Australia: Parliamentary Committee report on IT pricing recommends changes to copyright and competition law

Last Updated: 2 August 2013
Article by Timothy Webb

Key Points:

The IT Pricing report recommends removing the parallel importation restrictions in the Copyright Act 1968 (Cth), and broadening the parallel importation defence in the Trade Marks Act 1995 (Cth).

The House of Representatives Standing Committee on Infrastructure and Communications has published its report on the inquiry into IT Pricing. It has made a range of recommendations, some of which would if implemented have a significant impact on copyright law in Australia.

Background to the inquiry

On 18 May 2012, Senator the Hon. Stephen Conroy, Minister for Broadband, Communications and the Digital Economy, requested that the House of Representatives Standing Committee on Infrastructure and Communications inquire into the pricing of information technology (IT) products in Australia.

The terms of reference for the inquiry required the Committee to investigate:

  • whether IT products sold in Australia – including computer games and consoles, e-books, music and videos, whether online or in retail outlets – are more expensive than those sold in comparable overseas jurisdictions, and if so, how much more expensive;
  • why any such differences may exist;
  • the impacts price differences may have on Australian consumers and businesses; and
  • what actions, if any, may be taken to mitigate those impacts on Australian consumers.

The Committee conducted a yearlong inquiry, with briefings from Government departments, the ACCC and the Productivity Commission, 148 submissions from the public and a broad range of IT companies, business and industry bodies, and eight public hearings. On 29 July 2013, the Committee tabled its report on the inquiry, "At what cost? IT pricing and the Australia tax".

What did the inquiry find?

Australian consumers and businesses often pay more for their IT products than their counterparts in comparable economies. Sometimes Australians pay 50 to 100 percent more for the same product.

The Committee concluded that in many cases, the price differences for IT products cannot be explained by the cost of doing business in Australia. Particularly when it comes to digitally delivered content, the Committee concluded that many IT products are more expensive in Australia because of regional pricing strategies implemented by major vendors and copyright holders.

Recommendations made by the Committee

While the Committee recognised that businesses must remain free to set their own prices in a market economy, it has nonetheless made a range of recommendations that are intended to sharpen competition in Australian IT markets. The Committee hopes that these measures will increase downward pressure on IT prices and improve the access of Australian businesses and consumers to cheaper IT products.

The recommendations include that the Australian Bureau of Statistics monitor and report on IT expenditure, the Australian Government conduct a study of the future IT needs of Australian universities, and that the Australian Government consider a whole-of-government accessible IT procurement policy.

The Committee also noted that themes relevant to copyright law and competition arose repeatedly during the inquiry. As a result, it made several recommendations that would involve changes to intellectual property and competition law, which are set out below.

Parallel importation restrictions be lifted

Parallel imports are legitimately produced goods imported into another country. The goods are manufactured with the authorisation of the intellectual property rights owner (ie. unlike pirated or counterfeit goods, parallel goods are genuine) and subsequently imported into another country by an unauthorised distributor.

Australian copyright law currently allows parallel importation of computer programs, electronic books and music, and sound recordings subject to certain conditions. However, parallel importation is otherwise prohibited, which means that it is not legal to parallel import, for example, genuine films or television programs.

The Committee recommended that the parallel importation restrictions still found in the Copyright Act 1968 (Cth) be lifted, and that the parallel importation defence in the Trade Marks Act 1995 (Cth) be reviewed and broadened to ensure it is effective in allowing the importation of genuine goods.

It is not clear that the Committee considered the situation where the copyright owner for the Australian territory is different to the copyright owner in the country where the goods originated.

Secure consumers' rights to circumvent geoblocking technology

Technological protection measures (TPMs) and digital rights management systems (DRM) are measures designed to prevent unauthorised access to or copying of copyright protected content. Australian copyright law makes it illegal to circumvent certain (access control) TPMs, to manufacture a device for circumventing TPMs, or to provide or offer a service for circumventing TPMs.

Geoblocking is the term given to the methods vendors have adopted to differentiate between regions and to keep customers separate. It is used to block or limit delivery based on the geographic location of the consumer, which can be derived from their computer's IP address or at the sale stage using the person's credit card details or mailing address.

The Committee noted that there is a degree of uncertainty about the legality of methods used to avoid geoblocking mechanisms, and whether those methods could be considered to circumvent TPMs, and thus create liability for prosecution.

The Committee thus recommended that the Australian Government amend the Copyright Act's anti-circumvention provisions to clarify and secure consumers' rights to circumvent TPMs that control geographic market segmentation.

Consider creating a "right of resale" for digitally distributed content and clarify "fair use" rights

The Committee was interested in consumers' rights to legitimately use legally acquired copyright material, and noted those rights may be affected by developments arising from the Australian Law Reform Commission's ongoing review of copyright in the digital economy and the Attorney-General's Department review of TPM exceptions.

It recommended that the Australian Government consider the creation of a "right of resale" in relation to digitally distributed content, and clarification of "fair use" rights for consumers, businesses, and educational institutions, including restrictions on vendors' ability to lock digital content into a particular ecosystem.

Repeal of intellectual property exemption from parts of competition law

Section 51(3) of the Competition and Consumer Act 2010 (Cth) exempts intellectual property licenses and assignments from some parts of Australia's competition law. The provision was enacted in 1974 with the then Trade Practices Act, with the rationale that the boundaries between competition law and IP rights would thereby be clarified.

The Committee recommended the repeal of section 51(3).

Ban on geoblocking as an option of last resort

While the Committee acknowledged that in some cases geoblocking is a necessary business practice, it also noted that many IT vendors appear to use geoblocking as a means to raise prices by constraining consumers' ability to access the global marketplace.

The Committee recommended that the Australian Government consider enacting a ban on geoblocking as an option of last resort, should persistent market failure exist in spite of the changes to the Competition and Consumer Act and the Copyright Act recommended in the report.

The Committee also recommended that the Australian Government investigate the feasibility of amending the Competition and Consumer Act so that contracts or terms of service which seek to enforce geoblocking are considered void.

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