Beating The Australia Tax: How The Parliament Wants To Stop IT Rip-Offs

It has been months in the works, but the Australian Parliament finally outed its recommendations into how the government can best tackle the so-called Australia Tax, therefore halting the tech rip-offs being perpetrated onto Australian consumers. Most importantly, will these recommendations work?

The 150-page report contains a total of 10 recommendations to the Government, ranging from education campaigns through to law reform. Here are the 10 recommendations as presented in the report (snap to the bottom if you want to see our take on whether they'll actually work):

Price discrimination and consumer impacts

Recommendation 1 The Committee recommends that the ABS develop a comprehensive program to monitor and report expenditure on IT products, hardware and software, both domestically and overseas, as well as the size and volume of the online retail market.

Recommendation 2 Considering the importance of IT products to education, and in the interests of greater transparency in this area, the Committee recommends that the Australian Government, in consultation with Universities Australia and CAUDIT, conduct a comprehensive study of the future IT needs of and costs faced by Australian Universities, in order to provide clearer financial parameters for negotiations.

Recommendation 3 The Committee recommends that the Australian Government consider a whole-of-government accessible IT procurement policy, to be developed by relevant agencies including AGIMO, and in consultation with relevant stakeholder groups including ACCAN.

Copyright, circumvention, competition, and remedies

Recommendation 4 The Committee recommends that the parallel importation restrictions still found in the Copyright Act 1968 (Cth) be lifted, and that the parallel importation defence in the Trade Marks Act 1995 (Cth) be reviewed and broadened to ensure it is effective in allowing the importation of genuine goods.

Recommendation 5 The Committee recommends that the Australian Government amend the Copyright Act’s section 10(1) anti-circumvention provisions to clarify and secure consumers’ rights to circumvent technological protection measures that control geographic market segmentation.

Recommendation 6 The Committee further recommends that the Australian Government investigate options to educate Australian consumers and businesses as to: • the extent to which they may circumvent geoblocking mechanisms in order to access cheaper legitimate goods; • the tools and techniques which they may use to do so; and • the way in which their rights under the Australian Consumer Law may be affected should they choose to do so.

Recommendation 7 The Committee recommends that the Australian Government, in conjunction with relevant agencies, consider the creation of a ‘right of resale’ in relation to digitally distributed content, and clarification of ‘fair use’ rights for consumers, businesses, and educational institutions, including restrictions on vendors’ ability to ‘lock’ digital content into a particular ecosystem.

Recommendation 8 The Committee recommends the repeal of section 51(3) of the Competition and Consumer Act 2010.

Recommendation 9 The Committee recommends that the Australian Government consider enacting a ban on geoblocking as an option of last resort, should persistent market failure exist in spite of the changes to the Competition and Consumer Act and the Copyright Act recommended in this report.

Recommendation 10 That the Australian Government investigate the feasibility of amending the Competition and Consumer Act so that contracts or terms of service which seek to enforce geoblocking are considered void.


Will It Work?

It's worth pointing out first and foremost that these are only recommendations at this point. The government isn't bound to change laws or go after Adobe, Apple or Microsoft with big sticks: it can ignore all the recommendations, enact some and dismiss others or enact all of them. It really falls to the government to decide.

Let's say hypothetically-speaking that the government adopts all of the recommendations: what are the results we'd see in the Aussie gadget buying market?

Recommendation 1 is all about studying the costs that Aussies pay for gadgets, and reporting back to the Australian Bureau of Statistics to keep track of potential offenders. Recommendation 2 would see a broad research program into the costs of IT procurement in universities so that they can save money, while Recommendation 3 sees the Australian Government Information Management Office work on a whole-of-government IT procurement plan for penny-pinching IT contracts.

We've already seen how well the Microsoft testimony from the IT pricing inquiry affected a recent contract negotiation, with the government already reportedly saving $100 million by signing on the dotted line.

Recommendations 3-7 is where it gets meaty: the Inquiry recommends that through various legal and practical means, the Government get serious about allowing the circumvention of geoblocking enacted by multi-national companies like Adobe (for example), so that Aussies can take advantage of cheaper prices offered overseas.

