An IT pricing wake-up call

Lenovo's move to charge an extra $700 for the Carbon X1 makes a mockery of the IT price inquiry. Is it time for Canberra to bite back?

With just one price tag Chinese PC company Lenovo has dealt a drastic blow to the integrity of Australia’s IT price inquiry.

Despite the raging media storm and ongoing parlimentary inquiry around the outrageous mark-up’s of Australian IT products, Lenovo has chosen to slug Australian consumers around $700 more than what their US counterparts will have to fork out for the Carbon X1 Ultrabook. 

What’s worse, is that the company doesn’t even feel that it needs to give an adequate reason for the drastic price hike.

Talking to CRN, Lenovo’s director of products and solutions David Heyworth argued that the cost of servicing warranties and providing IT support for its customers forced the company to add just under $700 to the Australian recommended retail price.

“We have high standards and we wouldn’t compromise on service and support that we deliver through our partners, that’s always been important. That’s where we see a lot of growth for Lenovo, being able to back up our products 100 per cent,” Heyworth said.

We’ve heard such reasons before. Heyworth’s argument fits cosily into ‘the higher cost of doing business in Australia’ argument that companies use routinely.

The problem is that the public isn't buying it and they never have. They didn’t buy it before the IT price inquiry, (hence triggering this whole mess) and are unlikely to start listening now.

The argument around the 'added costs of business in Australia' just isn’t transparent and in Lenovo’s case, how can the general public honestly accept that it costs almost $700 more per computer to ensure that it is properly serviced and supported in Australia? Particularly when the manufacturer’s warranty usually only lasts a year, and from then onwards Lenovo is able to slug consumers whatever they want to have their Carbon X1 repaired.

On top of this, another reason widely touted by tech companies for higher prices - the added costs of customs stamp duty  in Australia - has recently been contradicted by Customs Australia's own submission (PDF) to the tech price inquiry. The justifications may seemingly be on shaky ground but it's unlikely that the tech giants are too worried. 

Scant regard for the inquiry

Behind Lenovo's explanation lies a simple truth; the timing of this rip-off shows that the company doesn’t care about Australia’s IT price inquiry or any conclusions it may reach.

As with the rest of the tech giants Lenovo must see it as a toothless, fruitless process that will simply blow over once the government is done appeasing the masses. Why else would they would the majority of them not bother in showing up and co-operating with it?

The fact that the world’s major technology players don’t care about our IT price inquiry has been evident  since its commencement in May, but what’s dangerous about Lenovo’s move is it reveals that all of this talk around exposing rip-offs and forcing down prices isn’t really having any effect.

In its current format, the inquiry hasn’t changed the attitudes of any of the companies involved.  

Perhaps it may be too soon to cast the whole inquiry off as a failure, but this incident has certainly reinforced lingering questions as to whether this it will actually stop tech rip-offs in Australia.

Calls for direct intervention

This whole debacle has led RMIT senior lecturer and IT price inquiry commentator Mark Gregory to believe Australia’s prices will remain as they are, unless the government directly intervenes and empowers the Australian Competition and Consumer Watchdog to take the tech players to task.

“No way will these tech companies do anything unless they are forced,” Gregory says.

This is quite possibly an outcome that the government wants to avoid. Even Treasury has recommended against it, saying in its submission to the inquiry that the government should work on promoting local competition rather than driving down prices through legislation.

But there may be no way around it. These are incumbent, wealthy technology companies - they aren’t scared of a bit of bad publicity or a panel of politicians.

Neither the media’s commentary nor the government’s inquiry is motivating the tech giants to lower their prices. Perhaps it’s time for the inquiry to stop threatening with words and start taking some action. 

What are your thoughts on the issue? Should the government act? And if so, how? Let us know in the comments below.