Aussies are still paying over the odds and it's time for ACCC action
Monday 16 June 2014
- Analysis for The Conversation by Angela Daly, Swinburne University of Technology
Yet another survey has found Australians are paying more than their American and British counterparts for the same entertainment goods and services.
In its submission to the government’s Competition Policy Review, consumer advocacy group Choice compared the prices of popular entertainment content. They looked at the Game of Thrones series, films in Apple’s iTunes store and Playstation 4 video games. Choice found that for all of these products, Australians were paying substantially more than people in the UK or US.
This tallies with the findings of the Parliamentary IT Pricing Review from last year. This report found that for the same content and software goods, Australians were sometimes paying a huge amount - 50% - more than their counterparts in the US and the UK. This premium, known as the “Australia tax”, was not justified by higher costs of doing business here.
I have argued elsewhere that these higher prices for Australian consumers should be a priority for government action. Lowering prices to be more in line with what consumers are paying in similar countries could address the alleged “problem” that Australia has with pirating content, as well as ensuring films and TV series have similar release dates here to other parts of the world.
Ensuring Australians can enjoy legal and cheap imports of these products from other countries would also help the situation, as Choice suggests. The IT Pricing Review also recommended restrictions on this practice, known as parallel importation, should be lifted. However, the Trans Pacific Partnership agreement (if it is ever finalised) may stymie this as the US has been supporting a provision that would allow big entertainment companies to prevent copies of their content made legally in another country from being imported into Australia without their permission.
These high prices and other restrictive conduct by the entertainment industry may also suggest a lack of competition in markets for digital content and software. If these companies are in some way coordinating with each other to ensure their prices are high, then this may constitute anti-competitive agreements between competitors, which is illegal. Alternatively, a company which has a monopoly or market power may be acting illegally if it misuses that power with anti-competitive effects.
There is also a prohibition on exclusive dealing in Australian competition law. Arguably, the Game of Thrones exclusive deal with Foxtel might fall within this illegal behaviour.
Firms are prohibited from engaging in exclusive agreements if these have the purpose or effect of “substantially lessening competition” in the market at issue. There have been concerns about Foxtel’s market power over pay TV in the recent past, and this exclusive deal may be another area the ACCC should investigate. However, similar competition investigations into UK pay TV provider Sky and its control over “premium movie content” came to nothing in the end, and resulted in no regulatory remedies.
Yet, there have been some inroads made into anti-competitive prices for digital content in other countries. In the last couple of years Apple and the big book publishers were considered by competition authorities in the US and EU to have fixed the prices of e-books being sold to Apple device holders. Earlier this year, a similar investigation into the major publishers was closed in Canada, with them making a deal with the Competition Bureau “that is expected to lower prices for consumers by 20% or more”. Australian consumers and their wallets could benefit from more proactive competition investigation and enforcement from the ACCC in this area, similar to what has been happening elsewhere.
The ACCC responds to complaints it receives from consumers and businesses about alleged anti-competitive practices, but it does not have the resources to pursue them all, and so must prioritise those which “harm the competitive process or result in widespread consumer detriment”. One of the ACCC’s current enforcement priorities is “emerging consumer issues in the online marketplace” and given the mounting evidence that Australians are paying over the odds for digital content and software, the ACCC may turn its attention to this issue.
If the ACCC finds illegal conduct via an investigation, it has a number of options for action. The companies involved can be persuaded to remedy their behaviour in the form of enforceable undertakings. If they are not cooperative, the ACCC can take them to court, which may result in large fines for companies or even prison sentences for particular individuals.