Chapter 4 Copyright, circumvention, competition, and remedies
4.1
While chapter 3 canvassed some of the reasons provided by industry for
practicing price discrimination, including higher costs for businesses
operating in Australia, themes relevant to copyright law and competition arose repeatedly
in discussions on IT pricing in Australia. Issues of access for users,
ownership and licensing of content, and managing the impacts of infringement
were also raised regularly. The development of the copyright regime, and its
ability to adequately adapt to the challenges presented by an environment with
increasing amounts of digital content were discussed in context with the
balance between often competing rights of creators, owners or users to access
that content.
4.2
Discussions about copyright and intellectual property inevitably include
considerations of who benefits: what gives one party an advantage may
disadvantage another. The Committee notes the many intersecting, and often
conflicting interests, and that what might appear by one party to be solutions
to problems, are seen by another party as threats to livelihood. The Committee
notes that interpretations are often disputed and interests are often opaque.
4.3
This chapter discusses these broad issues of intellectual property as
they apply to competition and consumer rights. The Committee notes that in the
current legislative framework, there is tension between treatment of physical
and digital content, and that current rules are seen by some to be inadequate.
The Committee acknowledges the development of measures, including geoblocking,
and methods to circumvent such measures, and their different impacts on
consumers and industry. The Committee notes that some remedies proposed by
inquiry participants to alleviate the effects of price discrimination are
therefore not universally agreed, including those relating to the nature of
rights and their protection, the legality of circumvention measures, the means
of maintaining competition in markets, and how to improve clarity for consumers.
The chapter concludes with an overview of some international aspects:
harmonisation of warranties and standards, and concerns about trade
negotiations.
4.4
The Committee also notes that several claims from inquiry participants
relating to price discrimination are not relevant to copyright issues,
and may simply be business decisions for which there is little observable
explanation. In its consideration of all of the above issues the Committee
notes previous and ongoing inquiries into Australia’s copyright regime.
Balancing copyright interests
4.5
Many of the IT products which appear to be subject to international
price discrimination are protected by copyright. According to Dr Nicholas Suzor
and Ms Paula Dootson, copyright scholars from the Queensland University of
Technology:
Copyright operates to provide an incentive for firms to
invest in the production and distribution of creative expression. As a
utilitarian statutory monopoly, it operates to balance the incentives provided
to producers against the interests of the public in having rich access to
expression. Seen this way, access is the goal of copyright – access to culture
is a predicate for individuals to learn, grow, create, and contribute back to
society.[1]
4.6
This inquiry has heard evidence suggesting that the balance between
rights holders and consumers in Australian copyright law has shifted in recent
years as a consequence of changes in the way content is delivered, changes in
the terms under which content is acquired, and changes in the ways in which
consumers are permitted to use the content they have purchased. The Committee
notes the views of rights holders that these changes have at least in part been
motivated by the incidence of copyright infringement, which is discussed later
in this chapter. In the view of some observers the balance has swung in favour
of rights holders at the expense of consumers, reducing competition in
copyright markets and generating higher prices for copyright material,
including through international price discrimination.
4.7
In its submission to the inquiry, the Treasury noted that the rights
conferred by copyright and intellectual property laws have an inherent
potential to generate price discrimination:
… intellectual property laws provide various rights for the
protection of economic investment in innovation and creative efforts. To the
extent that these rights allow rights holders to control the marketing and
distribution of goods and services, there is a potential for price
discrimination, should the rights holder choose to do so.[2]
4.8
Lack of balance and competition in the copyright system can generate
excessive prices for copyright material, which represents a significant social
cost, according to Dr Suzor and Ms Dootson.[3] The Australian
Competition and Consumer Commission (ACCC), in its submission to the Australian
Law Reform Commission’s ongoing Copyright and the Digital Economy review
highlighted the need for balance in the copyright regime:
Absent copyright laws, it is possible for users to ‘free-ride’ on copyright materials by using
them without payment. Consequently, there may be inadequate incentives for
investment in the creation of copyright materials that consumers value…
[However], the costs for economic efficiency and consumer welfare associated
with too high or too extensive protections for IP rights may be significant.[4]
4.9
In its review of the Australian copyright system in 2000, the
Intellectual Property and Competition Review Committee (the Ergas Committee) also
noted the importance of balance in copyright.[5] The Ergas Committee’s
report argued that while copyright legislation must seek to ‘redress the
problems associated with free riding’, it must also ‘address the adverse
economic effects that a grant of protection itself may create’:
It is, in this respect, a fallacy to suggest that policies
conferring more income on copyright owners in and of themselves are socially
desirable relative to those that confer less. Rather, the goal of the
intellectual property system is to provide a sufficient incentive for socially
useful investment in creative effort...Over-compensating rights owners is as
harmful, perhaps even more harmful, than under-compensating them.[6]
Development of current legislative framework
4.10
The Committee has considered the development of the copyright regime described
by industry and consumers throughout the course of this inquiry. Clearly the
increased presence of a digital IT environment has created challenges for
interpretation of the balance of rights of access by consumers, protections for
the artists, and the ability to generate financial benefits. It has also meant
that ideas of appropriate competition are contested.
