In July, people’s watchdog group Choice conducted research demonstrating that Australians pay between 34 and 88 percent more for electronics and information technology goods than overseas customers. Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and EBay (NASDAQ:EBAY) are widely known for adding an “Australia Tax” for digital products or fulfillment to the country. Microsoft (NASDAQ:MSFT) has blamed Australia’s higher labor costs and tougher regulations for pricier hardware and software.
A parliamentary committee in Australia has been investigating the pricing disparity for a while, and is now ready to crack down on the United States tech titans. Apple, Microsoft, and Adobe (NASDAQ:ADBE) have offered particular resistance to answering government inquiries, and the committee is preparing to exercise legislative force. The ability to force the companies to hand over documents “have existed for quite some time, they have just never really needed to be used,” said committee member Ed Husic to ZDNet. “Usually, you have a lot more cooperation in the course of an inquiry.”
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Microsoft submitted a statement to the committee in July that read, “There are a range of additional factors that impact pricing in the Australian market, including the relatively high cost of labour and rent; the impact of Australian-specific regulations; the higher costs of marketing, training, and advertising; supply chain costs, including transport, distribution and exchange rates.” The Choice group responded that there’s no reason any of those factors should result in the massive price disparity in the Australian market.
If the committee finds the companies guilty of systemic “international price discrimination,” Australia may be able to take them to court for price fixing. The legality of technological measures such as geo-blocking could be called into question. Geo-blocking ensures that if a user logs onto a site like Amazon.com from Australia, they are forced to remain in the Australia portal and pay the higher price. If this practice is outlawed, then digital commerce platforms will be forced to flatten prices, and distributors will have either charge a single, global price for a good, or find another workaround.
If Australia demands price normalization, then companies like Apple and Microsoft could be forced to sell at a lower margin. The inquiry is aimed at determining whether or not the companies have legitimately higher costs of operation in the country. Most controversially, if those costs should be reflected in the price of digital goods. The documents that the committee is seeking supposedly contain the private communications that would reveal this.
The committee is hearing from the Australian Recording Industry Association on October 5 on issues related to price disparity in digital music downloads. Microsoft, Apple, and Adobe were asked to appear before the committee on the same day but did not respond to the request.