Price gouging found on digital goods

21:25, Aug 28 2013

Price gouging by international software companies is undermining New Zealand businesses and is unfair on consumers, the Green Party claims.

A survey by the party of more than 100 software and hardware products found prices were about 40 per cent higher on average here than in the United States.

It has called for an inquiry by Parliament's commerce committee into the pricing gap, similar to one recently carried out in Australia.

That inquiry found evidence last month that Australians were commonly paying more than 50 per cent more than Americans for digital goods such as software, music and computer games bought online.

Multinationals can vary their country prices by detecting prospective customers' internet protocol (IP) addresses and directing them to different online store fronts, in a process known as "geo-blocking".

The Australian inquiry recommended that the government amend the Copyright Act to make it clear that it would not be illegal to circumvent geo-blocking by disguising IP addresses.


It also went further, by recommending the government consider banning geo-blocking if that did not have the desired effect.

Victoria University economist Toby Daglish, who is also a director at the Institute for the Study of Competition and Regulation, said there were three main reasons why prices were higher in New Zealand.

The first was the cost of shipping physical items, and the second was the existence of robust consumer guarantee laws that protected customers.

Lastly, the "elasticity of demand" meant that, while countries with large populations could increase sales by lowering prices, those with a small population were less responsive to price change.

"The extent to which they can get away with that is linked to the extent of how they can stop people from buying things and shipping them here from other countries."

Technology journalist Bill Bennett said many pundits scoffed when the Australian Government launched its inquiry, but it had proved quite successful.

"A lot of people said they weren't going to get a lot out of it because there's bugger all a government can do . . . but what happened in Australia as a byproduct was the Australian Government managed to negotiate $100m off their bill with Microsoft.

"By getting this stuff out in the open in public, it puts a lot of pressure on."

Information Technology Minister Amy Adams has instructed officials to work with their Australian counterparts to understand how the findings there may relate to New Zealand.

But in Parliament yesterday she said that work was still continuing, and indicated that any action might have to wait until after next week's Australian federal election.


All prices in NZ dollars.

HP Spectre XT 13-2114TU laptop: NZ price $1999 US price $873.75

Call of Duty: Ghosts: NZ $131 US $74.99

Windows 8 upgrade: NZ $249 US $148.75

iMac 21.5: NZ $1999 US $1498.75

iPod Touch: NZ $349 US $286.25

Source: Green Party survey

Fairfax Media