Copyright and competition in physical media
4.11
Many inquiry participants addressed issues of costs and competition, and
described how these have been managed prior to the advent of the digital
environment. The issue of parallel imports was raised extensively, and demonstrated
claims that in a digital world, those rules are rapidly losing relevance.
4.12
The Committee notes the Choice description of parallel importation:
Parallel imports are legitimately produced goods imported
into another country. The goods are manufactured with the authorisation or
consent of the intellectual property rights owner and subsequently imported
into another country by an unauthorised distributor. Unlike pirated
(counterfeit) goods, parallel goods are genuine and manufactured by the
intellectual property owners, or licensee of the owner.[7]
4.13
Parallel importation of copyright material is prohibited by sections 37
and 102 of the Copyright Act 1968 (Cth). For much of the last century
these sections effectively shielded copyright holders in Australia from
international competition by preventing consumers and business from importing
copyright material from cheaper overseas markets.
4.14
From the late 1980s, however, the Australian Government progressively removed
parallel import restrictions (PIRs) for certain products after reviews by the
Prices Surveillance Authority and the Copyright Law Reform Committee. In
response to these reports the Copyright Act was amended in 1990 to permit the
parallel importation of books in limited circumstances, and again in 1997 to
permit the parallel importation of CDs.[8]
4.15
The Ergas Committee observed in 2000 that PIRs ‘are likely to confer on
the owners of copyrighted material the power to charge higher prices to
Australian consumers than would otherwise be the case’.[9]
In relation to PIRs, the report said:
The Committee’s considered view is that the restrictions do
allow higher prices to be charged for the protected material than would
otherwise prevail. A significant proportion of the benefits from these higher
prices flow to foreign rights holders. The corresponding costs are borne in
Australia, by Australian consumers and industries - such as the domestic
software industry - that use imported protected material as an input in their
production process. The Committee does not believe the gains to Australia from
these restrictions outweigh their costs.[10]
4.16
Subsequently, PIRs on e-books, periodicals, sheet music and ‘legitimate
software’ were removed by the Copyright Amendment (Parallel Importation) Act
2003 (Cth).[11] In 2009 the Productivity
Commission was asked to review the effects of continuing PIRs on books,
concluded that reform is necessary, and therefore recommended that PIRs be
terminated.[12] The ACCC has also
advocated the removal of PIRs, most recently in its submission to the
Australian Law Reform Commission’s review of copyright law. In its submission
to the ALRC, the ACCC emphasised its long-held opposition to PIRs:
[The ACCC] has consistently held the view that parallel
import restrictions extend rights to copyright owners beyond what is necessary
to address the ‘free-rider’ problem...[G]ranting a monopoly right to import
creates the potential for market power to be conferred on copyright owners.[13]
4.17
Submissions to this committee indicate that parallel importation of
physical media is one of the most effective ways for Australian consumers to
mitigate international price discrimination in relation to copyright material. Mr
Philip Noonan, Director-General of IP Australia, advised the Committee that the
organisation ‘favour[s] the retention of the capacity for parallel importation’,[14]
and the Committee notes Choice’s arguments that this can be a useful mechanism
in reducing international price discrimination:
Parallel imports help overcome IT price disparities in two
main ways:
n presenting consumers
with lower-priced options for goods; and
n putting competitive
pressure on copyright owners to reduce their Australian prices.