The Inquiry doesn't want companies to change prices in Australia, it just wants to make the strategy of gouging customers far less profitable in the long-run. If everyone knows how to beat a geoblock, companies are going to be both less likely to do it and earn less money from the gouge.

The real teeth in the report comes Recommendation 9, that encourages the government to flat-out ban the practice of geoblocking products in the Competition And Consumer Act and the Copyright Act.

In a world where all of these recommendations are actioned, the Australia Tax isn't smashed entirely, but it will be circumvented for the majority of Australians shopping online.

Now for the storm-cloud:

Even if the Government does decide to take up the recommendations set by the inquiry, it's a fair bet we won't see change for some time or even at all because of two small but incredibly important words: Federal Election.

The 2013 Federal Election is coming at us like a political freight train overloaded with derp, and there's no way we can escape it. The process of law reform takes months to complete, and with, at best, three months to the election, we're not about to see law makers start reforming Acts any time soon.

Secondly, before an election the government is put into what's known as "caretaker mode", which is tantamount to setting the country on auto-pilot while the major parties duke it out in Western Sydney to see who will become the next head honcho of the world's largest island. That auto-pilot procedure means that no new legislation can be passed, including law reform.

Plus, if there's a change in government at the Federal Election, the new government might not think this an issue worth tackling within the first 100 days of office, potentially seeing the report and its recommendations stuffed into a drawer for at best, a while, or at worst, forever.

What we're more likely to see in the next term of government is a serious crackdown on multi-national tech companies like Apple, Google and Microsoft whacked by the Federal Government for the lightness of their respective income tax cheques.

In his time as Chief Government Whip, Ed Husic MP took aim at multinational tech giants for allegedly dodging tax in the country, and seeing as how the purse-strings need to be tighter than ever these days in Treasury, it's likely that a campaign towards tax revenue recoupment and loophole-closing legislation change would be pursued above an agenda to radically crack-down on companies charging Aussies a bit too much for their tech because of the direct revenue implications for the country. Why spend money when you can make it, after all?

We might sound a bit defeatist here, but we don't want to take anything away from the extraordinary work done by the Parliamentary IT Pricing Inquiry and its members in delivering these 10 recommendations. On behalf of the gadget geeks of a grateful nation, Gizmodo Australia would like to thank Inquiry Chair Nick Champion MP, and deputy chair members, Paul Neville MP, Paul Fletcher MP, Ed Husic MP, Stephen Jones MP, Rob Oakeshott MP, Jane Prentice MP and Mike Symon MP.

Your work is appreciated.


Comments

    Nicely done, Luke. That was a big document to chew through quickly.

    Recommendation 7 seems pretty odd to me. If the Australian government decides to start telling businesses how it can "lock" content to try and remove the ecosystems, those companies might decide to just stop selling in Australia. Apple doesn't sell phones and computers, it sells an ecosystem which those things exist in. If the government is telling us how to get around geoblocks, then Apple could do this without even losing all of it's Australian revenue.

    Last edited 29/07/13 12:40 pm

      It's actually detailed within the document. The example is given of something like the DRM on books on a Kindle - you can't move a book from a Kindle to an iPad, a Nook or a Kobo without using some sort of Kindle app. They want to limit anti-competitive behaviour when it comes to the mobility of your digital purchases, preventing you from using your products to their fullest extent if you leave a particular ecosystem.

      The Committee heard evidence to suggest that in order to increase competition, some mobility in digital markets is necessary. Dr Suzor and Ms Dootson suggest that in order to ensure that distributors do not engage in anti-competitive behaviour, it is critical to limit their monopolies:
      Consumers should be able to access digital content from a range of suppliers, and creators should have a range of distribution channels available to them.

        Heres one - the government allowing you to buy steam games using a VPN. Steam will ban you for that right now...but with the governments intervention maybe this can be reversed?

          steam bans you? i buy russian keys and activate using VPN ALL THE TIME

            They Ban you if you do it wrong.
            If you do it right there is no way for Steam to KNOW that you did it in the first place.
            But yes they can ban you, You would however be able to email them and ask your ban to be lifted I would imagine.

              this is why i have 12 steam accounts

              one for each MP game and another for free games and another for games that i are primarily SP focused

              because ive been banned for something stupid like a custom fps OSD DLL injected tool and they thought it was a hack.

