Is geo-blocking price gouging Australian consumers?

Geo-blocking is the process of restricting access to content based on geographic location determined by a users IP address. Content owners including multinational tech giants use geo-blocking to set different prices in different parts of the world. The frustrating reality of geo-blocking is common for Australian consumers, who are often charged prices significantly higher than in other countries including the US for products from companies such as Apple, Microsoft and Amazon.

A CHOICE analysis, conducted in June this year for a parliamentary inquiry into IT price discrimination and based on online prices of more than 200 products, found Australian consumers pay an average of 50% more for PC games, 34% more for software, 52% more for iTunes music, 41% more for computer hardware and a huge 88% more for Wii games than our US counterparts. (1)

On October 31st of this year the Standing Committee on Infrastructure and Communications held a hearing on IT pricing with members of the Competition and Consumer Policy Division of the Treasury.

Geoffrey Francis, General Manager of the CCPD, stated “I would say… that Treasury is not a fan of geo-blocking technology. We are certainly not enthusiastic about price discrimination where it results in Australians paying higher prices. But we are wary of forms of intervention which may end up being counterproductive…”

Mr Francis recognized that consumers may need protection from these prices, however expressed the opinion that there is no clear indication of a market failure, and the disparate pricing may be merely a consequence of a lack of competition in the Australian market.  Mr Francis suggested “improving local competition by lowering barriers to entry where possible and removing regulation that restricts competition and increasing access to international markets and also empowering consumers, through the provision of information and choice”, he noted that these “are all no-regrets measures that can assist in ensuring Australian consumers and businesses have access to goods and services at internationally competitive prices.”

The Australian Communications Consumer Action Network takes a different view, putting to the committee that “The widespread nature of illegal downloading points to a market failure”.  ACCAN argued that “Before threatening consumers or ‘educating’ them about why they should not have the content they desire in the way they want, the industry needs to take responsibility for meeting market demand.”

In its submission ACCAN calls for:

  • More fair dealing or fair use exceptions to copyright which are technology-neutral and recognise the legitimacy of consumer activities such as sharing user-generated content.
  • A right for consumers to record and format shift content that has been acquired lawfully, for non-commercial use. The rules must be simple, technology-neutral and easy for consumers to understand.

The best way for a consumer to avoid higher prices at present is to circumvent geo-blocking using a Virtual Private Network.  Be warned, however, that the legality of circumventing geo-blocking is a grey area.  Some copyright experts claim those who promote devices or programs that encourage people to infringe copyright are breaking the law. However, CHOICE believes consumers who circumvent measures used to protect copyrighted content are likely not to be in breach of copyright because they’re accessing products and services that are being provided knowingly and willingly by the copyright holder.

Circumventing geo-blocks may however breach the terms and conditions of the contract offered by the company you’re buying from; if discovered, your account could be cancelled, losing credit and access to your downloads.  According to the ACCC, these terms and conditions mean some of your rights under Australian law may be lost or difficult to enforce when buying from overseas retailers, including the tech giants.

While there is disagreement about whether there is a market failure, and whether avoidance measures are legal, what it clear is that prices are considerably higher for Australian consumers than for overseas consumers for the same products.

As Treasury’s Mr Francis pointed out, “We are aware….that technology to facilitate price discrimination is evolving rapidly, as is the technology that allows consumers to thwart such behaviour and seek out the best deals. So this is an area that remains worth watching.”

1. These prices dont take into account the average 9.6% US sales tax on one hand, nor Australian GST of 10% on the other.  However, even at 10% GST cannot account for the full price discrepencies.