If more consumers engaged in parallel importing, this would
pressure copyright owners to reduce prices in the Australian market.[15]
4.18
Several inquiry participants have noted the benefits Australian
consumers derive from parallel imports and have called for remaining
restrictions to be abolished. The Australian Digital Alliance and the
Australian Libraries Copyright Committee (ADA/ALCC), for example, argued in its
submission that the remaining PIRs on books should be removed. Citing the history
of independent reviews which have found PIRs to be ineffective and inefficient,
and noting the negative effects of the remaining PIRs on Australian libraries,
the ADA/ALCC recommended that:
Existing parallel importation restrictions in Australian copyright
law should be repealed, to facilitate more competitive pricing of content by
domestic retailers and increase consumer choice.[16]
4.19
After surveying the history of independent reports and subsequent
amendments to the Copyright Act, Dr Matthew Rimmer, a copyright scholar
at the Australian National University, concluded that PIRs should be repealed,
in order to ‘promote consumer choice, competition, and innovation’.[17]
Dr Rimmer’s views were supported by Dr Suzor and Ms Dootson.[18]
4.20
Although Assoc Prof Weatherall argued that lifting remaining PIRs in
relation to books and movies would increase competition, the precise extent to
which this might translate into lower prices was uncertain:
If local retailers were able, by sourcing parallel imports,
to charge a lower price (closer to cheaper prices being charged overseas) this
could, indirectly, put pressure on high prices charged to Australians seeking
to purchase online. Whether this would in fact occur would depend on all kinds
of qualifications and complications (such as local reluctance to source
parallel imported goods in order to preserve relationships with suppliers.)[19]
4.21
Although the publishing industry did not directly address the issue of
parallel import restrictions, industry representatives noted that the industry
has been subject to frequent government reviews.[20]
Evidence from the movie and music industries did not directly address the issue
of PIRs, instead stressing the ‘dynamic and highly competitive’ state of home
entertainment markets.[21]
Copyright and competition impacts of the shift to digital content
4.22
The shift to digital content has transformed the market for copyright
material in fundamental ways, including impacts on business models, and access
to copyright material by consumers. According to Mr Matt Minogue, First
Assistant Secretary of the Civil Law Division at the Attorney-General’s
Department (AGD), digitally distributed content is treated differently to
content on physical media in terms of copyright law:
The whole issue of parallel importation was very much a
paradigm in the context of physical supply. It does not really apply in the
digital world…[22]
4.23
The Committee notes that digital distribution of copyright content is
governed to a much greater extent by contractual and licensing agreements which
can effectively prevent consumers and businesses from accessing content in
cheaper overseas markets. Mr Minogue noted that these licenses can be regarded
as a right in themselves and acknowledged that they can be used to defeat
parallel importation:
If the original owner has divided the market up in such a way
that you can sell to one market and someone else can sell to another, leaving
each licensee to exploit it as they can in a different market, it also means
that contractually you may not be able to sell at all to the other market.[23]
4.24
The Committee has heard concerns that the terms under which digital
copyright content is distributed, combined with recent expansions in the rights
of copyright holders, may limit competition in copyright markets. The ACCC noted
that situations can arise in which the extent of the rights provided by
copyright may cause competition issues:
Although the mere grant and use of copyright seldom conflicts
with competition laws, in some circumstances, the extent and use of those rights
may give rise to competition concerns and be detrimental to efficiency and
welfare... [G]ranting a monopoly right to import creates the potential for
market power to be conferred on copyright owners.[24]
4.25
The ACCC further observed in its supplementary submission to the inquiry
that:
… a monopoly right to import, or a monopoly which is
analogous to a monopoly right to import through exclusive digital delivery, is
only one way in which market power might be conferred on copyright holders.
Market power might also, but not necessarily, arise through licensing practices
such as collective or exclusive licensing.[25]
4.26
This evidence suggests that in markets for digitally delivered content,
rights holders may enforce regional pricing arrangements, creating a monopoly
right of sale and substantially lessening competition. The Committee notes that
the evidence it has received highlighting high price differentials for
digitally delivered copyright material may be an early sign that competition in
copyright markets is lessening.
Access to digital works
4.27
As noted at the beginning of this chapter, impacts of copyright
provisions over digital content on consumers and industry are contested, as are
views as to how an appropriate level of competition is achieved. Some inquiry
participants disagree with industry claims that more choice means more
competition in copyright markets; the Committee also notes conflicting views as
to effects on pricing, including for IT products. The following section
canvasses some of the views on the benefits and disadvantages to stakeholders
in a digital market.
Choice and immediacy of access
4.28
The Committee acknowledges evidence from rights holders and industry
groups as to the advantages for consumers of copyright content; for example,
more choices as to how copyright content is accessed. Mr Dan Rosen, CEO of
the Australian Recording Industry Association (ARIA), highlighted ‘a huge range
of options’ available to music consumers, noting that ‘a music fan in Australia
has more opportunity to purchase music in different ways than at any time
throughout history.[26]
4.29
Mr Jose Borghino of the Australian Publishers Association also
emphasised the variety of options Australian consumers have in accessing
written content:
Apart from new e-book platforms… consumers can now log onto
the search engines like booko.com.au and choose between American or British
hardback editions mailed to them with free freight through Book Depository UK
and US… They can buy second-hand books from AbeBooks or de-accessioned library
books from Better World Books… They can go online and buy the book direct from
the publisher…. The Australian book market is extremely competitive, with
Australian consumers having more access to a greater diversity of titles than
ever.[27]
4.30
The Committee acknowledges that digitally delivered content can also
offer advantages over physical media in terms of near-immediate access to
content, and notes that this may be an advantage for which consumers may elect
to pay a higher price. The Committee notes that with this increased level of
immediate access, there is arguably an even greater focus on copyright
protection and industry claims about the need for protective actions.
Justifications for these claims are considered below.
IT pricing and copyright infringement
4.31
The Committee notes that there are many reasons for industry to take
action against copyright infringement, and not all will be canvassed here. The
Committee is also aware that consumers do not necessarily accept industry
explanations that price discrimination can, at least in part, be defended by a
need to protect against copyright infringement. The Committee understands that
consumers will often seek to access material in the most cost-effective way
possible.