              Luckily the rest of my games were unaffected because they are in separate accounts

              and you can share the same email address too.
              Just keep an excel list of usernames

        That's actually the perfect example. What if, as a result of this, publishers decide to either stop releasing books on Kindle or raise prices to make up for the fact that Kindle books aren't as secure as they used to be? Who wins then?

          I agree. And if Australia enforces the right to resell digital content, businesses are given an immediate reason to either cease trading in Australia or justify increased prices.

          In most cases, most of these aren't a problem for big business. The problem is just if these rules contradict business models

            Because used cars are what kills car manufacturers?
            Digital content being a little different in that it doesn't require maintenance per-se, but it is still "used". No different to how Amazon operates, when you jump on there you can select from new, or used product.
            Last time I checked, Amazon were still one of the largest online retailers.

      Parliamentarians... their lack of understanding of the whole game of parallel importing infuriates me. They claim to love it so much, but the regulatory landscape in this country makes it so difficult for Australian companies to actually DO parallel imports that its fast becoming unviable. They say they support them, but then enact ridiculous laws like the new EESS regime which places huge costs and impost on Australian parallel importers.

    The price of the Xbox One suggests Microsoft seem to be doing SOMETHING right.

    After you convert the $499US to AU, you get around $540AU (who knows what our dollar will be around November), add in the 10% GST and you get $594AU. "Australia Tax" of a mere $5AU.

    Pretty damned good start if you ask me.

      I'd rather pay a bit more for the console up front, than $100AU vs $50US for the games. This is the outrageous gouging that really gets my back up.

      $5? you mean $54

        No, that's just tax. "Australia tax" is the extra companies charge us just because we're Australian.

        Also the US price is BEFORE their states sales tax, so in the end the gap is smaller.

        No no, $4.

        After all conversions and taxes, we're being charged an "extra" $4 than we should be. By then it could actually be less. In fact, if our dollar drops further, we could work out winners technically.

      I think that price was set before we dropped below parity. Either way it is a lot closer that what the PS3 and 360 were at their launches. Also the Sony PS4 is $100 cheaper in the US but is only $50 here. So that comparison alone MS is a doing a lot better.

        Yeah if the rumours of the PS4 being a region free Blu-ray player are true, I'll just get my brother in law to bring me back on from the US. Save myself almost $100.

          PS4 will be 'region free' in that regioning will be left up to the publisher (same as PS3) but the Bluray drive will be region locked for movies (same as PS3).

            Ok, weird. Lifehacker had a comp[arison or a breakdown o something not long ago and mentioned both the Xbox One and PS4 were region free Blu-ray players, which of course I found strange at the time, so I'm hoping we get some definitive answer on that before year's end.

              There is already a definitive answer, which is that it's region locked for discs that are region locked (region locking BD is up to the publisher and many discs are not region coded). It's part of the Bluray standard. Either Lifehacker misreported it or you're conflating the fact that both have Bluray players and both are 'Region Free' for games.

              Note that neither system is actually region free. Instead it's left up to the publisher to decide. This is actually different to PS3, which was actually unregioned for many years but had a publisher-side regioning system stealthily patched in a few years ago, which thus far has been used to lock a single game (Persona 4 Arena). X360 has an optional regioning system as well. So basically the two new systems are continuing the status quo from the previous iteration.

                Ok, but with the Lifehacker story, they definitely listed "Region free Blu-ray player" for both. I'm aware of all the rest of it. I know how it all works.

          @shpeshal_ed the Xbox One is "region free" as well but for both system as @negativezero said only applies to games not the BluRay drive for that you need to bring back HD-DVD that was region free. Also the PS4 is able to be region locked for downloadable content like the PS3 was. Not sure on the Xbox One.

          That said Army of Two on the 360 we had the Europe version of the disc and there were 2 copies of the DLC. The US and EU. But again the 360 had region locked games which it doesn't now with the Xbox One so who knows.

    That the Australian Government investigate the feasibility of amending the Competition and Consumer Act so that contracts or terms of service which seek to enforce geoblocking are considered void.

    I wonder how effective such measures around "banning" geoblocking would be on their own? It's never an Australian company geoblocking us from accessing content, it's always a foreign company eg. Netflix. Having a law in Australia to say "You can't stop Australian's from buying stuff" won't really do much if the company is based in the USA.

