Australia takes Apple, Microsoft and Adobe to task over high product prices

News 12 Feb, 2013

Tech giants have been summonsed to appear in front of an Australian parliamentary committee to explain product pricing strategies.

Apple, Microsoft and Adobe have been ordered to appear before Australia's parliament to explain why local consumers pay so much for their products, despite the strong Aussie dollar.

Broadening a row between the world's most valuable company and Australian lawmakers over corporate taxes paid on Apple's operations, the company's executives were formally summonsed on Monday to front a parliamentary committee in Canberra on March 22.

"In what's probably the first time anywhere in the world, these IT firms are now being summoned by the Australian parliament to explain why they price their products so much higher in Australia compared to the United States," said ruling Labour government MP Ed Husic, who helped set up the committee.

For some time consumers and businesses have been trying to work out why they are paying so much more.

All three companies have so far declined to appear before the special committee set up in May last year to investigate possible price gouging on Australian hardware and software buyers, despite the Australian dollar hovering near record highs above the US currency around A$1.03.

A 16GB WiFi iPad produced by Apple with Retina display sells in Australia for A$539, $40 above the price in the US, despite the stronger local currency. Microsoft's latest versions of Office 365 home premium cost A$119 in Australia versus $99.99 in the United States.

IT firms and other multinationals have blamed high operating costs in Australia including high local wages and conditions, as well as import costs and the relatively small size of the retail market in the $1.5 trillion economy.

Failure to appear before the committee as ordered could leave all three firms open to contempt of parliament charges, fines or even jail terms.

"For some time consumers and businesses have been trying to work out why they are paying so much more, particularly for software, where if it's downloaded there is no shipping or handling, or much of a labour cost," Husic told Reuters.

Adobe and Microsoft have previously provided separate written statements and submissions to the inquiry. But executives have been reluctant to explain their pricing before a public inquiry.

Apple executives in Australia declined to comment when contacted by Reuters.

"The companies have blamed each other for not appearing. One will say 'we're not going to appear if the other is not going to appear'. So we've cut straight to the chase and said we'll just summons you," Husic said.

Price gouging in IT for hardware and software, Husic said, could be costing Australia's more than 2 million SMBs as much as $10 billion extra.

Husic took aim at Apple last week over local taxes paid by the company, telling parliament that Apple generated A$6 billion in revenue in Australia in 2011, but paid only A$40 million in tax - less than one percent of turnover.

"While they generated A$6 billion in revenue, they apparently racked up from what I understand A$5.5 billion in costs. How?" Husic said. "They do not manufacture here. They have no factories here."

He accused Apple executives of maintaining a "cloak of invisibility", while dodging scrutiny of operations. Apple has been criticised elsewhere for its zealous secrecy.

"Ask anyone who has sought answers from them about their Australian operations and you will hear a common theme. They will not talk," he said.