4.32
Rights holders may seek to justify the use of contractual and technical
devices, which may have the potential to affect competition, on the basis that
such devices prevent copyright infringement. Rights holders have argued in
submissions and in evidence before the Committee that copyright infringement
threatens creative industries and that government action is needed to address
it. The Committee has also heard evidence, however, which suggests that high
prices for copyright material and anachronistic business practices may
undermine the copyright regime generally and may also serve to generate
infringement. This section will outline the evidence presented to the Committee
in support of these competing claims.
4.33
In relation to the issue of copyright infringement, the Committee
acknowledges concerns of rights holder organisations in the music, movie and
publishing industries about the ongoing unauthorised access to copyright works
made possible by the internet. The Committee received contrasting evidence as
to the impacts on revenues for industry or costs to consumers.
4.34
Submissions from the music, movie and publishing industries demonstrated
that copyright infringement is of concern to rights holders, and has a serious negative
impact on industry revenue. ARIA, for example, indicated in its submission that
copyright infringement is a serious issue for its members:
… a major issue for the Australian recorded music sector
today is the impact of piracy. … Unlike some other jurisdictions, there is no
coherent industry or legislative framework in Australia to deal with the
problem of unauthorised access to music.[28]
4.35
As noted in chapter 3, Universal Music Australia Pty Ltd (UMA) stated
that the prevalence of illegitimate music downloads and streaming has led to ‘a
rapid decline in willingness to pay for recorded music’.[29]
In describing the impacts of piracy, UMA stated:
The enormous impact of piracy on the supply of authorised
recorded music has dramatically reduced the resources available to UMA and
other record companies to invest in new music. It has also fundamentally affected
the way in which record companies make music available to consumers…
Piracy has already irreparably damaged the recorded music
industry and will continue to be a major competitor to legitimate sales for as
long as it remains unchecked.[30]
4.36
The Australian Home Entertainment Distributors Association (AHEDA) made
a similar argument in its submission:
It is important for the Committee to recognise that Australia
has some of the highest rates of online piracy (both peer-2-peer and streaming)
infringements in the world and 90 per cent of P2P piracy in Australia is
infringing. Australia is currently exposed without a legislative regime to
counter such behaviour.[31]
4.37
Mr Ross Gibb, Group Managing Director at Macmillan Publishers Australia
noted that the publishing industry increasingly regards copyright infringement
as a significant problem:
The main issue that we have with piracy is that people can
circulate one digital file in very large numbers very quickly, and of course it
removes the commercial value for that book.[32]
4.38
Mr Jose Borghino of the Australian Publishers Association elaborated:
It is a growing problem, and we estimate that once the NBN is
up and running it will become a bigger problem. All the content industries in
Australia are very worried about the increase in piracy that we are facing in
the future.[33]
4.39
While copyright holders are clearly concerned about the impact of
infringement on their industries, the Committee heard evidence that the impact
of infringement may be less severe than rights holders claim. Mr John
Stanton, from the Communications Alliance, advised the Committee that in
contrast to the claims of rights holders, the entertainment industry grew
significantly over the last decade. In describing the overall state of the
entertainment industry, a 2012 report notes that:
… you wouldn’t know it, just listening to the entertainment
industry talk about how much the entertainment industry is ‘dying’, but data
from PricewaterhouseCoopers (PwC) and iDATE show that from 1998 to 2010 the
value of the worldwide entertainment industry grew from $449 billion...to $745
billion. That’s quite a leap for a market supposedly being decimated by
technological change.[34]
4.40
The report cites statistics demonstrating growth in world-wide
box-office receipts and broader film industry revenue, as well as growth in the
global music industry.[35] In addition, the report
cites US government statistics which indicate growth in the last decade of
household spending on entertainment, and growth in employment in the
entertainment industry, and suggest that the number of creative works being
produced has grown ‘at a tremendous rate’.[36]
4.41
In relation to the problem of widespread copyright infringement, Mr John
Stanton, CEO of the Communications Alliance, stated that, while there are
several reasons behind high rates of infringement, ‘one of the most obvious of
those is the lack in some cases of availability of legal and affordable online
content’.[37]
Mr Stanton also argued that artificial barriers to content created by
rights holders can have a huge impact on the level of copyright infringement,
and that geoblocking is a ‘classic generator of online piracy’.[38]
4.42
Mr Stanton advised that the price of copyright material can have a
significant impact on infringement, and cited a pricing experiment conducted by
computer game vendor Valve (owner of the distribution platform Steam), where the
price of one of its most successful games was reduced by 75 per cent, and sales
revenues skyrocketed.[39]
4.43
The Committee received evidence that high prices and limited availability
of content can also undermine the ‘the legitimacy of Australian copyright law’.