    I have to say I'm quite disappointed this hasn't covered off other imported items. For example, Levi's jeans. You can't buy them from the USA because they don't let you, you're forced to buy them at the higher price here in Australia. Worse still, with Levi's, they don't actually offer all the sizes and styles in Australia, so you can't buy them in any case because of the restrictions in place. I don't see anything here that would stop that from continuing, it's no a copyright issue, it's a business term issue.

      I suspect what it's specifically referring to is the possibility of prohibiting companies like Adobe restricting Australian access to purchasing through those sites if they choose to operate in Australia as well. Netflix isn't restricting our access to content, it just doesn't operate here, so the anti-competitive practices the committee is targeting are centred around the content's publishers rather than the company distributing it. No Netflix in Australia charging us a premium, no problem.

        The trouble there is that many of those measures are about protecting Australian jobs. Would you be OK losing your job if it meant a few thousands businesses could buy their software incrementally cheaper? Would you be happy getting your software slightly cheaper if it meant the end of local support and local events (launches, expert presentations, etc.)?

          I'm not supporting it, I'm merely expanding on what it's talking about. There are obviously reasons why companies do what they do with regard to local pricing. Unfortunately, with some of the premiums, you absolutely cannot put it down to the specific local conditions. My Adobe CC does not feel like a special Australian-specific experience, unfortunately for Adobe's pricing explanation, and my support calls definitely don't go to Australian tech support.

            But we actually pay LESS for Adobe CC than they do in the US, thanks to the strength of the US dollar, so it's not an applicable example.

              The point was, Adobe's justification for pricing at the time of the inquiry was that Australia needed a unique experience, hence the incredible price hikes on products like CS6 Master Collection, etc. While Adobe CC might be more in line (notably, this is the case AFTER the inquiry), Creative Cloud was only in its initial offering stages when the inquiry brought Adobe in, and boxed/digital copies of the fully licensed version of their software were significantly marked up compared to their American counterparts.

                Bullshit! Adobe CS6 was EXACTLY the same price as CC when you got it on-line. Their pricing has not changed since they launched their cloud service, AFAIK. So if the pricing enquiry has done anything, it has probably taken away our access to a physical product and I reckon that is the trend we will see if the government tries to implement any of these measures. Nobody needs to sell their products here, they do it because they can make money. If you make it too hard, they just won't bother any more and we'll have no choice but to buy overseas, sight unseen and with whatever support they can be bothered providing.

                  Again, you're missing my point. I'm not challenging the cloud offerings of their subscription service. I've been subscribing since it came out, and it hasn't changed. I'm talking about when Adobe CS6 Master Collection was available as an individual, non-subscription product for . The pricing enquiry hasn't done anything like take away our access to a physical product - Adobe has made that decision worldwide, as evidenced by this statement from their US website:

                  While Adobe Creative Suite® 6 products will continue to be available for purchase, Adobe has no plans for future releases of Creative Suite or other CS products.

                  This is from Neowin on Feb 13:

                  In Australia, Adobe's Creative Suite 6 Master Collection costs AU$4,344 for a boxed copy, or AU$3,949 for a digital copy which is GST exempt. In the United States, the exact same product will cost you US$2,599, which when currency converted comes in at AU$2,513 - a difference in price of AU$1,831 over the boxed copy (AU$1,436 over digital).

                  My point about CC being in line with the US after the inquiry is that cloud pricing was being worked on around the time that the inquiry was first initiated, and that's probably not really an accident. In fact, it's very much NOT an accident. Feb 12, same website:

                  Following yesterday’s report that Adobe, Apple and Microsoft are to appear in front of the Australian House of Representatives Standing Committee on Infrastructure and Communications to answer question on IT pricing, not only has Adobe responded by providing full cooperation to the committee, but it has reduced the pricing of its Creative Cloud Membership in Australia from AU$62.99 to AU$49.99 per month.

          I agree with exnihil0. Often these justifications are talk only, and "local support and local events" are either non-existant or not really worth the exhorbidant mark-up.

            The only examples of "exhorbitant mark-ups" are expensive and obscure products, it really doesn't apply at all to consumers in the broader market. Unless you can give us some examples?

