Geo-blocking

August 29th, 2013 at 10:00 am by David Farrar

Stuff reports:

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 “”.

The Australian inquiry recommended that the government amend the 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.

Both excellent ideas. We are, or should be, one global market.

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.”

They charge more, because they can! :-)

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.

Not sure we need an inquiry per se as would find the same as in Australia, but anything that highlights the problem and puts pressure on for solutions is probably a good thing.

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12 Responses to “Geo-blocking”

  1. DylanReeve (166 comments) says:

    Adobe launched their subscription-based licensing model a bit over a year ago.

    New Zealanders are forced to pay in Australian dollars for the service. In the US a full Creative Cloud subscription was US$50/mth while in Australia (and NZ) the exact same service, providing the same software through the same servers, was AU$70/mth. At the time the Australian dollar was higher than the US dollar – we were effectively paying 50% more.

    The day before Adobe was called to present at the Australian inquiry they lowered the price to AU$50/mth… But we still have to buy the service in AUD from New Zealand.

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  2. marcw (249 comments) says:

    Companies being awarded “exclusive” agency rights for no good reason is part of the problem. Website commerce and parallel importing have gone some way to fixing this, but there are still problems with service products. Remember the exposure Adidas got when they were outed for their product price gouging for the RWC – turned what should have been a celebration and corporate success to a slapping and sacking in public. We need more naming and shaming to make companies realise that unearned creaming off customers does not make a successful future.

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  3. Jack5 (5,137 comments) says:

    Not only software. If you’re into hardware, for say, gaming, you see a new video card on Amazon, or maybe even a CPU that isn’t on sale in NZ, and you get the message:

    We are not able to ship this item to your default shipping address.

    Sadly, I think things will get even tighter if NZ and the US agree on a free trade arrangement.

    This copyright stuff bossiness follows many decades of the book publishers agreement, which Amazon effectively torpedoed. It meant (and may even linger on), that when a book was published in both America and the UK, NZ and Australian readers were forced to buy English editions of that book, while Canadians were forced to buy American editions.

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  4. Andrew (5 comments) says:

    Great to see the Greens supporting lowering barriers to trade between nations! Such a change from every previous position they have ever taken on trade

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  5. Kimble (4,440 comments) says:

    How about a website that shows Kiwis the overseas price for everything?

    http://www.WhatsThePriceOutsideNZ.co.nz is free.

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  6. Mark Thomson (82 comments) says:

    “We are, or should be, one global market.”

    As opposed to a free market.

    At least we know where you stand.

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  7. UrbanNeocolonialist (289 comments) says:

    The differential pricing really hurts the competitiveness of NZ business. Eg Chinese companies mostly pay nothing for the software they use. US companies frequently pay about 50-70% of what NZ pays (One example I am aware of is popular engineering CAD program Solidworks where US price for one package is around $8-10k, NZ price around $16-20k). Makes it tough for NZ business to compete when their overheads are unfairly increased relative to the competition by such issues.

    What would be nice is a law by which the govt could impose fines on companies that create such differential pricing structures – make it illegal in NZ and fine the company the value of any price differential between minimum OECD price and NZ price (and return that fine to the customers in question). If Australia implemented the same law at the same time then less chance software companies would resist.

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  8. Kimble (4,440 comments) says:

    “We are, or should be, one global market.”

    As opposed to a free market.

    Let see you justify that statement. Why are global markets the opposite of free markets?

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  9. gazzmaniac (2,307 comments) says:

    The only law the government should be contemplating is one where a copyright holder (anyone, in fact) cannot prevent somebody else from importing their products if they are sold for less overseas.

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  10. Mark Thomson (82 comments) says:

    @Kimble, I think perhaps you misconstrued my point. DPF is advocating laws that restrict the rights of people and companies to make their own decisions about the prices at which they are willing to exchange goods and services, including the right of companies to reach different conclusions about their best interests based on the location of the purchaser.

    In context, the emphasis of his phrase “one global market” is on *one*, meaning an enforced uniformity of choice across all geographical locations. In this sense, DPF is arguing against the proposition that markets should be free.

    We can agree or disagree with his point of view – I’m just pointing out that this is not a free market position.

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  11. gump (1,650 comments) says:

    i purchased a Microsoft Office 365 subscription the other day for my Mac.

    It cost me $165 NZD for one year’s subscription. If I purchased it through Microsoft US web site it would only cost me $99 USD. Allowing for GST and FX conversion, that’s about $20 NZD more for the same product delivered through the Internet.

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  12. gazzmaniac (2,307 comments) says:

    MS would probably prefer it if you did pay in USD. You’ll be paying for their hedging too. It is a risk for them to accept the NZD since it’s a volatile currency from the arse end of the world and currency exchange is not exactly core business.

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