average price of petrol is $3.566 a gallon.

      Given there are 3.785 litres per gallon that works out to 0.942US/c per litre. For 50L that works out to $47.10. as a percentage of the wage that works out to 6.21%

      As you can see the difference is minimal. Whilst the US wage is correct (758 x 52 = $39,416) the Australian wage seems low. It seems i have an incorrect figure. The correct weekly wage is 1,416 (1,416 x 52 = $73,632). With that in mind the percentage of your weekly spend in Australia is 4.90%.

      The reason i chose 50 Litres is to average it out. The end result would be the same for 1 Litre, 100 or 41.

      Its not to say petrol is cheap nor expensive. Just comparing Apples to Apples.

        I see you cherry pick petrol to make some sort of point about how we're really getting a good deal, you employed by the Government or something? Now do the same math for airfares, wages, transportation logistics electricity per kw, gas per MJ, International postage, shopping mall rents etc etc etc instead of cherry picking petrol. if you do the math on these too my point that we're being sc...ed royally locally remains. Last time I looked the economy ran on more than petrol mate.

          Rather than having a rant, why don't you actually provide some information and analysis to back up your opinion. nitrobuggies has gone to the trouble to rebut at least one of arguments with facts and analysis. Care to do the same?

          Ironically I'm actually writing a paper for Uni right now comparing and contrasting the costs of living between different countries.

          I love how when someone brings up a valid fact based point you immediately just trash it as I'm a government employee cheery picking information. I NEVER stated the costs of rent, food, car prices, etc etc were better here. I talked about one example, the refuted your claim and proved mine. I don't feel I should post my entire Uni work on here just yet. Whilst some things are cheaper in America (digitally delivered software as well as music, movies and TV shows) there are others where it is more expensive over there.

          The economy runs on so many different internal and external aspects that to explain international economics, micro and macro economics and finance in a comment on gizmodo would be insane. It would require at least 100+ pages for a simple fact driven article to explain most of it. Not worth my time (unless you wish to pay me, in which case I'm more then happy too)

      Seriously? You're using GROSS amounts and not NET? Income tax alone blows your argument out of the water. If you have children you can earn up to $65,000 and pay zero Federal income taxes.

        Considering the complexities of taxation and how it varies from single people to those with children etc. it's not as simple.

        But I will say this. In my quick search on taxation I just did. I have found the tax rates for middle to lower income workers in Australia vs the US (as that seems the most common place to compare and contrast too) is better here (ie we pay less tax as a percentage comparative to them). For higher income earners, its flipped and in America they pay less tax vs we do here.

        In my Uni paper I am also adding another table on the average take home pay (after tax) but as I stated this can vary wildly. But even from this data, my earlier data is accurate (as in its cheaper here)

    About damn time the government did something about this!

    How are we far away ==' most of the IT stuff are in Asia (China, Thailand, etc) . aren't we closer to Asia than like London? Ship us the stuff directly from the Asia warehouse. =)

      China (not including Hong Kong) pays the same as we do for tech.. unless you go under the counter and then anything is cheaper under the counter, so that's a moot point. With mainland China, you can't sell the stuff domestically. It first needs to leave the country (tax), then re-enter the country (tax) and then ends up the same price. This is why things are so cheap if sourced from Hong Kong because they have only had a single tax placed on them at that point. Don't know enough about Singapore or Taiwan tech markets to say anything about them.. but mainland China, where it's all made, pays the same as we do for most tech.

    Keep the Gov out of it. They MIGHT step in now and force resellers to charge the same price as in the USA for some tech stuff, but just wait until they use the same legislation to weasel in a tax.

    Meh, what about everything else. My car costed 150% more than it does in USA/Japan... And then there's the alcohol... $80 for a bottle of excellent spirits. Costs 1/2 that in the US/Europe.

      Adr testing drives the cost up quite a bit plus the fact you have to ship s car over not download it then extra tariffs and taxes and duties. A car compared to it isn't even apples and oranges it's apple's and washing machines.

    The Australian government has all the power and authority of a wet fish handshake from a convicted sex offender.

      Wow, you must really hate convicted sex offenders by comparing them with the Australian government, I always rate sex offenders a few rungs higher than government on the loathsome scale.

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