International Price Discrimination: Exaggeration or a Fact?

In late July last year a national IT pricing inquiry was begun to examine what the consumer advocate Choice has called ‘international price discrimination’; when international businesses such as Apple, Microsoft and Adobe charge more in an Australian market for their goods and services.jono

The inquiry was began after extensive campaigning by federal MP Ed Husic, who accused international companies of ‘ripping off’ Australian consumers. There are fears that the high costs of these products on the Australian market are detrimentally affecting university students, and placing them at a disadvantage on the global stage.

Currently Adobe products are retailing for at least 50 per cent more in the Australian market than in the United States. Doctor Sean Rintel, a lecturer at the University of Queensland with a focus on new communication technologies, has labelled this state of affairs as completely unreasonable. He argues that in the highly globalised society we live in, especially one which utilises an internet distribution system, it is imperative that everyone receives the same content, and pays the same price for it. “I don’t see why we can’t at least push for accountability in that realm… To me it’s not really particularly valid that they can say ‘well, we need to internationalise and set up all these ecosystems and resellers, and if we don’t do that then we couldn’t sell our products’. I just think that’s unreasonable.”

Dr Rintel believes these claims might be valid in non-English speaking countries, but that the differences between Australian and US products are so minimal that it is underhanded for Adobe to claim they need to charge more in order to pay for the internationalisation process. Additionally, he doesn’t believe their methods work, mentioning instances of students ‘pirating’, or illegally downloading the software, or asking someone in the US to post it to him or her. Dr Rintel has praised the Australian government for implementing the pricing inquiry, however he feels that the inquiry is failing in regards to its ability to get companies to “fall into line”. One outcome of the inquiry he feels would be viable is defining price parity to take into account the exchange rate, so products may cost more Australian dollars than US dollars, but only when the US dollar is worth more.

This would have the corollary of forcing companies who wanted to charge more for their products to make a case to explain why they should charge more in Australia than internationally. However Dr Rintel disagrees with Choice’s labeling of affairs. He feels that labelling the pricing differences ‘discrimination’ is an exaggeration of the facts. The lack of price parity is opportunistic, and definitely problematic, he agrees, and goes on to say, “It’s taking advantage of what has traditionally been highly segmented and differentiated sorts of markets… But discrimination, where they’re trying to deliberately make it high because it’s in Australia or somewhere else?  That’s going a little bit too far.”

The spokesperson for Adobe Australia, Paul Robson, argued that higher product prices were due to costs incurred through customising the Australian retail experience, as well as the costs involved in doing business and maintaining a physical presence in Australia. Consumer advocate Choice rejects these claims. Matthew Levey, head of Choice campaigns, has said “there is no justification for Australians paying more than consumers in the United States for identical products.”

As a result of the ongoing inquiry, Adobe Australia has reduced the cost of its subscription-based service Creative Cloud, which provides subscribers with access to all their products, for a monthly fee.  In a recent bid to popularise this product with Australian users, Adobe has cut the monthly cost of Creative Cloud by 40 per cent until the end of July. This means students will pay $14.99 per month, individuals will pay $49.99 per month, and teams will pay $69.99 per month for software access and storage.price

However, the government has stated that these price reductions are not enough. Labor MP Steven Jones described this move as forcing users into ‘digital handcuffs’, as it forces users to pay to access their files.
Dr Rintel had a similar reaction, saying, “Adobe argue that the future of Adobe is going to be in the Creative Cloud, and there’s lots of values to cloud computing, I mean that fact that you can access all your data and raw files anywhere? That’s pretty cool… But the fact that you’re effectively having to rent the software, and rent access to it, is certainly an issue.” The other issue he brought up was that ‘the Cloud’ is designed to work most efficiently within the US, but people’s ability to access the Cloud outside of the US is hindered.

He was joined in his sentiments by a Choice spokesperson, who has said that they want all Adobe products, not just subscription cloud services, to be brought down to internationally comparable prices, including both digital downloads and physical copies of the products. Choice was however, complementary about the cheaper pricing for students and teachers for the Creative Cloud services, which is now comparable to or cheaper than US pricing. This is especially important, Choice notes, as technologies such as Adobe provide essential services for many, not just students, and higher prices act as a barrier to those trying to access the technology, which has implications for equity and competitiveness.

Carl Smith is a University of Queensland honours student, and currently a freelance ABC worker. As a former journalism student, his course required he make extensive use of Adobe products. The only viable way for him to access this technology was at his university, as the computers there had the software he required installed. He confided that in his time at university, he knew plenty of fellow students who had illegally acquired the software due to it’s extremely high prices. Another way students could access the software was through the 30-day program trials, but this wasn’t always viable, he explained, saying, “If you were doing multiple assignments over many semesters, your 30-day product is only going to last 30 days, and then you have to uninstall it and find a sneaky way of reinstalling it, or just drop the whole having it at home thing and come into the university instead.”

Mr Smiths feels that the prices for Adobe software are extortionate, especially in comparison to US pricing. However, he does approve of the price reductions in Creative Cloud, saying “I’m glad that it’s now benchmarked at a global standard, so we’re paying roughly the same as students all the way around the world, because without that basic editing software, as students, we’re not going to be able to perform at an industry standard across the world.” But like Choice, the Australian government and Dr Rintel, Mr Smith believes that dropping the price for Creative Cloud should only be Adobe’s first step.

Regardless of how they describe it, most people agree that the lack of price parity in Australia from companies such as Adobe, Microsoft and Apple is unacceptable. The ongoing IT Pricing Inquiry is certainly a forward step on the part of the Australian government, but more needs to be done to bring accountability to the industry-dominant companies and the products they sell, or the next generation of Australians may feel the brunt of being under prepared and unable to compete against their international counterparts.