Killing The Australia Tax Versus Killing Piracy

Well this is interesting, isn't it? Yesterday, a Government-appointed panel on Competition Law just told everyone it was OK to use their VPNs to circumvent international geoblocks in order to dodge the Australia Tax. So what does this mean for a government desperate to get people to stop using VPNs to access overseas services like Netflix?

Buried inside one of the driest documents I've ever read courtesy of the government-appointed panel analysing Australia's competition law, is a very curious piece of analysis on the so-called "Australia Tax".

The Australia Tax is the idea that we pay more for exactly the same goods and services, especially gadgets and online content from the likes of iTunes and Google Play, simply because we're located outside the US when we purchase.

The Competition Policy Review Panel calls it "international price discrimination", and said in its report issued yesterday that Australians should all fire up their VPN tunnels and burrow into the US to buy from international retailers, and use intermediary mailing services like HopShopGo to get our gear back into the country. By doing so, it would keep our dollars away from merchants who like to gouge Australians and create a market force designed to lower domestic prices.

Here's the quote (emphasis added):

The Panel favours encouraging the use of market-based mechanisms to address international price discrimination, rather than attempting to introduce a legislative solution. The Panel notes the recommendations of the July 2013 report of the House of Representatives Standing Committee on Infrastructure and Communications into IT pricing in Australia.
That Committee recommended the removal of restrictions on parallel imports, consistent with Draft Recommendation 9 of this Draft Report. In addition, the Committee made a number of recommendations (as set out in Box 16.4) that the Panel endorses in principle as a means of encouraging a market-based, consumer driven solution to concerns about international price discrimination, as well as a number of recommendations that could form part of the overarching review of intellectual property proposed at Draft Recommendation 7.

The Panel also made a recommendation to encourage the legal use of services that circumvent geoblocking (emphasis added):

Attempts to prohibit international price discrimination should not be introduced into [law] on account of significant implementation and enforcement complexities and the risk of negative unintended consequences. Instead the Panel supports moves to address international price discrimination through market solutions that empower consumers. These include the removal of restrictions on parallel imports (see Draft Recommendation 9) and ensuring that consumers are able to take legal steps to circumvent attempts to prevent their access to cheaper legitimate goods.

This puts the Government in somewhat of an interesting position: on the one hand, it's trying to get a fair deal for consumers by appointing a panel that has recommended the use of VPNs for online shopping, while on the other hand encouraging Aussies to put down their VPNs and stop using international content services like Netflix, Hulu and other streaming services that take revenue away from the likes of Foxtel, Telstra and various local studios.

The new competition review has inadvertently opened the door to a an awkward intersection between the issues raised in the IT Pricing Inquiry and so-called "piracy" when using Netflix from Australia. A panel of experts has told the Government to encourage Australians to use VPN services to circumvent retail geoblocks to pay less for goods and services, while the Government tries to stop people using VPNs to get their entertainment content.

Communications Minister Malcolm Turnbull acknowledges that pricing and availability of content is a major issue in Australia, and solving it will go a long way to reducing piracy here. Interestingly, the Competition Review draws a similar conclusion: if pricing and availability of goods and services in Australia reaches parity to products seen overseas, Aussies won't have to tunnel under the geoblock walls to get a better deal.

Applying the logic of the Competition Review to the problem of high prices in the Australian content industry means that a government-appointed panel just told everyone that streaming Netflix is OK until vendors like Village Roadshow, Foxtel and Hoyts reduce prices or make content more freely available.

Of course the Government, which is hard at work formulating copyright law amendments to reduce piracy as well as the number of people sending their content dollars off-shore to services like Netflix and Hulu, is unlikely to share such a view, given that one of its main three-word slogans is that Australia is "open for business".

The Government doesn't have to implement a single recommendation the Competition Review Panel has made. It can just sweep it under the rug like it seems to have done with the IT Pricing Inquiry, to which we still don't have a formal response.

Either way, two panels of experts appointed by both sides of the House over the last two years have told us the same thing in two different ways: we pay too much for our tech, and we should vote with our wallets and shop overseas until local merchants get the message that we won't pay their Australia Tax.

Read the full report here.

Money image via Shutterstock

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