[40] Dr Suzor and Ms
Dootson cited research which explored consumer perceptions of fairness, and how
content restrictions and price discrimination affected the perceived legitimacy
of illegal downloading:
The more that Australian copyright law is seen as
anachronistic and supportive of perceived unfair business practices, the less
likely it is to be followed. The apparently unjustifiable difference between
prices in Australia and comparable European and US markets is likely to lead
consumers to infringement.[41]
4.44
The study found that Australian consumers consider higher prices to be
‘discriminatory’, that they make them feel like ‘second-class citizens’, and
that this can create a mindset in which infringement is seen as more
legitimate.[42]
Consumer submissions to this inquiry overwhelmingly support this view.[43] Dr Suzor and Ms
Dootson went on to argue that high prices and limited availability of copyright
material can generate infringement and undermine the copyright system as a
whole, and concluded that:
… by failing to provide reasonably priced, effective, and
convenient legal distribution channels, some copyright owners are contributing
to infringement and the growing disregard for copyright law. In this context,
recent attempts by copyright owners to shift the burden of enforcing copyright
law to taxpayers (through criminal copyright regimes) and to internet
intermediaries (through litigation against ISPs and lobbying for graduated
response regimes) should be treated with strong scepticism.[44]
Measures to limit access to content
4.45
From the above discussion, the Committee notes that despite industry
claims about the costs of copyright infringement, consumers insist that their
rights to access copyright material are being unfairly limited by methods such
as copyright law provisions, or mechanisms such as geoblocking, which as
discussed in earlier chapters can take various forms. The Committee also notes
suggestions that copyright provisions can have a practical effect of reducing
competition. The Committee acknowledges claims that access to content is sought
in various ways, and notes that these claims are often the subject of debate
about legitimacy.
4.46
The Committee notes the distinction between technological protection
measures (TPMs) and geoblocking technologies. Mr Minogue of AGD, explained
that:
… general geoblocking devices that allow market segmentation
would not of themselves be a technological protection measure...to the extent that
the Copyright Act allows an owner or assignee of property to impose a TPM over
the content, that is not the same thing as geoblocking.[45]
4.47
AGD suggested that it is unlikely that geoblocking mechanisms could be
considered to be TPMs. The department observed that a particular geoblocking
technology would only be protected under the Copyright Act if it falls within
the definition of a TPM in section 10(1) of the Copyright Act, which requires
the TPM to be used:
n in connection with
the exercise of the copyright;
n by or with the
permission of the owner or exclusive licensee of the copyright in the material,
and
n to control access to
the work or other subject matter.[46]
Technological protection measures
4.48
TPMs (also referred to as effective technological measures, or ETMs) and
digital rights management systems (DRM) are measures designed to prevent
unauthorised access to or copying of copyright protected content. TPMs initially
appeared in the 1990s, in response to concerns held by copyright owners about
the rise of easily reproducible digital media. The Australian Copyright
Council, in its submission to the current review of the TPM regime, has described
access control TPMs as:
… a type of technological lock that prevents a person from
accessing copyright material without permission...Technological protection
measures are vital in enabling copyright owners to develop new business models
and make their material available in digital formats.[47]
4.49
TPMs are justified by some rights holders as necessary to protect
content from copyright infringement,[48]
but the Committee notes that some TPMs are easily circumvented. The 1996 World
Intellectual Property Organisation copyright treaty provided for legal remedies
to make circumventing TPMs illegal.[49] Subsequently, legal
protections for TPMs were introduced in many international jurisdictions in the
late 1990s. Australia enacted measures in the Copyright Amendment (Digital
Agenda) Act 2000 (Cth). As a consequence, as Assoc Prof Weatherall noted in
her submission:
Australian copyright law makes it illegal to circumvent
certain (access control) TPMs, to manufacture/provide/transmit a device for
circumventing TPMs, or to provide or offer a service for circumventing TPMs.
Circumvention of access control TPMs for a commercial offence is a criminal
offence – a provision that would not impact on individual consumers but could
impact on Australian businesses seeking lower prices for software.[50]
4.50
The Committee notes Dr Rimmer’s observation that laws around TPMs are a
form of ‘paracopyright’ – it is illegal to circumvent a TPM which has been
applied to content, even when that content would otherwise be in the public
domain. Under TPM laws, copyright holders effectively have the ability to
control access to works, whereas previous copyright only allowed control
of the uses falling within exclusive rights.[51]
4.51
Industry groups did not provide any evidence to this inquiry in relation
to TPMs. However, concerns about TPMs were raised in several submissions to
this inquiry. Dr Suzor and Ms Dootson argue that while TPMs were developed to
protect the interests of copyright holders and should not protect market
segmentation, ‘the reality of TPMs has turned out much differently’. Dr Suzor
and Ms Dootson observe:
TPMs now appear to impose significant costs on legitimate but
technically unsophisticated users. They prevent users from making backups of
their software as permitted by the copyright act. They prevent blind people
from using software to read books aloud. They cause untold headaches for
consumers who purchase content only to find that the copy protection is faulty,
rendering their purchase useless. If and when Australia introduces new
copyright exceptions to allow commonplace activities like making backups of
digital copies of films, books, games and music; and making copies of each of
these for viewing on portable devices or over cloud services, these activities
will also be hampered by TPMs. They do not, however, prevent technically
sophisticated individuals from breaking the locks and engaging in large-scale
infringement.[52]
4.52
Dr Rimmer argues that not only have TPMs been largely ineffective in
preventing copyright infringement (thereby failing at the task that is their
primary justification), there is also evidence that:
… TPMs have been used for anti-competitive purposes in
attempts to control secondary markets for remote controls, printer cartridges,
data storage, and wireless telephone services. There
have also been a number of cases in which there have been difficulties engaging