              All Microsoft licensing for one, and boxed products as well.

                Again, this is just bullshit. A Windows 8 license is pretty much exactly the same price here, pre-GST as in the US. In fact, when our dollar was worth more than theirs, we got it cheaper. I don't know about Office because I get that in the cloud for free, via my Hotmail account, but I don't imagine it could be any cheaper than free elsewhere.

      Yes, Recommendation 4 should be for everything. :( Unfortunately that was out of scope.

      I recently had this issue with some Dainese motorcycle boots. They don't sell the full range in Australia, but their overseas distributors are contracted to not sell outside their own region. Took me a while to track down a German store who didn't give a crap and would sell to me, much nicer boots than anything I could find here.

        I had the same issue with Oakley. Ended up having to pay a extra $100 over the US price for lenses.

        Disgraceful!

          haven't you guys heard of eBay? I have purchased both products - Dianese boots and Oakley lenses, on eBay for extremely good prices.

            Why are you guys running around wearing oakleys and motorcycle boots? Surely you look ridiculous?

            Last edited 30/07/13 1:04 am

              What do you mean... my mum said I looked great!!!

              Because I ride a motorcycle and didn't want to be stuck walking around all day looking like a motor GP rider.

              I don't need motorcycle boots or Oakleys to look ridiculous, thankyou very much.

            Yeah I looked @ lenses on there but they are all fake no?

            Boots I wanted were only in one size on Ebay, and $50 more than the german store.

        1 - Whoever disliked this I just cancelled you out...

        2 - I got my AlpineStars leather jacket from America for about 1/2 the price of a shop here in Aus.

    Wow! Only governments come up with convoluted "plans" like this that won't work...
    Here's an easier plan guaranteed to work, without the overhead:

    1. Make it illegal for companies to prevent overseas purchases
    2. Force overseas IT purchases to be supported in Australia by manufacturer

    No price monitoring needed! And no wasted extra resources!!

      It just isn't that simple. e.g. I used to work for Autodesk, who sell through "value-added resellers" all over the world. Each reseller has a territory and they cannot sell outside it. Why? Because they are required to provide the first line of technical support via dedicated staff and they also receive extra margin to give them a marketing budget. It gives each reseller some stability and allows them to nurture their own market and provide a high level of service to customers. It's how franchises like Snap-On Tools, Dominos and the like operate both here and overseas, so it would not be an easy thing to dismantle without costing thousands of Australian jobs.

        australian jobs based on and funded using the money from gouged Australians from an anticompetitive business model(s)

          No, Australian jobs based on high wages, high property values, high utility costs, ridiculously expensive freight and a need for each country's operation to be profitable in its own right. But again, I hear you talking about gouging but I find it very difficult to find any real examples of it.

        Except there is nothing stopping me from visiting the Domino's store the next suburb over if I don't like the local one for some reason.

        The system you describe is obviously good for the resellers, since they have a captive audience. However it isn't obviously better for consumers, particularly if they are not interested in the "value added" part.

          You can visit any store you like, just like you can go to the US and buy software, but if you ring one Dominos store from within the boundary of another, they won't deliver to you. (Actually, they probably would but they'd be in breach of their franchise agreement and they'd do it on the QT.)

            The out of suburb Domino's store might not deliver to me, but if I go to the store to pick up the pizza myself I'll still be able to eat it when I get home.

            According to this news story, some users were told by Autodesk that if they bought their software licenses in the US they wouldn't be able to use them in Australia: http://www.kotaku.com.au/2013/02/autodesk-and-the-price-gouge-thats-holding-back-the-australian-games-industry/

            So that's not really so similar to fast food franchises. It'd be the equivalent of getting home to find I'd been sold an empty pizza box.

              As I said, if you go to the US you can get US pricing on anything, too. It's the same situation, it's just that the trip is more costly. I've explained why Autodesk geoblock, it is the very foundation of their sales model and it is about looking after local resellers - Australian companies employing Australians - not about keeping their prices high. In every market their retail prices are based on their US list price. They seem to have become less flexible than they once were but it's not like they are making squillions. The cutbacks have been savage in recent years as they try to remain profitable in a very mature market. I'm no fan of Autodesk, they well and truly shafted me and I'd like nothing better than to see them wither and die, but there is no way they are ripping us off with their pricing here. If you don't want to pay their prices there are plenty of alternatives.

