Channel slams parallel importation proposals

Channel slams parallel importation proposals

The risks involved with parallel importing outweigh any potential benefits, according to resellers and vendors alike, but the industry is facing an uphill battle convincing a Government bent on lifting parallel importing restrictions to lower software prices.

Formulated late last year, the lifting of parallel importing restrictions is advocated by the Australian Consumer and Competition Commission (ACCC) and the Department of Communications, Information Technology and the Arts (DCITA). Based on research undertaken between 1998 and 1999, the Government argues that software prices are too high by international standards.

The presumption that

distributors and resellers are over-charging for software has angered resellers, who see the lifting of parallel importing restrictions as opening the floodgates to pirated software and a calculated political move designed to favour large, mass-market resellers over niche players.

John Fox, manager of Sydney-based reseller IT National, said it is rare to see Australian prices any more than a few percentage points above recommended retail prices in the US considering the recent current exchange.

"These decisions are being made by a bunch of do-gooders who think they'll save people money," he said. "Software and hardware are commodity products being sold on small margins. People who think prices are too high have their heads in the clouds, not in the real world."

His sentiments were shared by John Telitidis, proprietor of Melbourne's Downtown Software, who fears the changes will wipe out independent resellers and advantage larger retail chains. "If software costs too much, it is not the fault of the channel," he said. "Our margins are so thin, it's barely worth being in business."

"In distribution, nobody is making any money," said Fox. "And the channel is certainly not making any money. Where do these people get off thinking we're gouging the market? Maybe they should get a real job instead of pontificating about what might be the case".

The pontificators, as it were, are adamant their research speaks for itself. The ACCC's 1998-1999 research, referred to by one reseller as "so out of date it's Neanderthal", suggests Australians paid 12 per cent more for business software than in the US. "The importation provisions of the Copyright Act restrict competition to the detriment of consumers by granting an import monopoly to copyright holders," a statement from ACCC chairman Allan Fels read.

This research is backed by DCITA, which is using the issue to suggest the ALP has "no idea how the Internet works", in that they do not support the Government's proposal to remove the restrictions.

This is in stark contrast to the comments of John Donovan, managing director of security software vendor Symantec Australia, who said he has to keep Australia's pricing comparable to overseas prices, or consumers would buy from US Internet sites and bypass Australian subsidiaries and their channel partners all together. Donovan is a director of the Business Software Association of Australia (BSAA), which is opposed to the lifting of parallel importation restrictions due to the threat of pirated software filtering onto the Australian market. The BSAA's research, undertaken late last year, found UK software prices are actually 22 per cent higher than Australia, and Australian prices are only 3.5 per cent higher than the US.

"The lifting of parallel importing restrictions scares the hell out of me," said Donovan. "The ACCC has been giving out the wrong information".

Downtown Software's Telitidis said the economies of scale that independent retailers work at will prevent them from being able to deal with distributors from overseas that are able to offer the discounts.

"Someone like Ingram Micro in the US would laugh at an order of 20 or 30 units - they start dealing in the thousands of units," he said. "So I can't obtain software any cheaper. And often distributors and vendors have contractual agreements that restrict the exporting and importing of software anyway, so again it makes the legislation redundant - a whole lot of fluff. But some of the bigger players, the Coles Myers and Harvey Normans, have the negotiating power to overcome that, or they might just open an office in the States and import it from there."

Richard Weadon, marketing manager at catalogue-based reseller Adelong, believes the lifting of the restrictions will lower prices and increase the threat of piracy. But he does not believe it will wipe out independent resellers because even though larger chains will get better prices from their new suppliers, they are not necessarily going to pass that saving onto the consumer.

Telitidis said that while the point of lifting the restrictions is to encourage competition, it will effectually ruin those resellers that offer advanced service and technical support and favour supermarket-style chains.

"In my opinion, it will not bring about competition," he said. "It will destroy the already fragile software industry and play straight into the hands of the larger players. Independent retailers, such as myself, will potentially get wiped out by this legislation."

"It won't bring prices down, it will work the other way. When we get pushed out, there won't be any motivation for the big players to keep prices lower. It might sound good on paper, but in practice it will destroy businesses."

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