in security testing and reverse engineering because of the use of TPMs.[53]
4.53
The ADA/ALCC submission notes that TPMs can limit or prevent a number of
legitimate uses of content by libraries, schools and universities. The
submission cites a list provided by the Copyright Advisory Group of the
Standing Council on School Education and Early Childhood representing
Australian schools and TAFES, which highlights:
… circumstances in which teachers are prevented from using
content because of TPMs, even where the intended use of that content is non-infringing
under copyright law. Where TPMs are attached, educators cannot:
n Create subtitled
versions of films for hearing impaired students
n Use devices other
than a DVD player (like iPads, laptops, content management systems) to play
protected DVDs in the course of classroom instruction
n Compile film clips
and other snippets of content protected by TPMs to aid student analysis or
classroom discussion.[54]
4.54
The ADA/ALCC also describes practical challenges for legitimate users:
Even where copyright law recognises a specific situation in
which TPMs can be circumvented or removed, in practice this may be difficult to
achieve… Digital locks attached to content can restrict a user’s ability to
print, copy or email portions of the text as permitted under copyright law, and
in some circumstances, library staff do not have the technical expertise or
circumvention device to remove the lock.[55]
4.55
This evidence indicates that TPMs can restrict competition in copyright
markets by preventing consumers from accessing and using legally acquired
content in legitimate ways. The Committee is also aware that TPMs have been
used in some circumstances to enforce geographic market segmentation (that is,
as a form of geoblocking).
Geoblocking
4.56
As discussed earlier in this report, geoblocking is the term given to
the methods vendors have adopted to differentiate between regions and to keep
customers separate (see chapter 2). From the perspective of industry, it can be
a legal means of conducting business. From the perspective of consumers (see
chapter 3), it can mean being unfairly overcharged for IT products or
discriminated against based on geographical location. The Committee heard about
interpretations of geoblocking practices as they relate to copyright and
debates about access to intellectual property, including the way in which it
has been suggested that practices have unintended consequences for consumers,
markets and the copyright regime.
4.57
Despite positive developments in terms of the choices offered by rights
holders to consumers to access content, Dr Suzor and Ms Dootson elaborated on
content vendors’ attempts to limit competition by capturing consumers within
‘walled gardens’:
The recent trend has been towards the creation of locked
digital ecosystems: phones locked to app stores, book readers locked to single
retailers, music and films only playable on the retailing company’s devices,
computer games only available through a single digital distributor. One of the
unfortunate results of this trend is to drive up prices for consumers and to
enable publishers to exercise unprecedented control over how and where cultural
goods are enjoyed. This is bad for three reasons: increased control over how
media is used limits legitimate acts of consumption, expression, learning,
sharing, and cultural play; increased prices and closed ecosystems limit
consumer access to cultural goods; and perceived unfairness challenges the
legitimacy of copyright law.[56]
4.58
Another way in which rights holders exercise control is through the
license agreements under which copyright content is acquired. Cyberworld
Publishing explained that digital content is not purchased in the same sense
that physical media are purchased. Instead, consumers purchase a license to
access that content:
An e-book may be accessed electronically but it always
remains the property of the publisher. An e-book purchaser merely acquires a
license or the right to access and read the contents of a file they download.
They cannot perform any actual process or manipulation with the contents of the
e-book file and should not transfer it or its contents - which are subject to
copyright - to anyone else.[57]
4.59
Similar licensing conditions are attached to the acquisition of other
digital media. Conditional licenses to access copyright content contrast
sharply with the traditional rights of consumers over purchased copyright
content and have broad flow-on effects in relation to the cost of copyright
material. The Committee notes views regarding impacts of restrictive licenses,
for example, the prevention of resale, on competition. According to Dr Suzor
and Ms Dootson, the lack of a robust secondary market entrenches the monopoly
power of distributors.[58]
Limits to geoblocking strategies
4.60
Dr Rimmer noted that for copyright owners who may have hoped that their
business models would be protected by elements of ‘technological protection
measures, digital locks, strong economic rights [and] strong enforcement’, this
hadn’t occurred. [59]
In his submission, Dr Rimmer states:
Australian consumers have been locked out by technological
protection measures; subject to surveillance, privacy intrusions and security
breaches; locked into walled gardens by digital rights management systems; and
geoblocked.[60]
4.61
At a public hearing, Dr Rimmer told the Committee:
You would have to say over the last decade the choices by the
big copyright owners in publishing, music and film have been to try to rely on
exclusive rights, to have a very tight control of that regime through peer
networks, but that strategy has not necessarily been effective. Really in the
void these other intermediaries have appeared because they have helped satisfy
consumer demand for legitimate products in an accessible way.[61]
Methods of accessing cheaper goods
4.62
As the Committee has been advised, consumers have developed many ways to
improve their ability to access content despite geoblocking mechanisms. According
to Ms Erin Turner from the Australian Communications Consumer Action Network:
… consumers, due to the high prices in Australia, use a
number of methods to purchase overseas—or at least the particularly savvy
consumers do. They might shop while they are travelling; they might purchase
through online stores that know they are selling to Australia; or, as we are
increasingly seeing, services are offered on online—virtual private networks or
even stores—that give you a fake US address and then courier products to
Australia. They allow you to access those cheaper products.[62]
4.63
Consumers may use a proxy server or a virtual private network (VPN) to
bypass IP address-based geoblocking. Proxy servers and VPNs create an encrypted
tunnel between a customer’s computer and a server elsewhere, usually in another
country. The customer’s internet traffic is routed through that server and as a
result vendor websites recognise the IP address of the server, rather than that
of the customer, which may enable consumers to access content that would
otherwise be region-blocked.
