By Claire Reilly
The House of Representatives Inquiry into IT Pricing has begun in Canberra today, with the managing director of Apple Australia, Tony King, taking the stand to answer questions about the brand’s pricing of hardware, software and digital content.
Speaking at the hearing — which is being attended by the Federal member for Chifley, Ed Husic, who lobbied extensively for the inquiry — King said “it is rare that Apple makes a public appearance". Indeed, Apple has only recently given permission for its submission to the standing committee, first tabled on 6 July 2012, to be published.
In this submission, the brand outlined the reasoning for price differentials on the products it sells through both its bricks and mortar and online stores.
“Apple strives to set equivalent pricing for our products around the world at the time of product introduction,” the submission read.
“When setting pricing on the Apple Online Store and at Apple Retail Stores, Apple considers differences among regions in product cost, freight, local sales taxes, levies, import duties, competitive price points, and local laws regarding advertised prices. It is at the discretion of our reseller community to set their pricing.
“Foreign currency is an important variable in how product prices are compared between countries. It is not uncommon for macroeconomic factors to cause foreign currencies to fluctuate dramatically during a product's life cycle.
“Over the period of time a particular Apple product is in the market, it may appear to be either priced higher or lower in a local market when compared to the price in the United States or elsewhere.
“Currency is not the only factor which changes during a product life cycle. Product costs, local levies, or duties may change as well. The company’s typical practice in such circumstances is to keep local prices the same, whether unfavourable or unfavourable to the company, until replacement products are introduced.
“This is less disruptive for local customers and local business channels than if Apple were to reprice products up and down on an unpredictable basis in response to all such fluctuations.”
Speaking at the Committee hearing today, King said Apple had a model to set an “equivalent price” on products across its markets across the world, and that the brand establishes this price when the product is first introduced to market, conceding that it is “an incredibly complex model to run”.
“We start with a US denominated price,” he said. “We do take into consideration some costs of doing business in a market…the per unit freight charge of an iMac for example is more expensive to bring into the Australian market than it is in another market.
“It’s a cost model.”
King remains on the stand and the hearing continues.