Rihanna’s album “Unapologetic” is 49 percent more expensive to buy from iTunes in Australia than the U.S., prompting the nation’s parliament to summon Apple Inc. (AAPL) (AAPL) and other technology companies to explain how they set prices.
Microsoft Corp. (MSFT) and Adobe Systems Inc. (ADBE) (ADBE) also were called by Australian lawmakers on threat of contempt proceedings to appear at a hearing today in Canberra. The companies previously declined to appear before the committee, Chairman Nick Champion said in an October speech.
Software and hardware products in Australia sell for a median 50 percent more than their U.S. equivalents, according to a 2012 survey of 186 songs, games, programs and computers by Choice, a not-for-profit consumer advocacy group. Companies could face restrictions on their ability to set prices in Australia under measures being considered by lawmakers.
“There’s been price discrimination against Australian consumers,” said Matthew Rimmer, a professor at Australian National University in Canberra, who specializes in copyright law. “If the distribution is digital, why are the prices so much higher?”
Rihanna’s album costs A$22.99 ($23.98) in the Australian iTunes store, compared with the $15.99 that fans in the U.S. pay. Bruno Mars’s “Unorthodox Jukebox,” in the Top 10 of both nation’s charts, costs 42 percent more.
“We would love to see lower prices for content in the Australian store,” Tony King, managing director of Apple’s Australia unit, said at the committee hearing in the capital Canberra today. “We would urge the committee to talk to those folks who own the content.”
The biggest difference in prices for music and films was due to the wholesale price set by music labels and film and television studios, he said.
Customers “will vote with their wallets” and buy alternative products if prices are too high, Pip Marlow, managing director of Microsoft’s Australia division, told the committee.
Different packaging distinguished products sold in Australia from those sold elsewhere, Adobe’s Australian managing director Paul Robson said.
“I’d consider a box that has different writing on it to be materially different,” he said.
Sales taxes, different labor and rental costs, marketing spending and the decisions of third-party resellers can all cause Australian prices to be higher, Redmond, Washington-based Microsoft said in its filing to the committee. Even download sites incur costs for maintenance and support, the company said.
The strength of the Australian dollar has increased the contrast between local and international prices for software, music and entertainment.
The currency, which didn’t climb above parity with the U.S. dollar from 1982 through 2009, has risen more than 50 percent over the past four years and hasn’t been worth less than a dollar in eight months.
The Windows Vista Home Premium software package cost A$455 in mid-2008, 75 percent more than the $240 U.S. price at the prevailing exchange rate, Choice said in its submission. The updated Windows 7 Home Premium package cost A$299 four years later, still 47 percent more than the $199 charged to U.S. users.
Consumers expect prices to be more stable than they would be if they tracked every shift in the foreign exchange market, San Jose, California-based Adobe said in a submission to the inquiry last year.
The government should ban geo-blocking, which allows websites to identify the location of shoppers and restrict the pricing available to them, according to Choice. That would force downloads targeted at the local market to compete with those available overseas.
“If a legitimate product is available in an overseas market, people should be able to access it,” said Matthew Levey, Choice’s head of campaigns. The current system is “a form of protectionism imposed by private businesses,” he said.
The committee hasn’t yet decided on what, if any, measures need to be taken, and it wasn’t appropriate to comment again on the merits of the case before this week’s hearing, Paul Neville, deputy chairman of the committee, said by phone yesterday.
“The public has had enough of this pricing,” Neville told parliament in an October speech.
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