                The quotes in that post seem to indicate that it clearly isn't the same, since Autodesk told those developers that they wouldn't be able to use their licenses back in Australia.

                You've done a good job arguing why these policies are good for the local resellers, but that is not the same as it being good for consumers. If the resellers really are providing a vital service that customers want, then why do they need this protection?

                And while you can argue that removing international competition from the local resellers probably creates more local jobs, it is probably also true that the higher license costs reduce the number of people companies using this software can afford to employ.

                  They need the protection precisely because they are offering this service. It costs them money to employ these specialists but if you could buy your license on-line from the US, you'd be buying from someone who knew they'd never have to provide any service to you, so that sales woudl just be icing on the cake for them, at the expense of your local reseller. These are not mass market products, there is little or no economy of scale. They are specialist products in niche markets that require a different sales model. e.g. In the 6 years I worked for them, their premier VFX product, Flame, never made a profit, despite costing between $150,000 and $250,000 per seat. That's not a product you can just put on a shelf at JB Hi-Fi and expect the cash to come rolling in. They've sort of tried it with its siter product for editing/finishing, Smoke, which you can buy on Mac for only $7000 now (or $100k+ as a turnkey solution). I was talking to them at SMPTE last week and they are yet to sell 100 licenses here after nearly a year of sales. They tries doing the mass market thing a while ago - you used to be able to get AutoCAD from Harvey Norman - but it didn't work for them at all.

      Wow, you must think Australian Law applies outside our borders. Hot Tip - It doesn't. Any of the 'laws' suggested in all comments here will be completey pointless and worthless. Example "Hey Apple Australia, we demand you let Aussies buy this video on iTunes or go to jail" Reply "Apple Australia doesn't own, control or manage iTunes. Your law doesn't apply to us. Go away and talk to Apple USA". "Hey Apple USA, we demand you let Aussies buy this video on iTunes or go to jail". Reply "Ha ha ha ha. Go away". The end.

    These must be done!!!

    Competition & business models come into play also taking the low tech Levi's example.

    Myer last year $119
    Myer this year $79 (on perpetual sale)
    Costco this year $49

    & yes its limited styles & sizes but our market is very small. Small markets shouldnt be relevant to digital products.

      Why not? Do Adobe and Microsoft somehow not have the need to cover the extra cost of being in Australia?

        I don't know about Adobe, but I can tell you that Microsoft pretty much operates only as a sales office here in Australia. All support has been offshored for some time now. Even if you call their general access number (13 20 58), and select anything other than sales, you'll be routed to an overseas call centre.

    It's funny how regional goeblocking is already discouraged under the Copyright Act!! Putting the ban in the Consumer Act will just strengthen it and may actively discourage companies from using it as a means to inflate prices!

    "...the next head honcho of the world’s largest continent."

    Umm, I don't think either of the main protagonists are bidding for governing Asia. Maybe you meant smallest continent or largest island?

    For those wanting specific examples of gouging and excessive markups, after having had a quick read through Chapter 2 of the report, I recommend you try skipping to these sections:

    2.34-2.35 - median mark-ups ranged from 13-67%. The evidence was refuted by industry groups claiming that price comparison is not valid, as there are other factors built into the price, but there is no evidence or specific examples provided (information was cited as commercially sensitive, of course).

    2.48-2.93 - examples for several classes of electronic goods

    2.128-2.133 - Libraries getting extra screwed - the licencing away of rights under Copyright law for Australian libraries to even get access to eBooks, and the loss of already paid content due to licensing changes, so that not only were libraries paying more and getting less, but that the content could be permanently lost despite having paid for it.

    2.146-2.150 - Committee overall findings - that while industry groups are correct that there are other factors than price alone, the scale of differences and variation in prices meant that his was not an adequate explanation.

    Pretty much the entire submission by Choice: http://www.aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=ic/itpricing/subs/sub075.pdf (which also cited the Productivity Commission report on Economic Structure and Performance of the Australian Retail Industry which found that the argument about higher rent and wages pushing the price up was “in most cases…not persuasive.”)

    Last edited 29/07/13 6:00 pm

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