4.64
Many IT vendors seek to further enforce geoblocking by checking
customers’ credit cards at the point of sale, or by only shipping to addresses
within a certain region. These geoblocking methods can be challenging for
consumers to circumvent. The Committee notes however, that other options are
available to consumers seeking to access lower overseas prices. These include
the purchasing of US iTunes store gift cards through intermediaries set up for
that purpose and by making use of ‘freight-forwarding’ companies which ship
goods from the US on behalf of overseas customers.
4.65
The Committee was made aware of various ways which enable access to cheaper
computer games. Many consumers expressed a preference for parallel importation
of physical media from online stores based in cheaper jurisdictions – the
UK-based ozgameshop.com being among the most popular.[63]
The Committee is also aware of means by which consumers can access CD keys
re-sold from cheaper markets – a practice not generally approved by games
publishers, who have been known to remove English-language support from those
games, making them unplayable.[64] The Committee also notes
that some vendors may terminate a user’s account and confiscate that user’s
legally purchased items if it decides they have breached the terms and
conditions which enable geoblocking.[65]
Legality of circumvention methods
4.66
While many submissions strongly support the avoidance of geoblocking
mechanisms put in place by IT companies and vendors, there is also uncertainty
as to whether such actions are legal in all circumstances, including as a
possible breach of the Copyright Act’s anti-circumvention provisions in relation
to access control TPMs.
4.67
AGD noted that ‘the relevant provisions of the Copyright Act have not
been tested by a court. There are no judicial decisions that provide any
further guidance as to whether a particular technology would be considered a
TPM or not.’[66] However on the basis of
a plain English reading of the definition, AGD:
… considers it unlikely that the technologies discussed would
fall within the definition of an ‘access control technological protection
measure’. Where a geoblocking technology is not a technological protection
measure, the Copyright Act does not prevent a person bypassing that geoblocking
technology.[67]
4.68
Assoc Prof Weatherall, while agreeing with AGD in some respects, reached
a less definite conclusion on whether geoblocking mechanisms could be
considered to be TPMs:
Determining whether geoblocking is prohibited turns on
deciding whether technologies used to enforce geographical market segmentation
fall within the definition of an ‘access control technological protection
measure’ (ACTPM) under section 10 of the Australian Copyright Act.[68]
4.69
According to Assoc Prof Weatherall, it is ‘far from straightforward’ to
determine whether a particular form of geoblocking is protected under the
Copyright Act. Such a determination would need to consider:
n the way the
technology works
n how Australian courts
could interpret the anti-circumvention provisions of the Copyright Act, and
n the language of the
Act itself, which is ‘complicated and opaque’.[69]
4.70
Assoc Prof Weatherall considered it ‘unlikely’ that requiring a US
credit card or US mailing address could ever be considered as an TPM because
‘such measures are too distant from the exercise of copyright rights’. However
geoblocking technology on the basis of IP address raises ‘questions of legal interpretation
for which we have no guidance from the legislative history or court decisions’.[70]
4.71
In addition to uncertainty over the extent to which geoblocking
mechanisms can be considered TPMs, the Committee has heard that there is some
uncertainty surrounding the extent to which Australians are permitted to
circumvent geoblocking TPMs.
4.72
The Committee understands that section 10(1) contains an exception which
permits Australians to circumvent some TPMs. The exception arose as a
consequence of the High Court’s decision in Stevens v Kabushiki Kaisha Sony
Computer Entertainment (Stevens v Sony).[71]
In that case the High Court ruled that the circumvention of TPMs designed to
enforce geographical market segmentation – specifically, the installation of
‘mod chips’ in PlayStation gaming consoles – was permitted. In his analysis of
the case, Dr Rimmer notes that:
… the High Court was concerned that an expansive
interpretation of ‘TPMs’ would provide unwarranted protection to regional
coding devices, which would allow copyright owners to engage in price
discrimination between markets.[72]
4.73
As a consequence of the High Court’s decision in Stevens v Sony,
the Copyright Act was amended to permit the circumvention of some TPMs. Section
10(1) provides that Australians are permitted to circumvent a TPM if it is
applied to a ‘film or computer program (including a computer game)’ and if the
TPM ‘controls geographic market segmentation by preventing the playback in
Australia of a non-infringing copy of the [content] acquired outside of
Australia’.[73]
4.74
The ADA/ALCC noted that the application of the section 10(1) exception
is not clear, as it may exclude geoblocking TPMs which: are applied to books,
music or other content; are applied to content acquired in Australia; do not
‘prevent playback’; or which have a dual purpose.[74]
4.75
This evidence may suggest that the TPM provisions of the Copyright Act
are not intended to protect geoblocking mechanisms. The Committee notes the
views of Assoc Prof Weatherall that:
… the law in this area is plagued by uncertainty. Thus
submissions suggesting that the legal status of circumvention of geoblocking
mechanisms is a grey area are correct.[75]
4.76
Considering the evidence above, and earlier in this chapter, the
Committee has considered areas where remedies have been proposed, or may be
desirable.
Possible remedies to address IT price discrimination
4.77
This chapter has considered the issue of price discrimination in the
context of legal frameworks and formal pricing mechanisms. It has considered
the competing and often overlapping interests of industry and consumers, based
on evidence received during the course of the inquiry. The Committee received
various suggestions as to possible remedies to matters which affect the cost
burden on Australian consumers, as well as the challenges of providing a
sustainable and competitive market. In this section, the Committee deliberates
on some areas for possible remedy, including some of the conflicting claims and
predictions about their success, and makes recommendations accordingly.
Parallel importation restrictions
4.78
The Committee notes views of inquiry participants that the shift to
digitally delivered content has altered the balance between the interests of
rights holders and those of consumers. The Committee notes concerns about finding
a balance in the copyright regime and that, in order to address this challenge,
remaining restrictions to parallel importation of goods should be removed. The
Committee concurs with views that the remaining restrictions on parallel
imports are neither appropriate nor necessary.[76]
Recommendation 4 |
|
|
The Committee recommends 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. |
Clarification of legality of measures
4.79
The Committee notes 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 possibly be liable for
prosecution. Consumer group Choice was among many inquiry participants who expressed
the view that the government should act to remove doubts about the legality of
circumventing geoblocking:
The confusion surrounding IP address lockouts means that many
consumers may be civilly or criminally liable by circumventing ‘access control’
TPMs… Choice believes that such
circumvention should be exempt because consumers are merely accessing products
and services which are being provided knowingly and willingly by the copyright
holder.[77]
4.80
The ADA/ALCC suggested that the Copyright Act could be amended to ensure
that Australian consumers who remove, disable or circumvent geoblocking
mechanisms should not be subject to civil or criminal sanctions.[78]
In her submission, Assoc Prof Weatherall canvassed the possibility of drafting
legislative amendments to ensure that Australian consumers who do take steps to
circumvent geoblocking are not acting in breach of the Copyright Act:
In my opinion it would be possible to draft an exclusion to
ensure that Australian consumers who take steps to evade technical measures
used to enforce market segmentation on the basis of geographical location are
not at risk of infringing the Copyright Act 1968. Such measures should be
excluded from the definition of ACTPM [an access control TPM]. This would
protect consumers, although individual consumers are unlikely to be sued. More
importantly it would have the effect of ensuring that commercial providers of
services for evading geoblocking do not risk liability under the Copyright Act
1968; either civil liability under the manufacturing or services provisions of
anti-circumvention law, or accessorial liability for assisting others to
undertake a criminal act.[79]
4.81
Assoc Prof Weatherall further expressed the view that such amendments
could be adopted consistent with Australia’s international obligations and
would have the effect of removing any doubt regarding the potential liability
of consumers for circumventing geoblocking technology.[80]
4.82
The Committee notes evidence from AGD that geoblocking devices which
allow market segmentation are not of themselves a TPM.[81]
The Committee also notes AGD’s view that ‘the Copyright Act is not the
appropriate vehicle to consider any such proposed amendment’.[82]
Recommendation 5 |
|
|
The Committee recommends that the Australian Government
amend the Copyright Act’s section 10(1) anti-circumvention provisions to
clarify and secure consumers’ rights to circumvent technological protection
measures that control geographic market segmentation.
|
|
|
Recommendation 6 |
|
|
The Committee further recommends that the Australian
Government investigate options to educate Australian consumers and businesses
as to:
n the
extent to which they may circumvent geoblocking mechanisms in order to access
cheaper legitimate goods;
n the
tools and techniques which they may use to do so; and
n the
way in which their rights under the Australian Consumer Law may be affected
should they choose to do so. |
Increasing competition and protecting consumer rights
4.83
While some inquiry participants suggested that current levels of
competition are adequate, the Committee notes that not all share the view of
ARIA that no change is needed as ‘very considerable choice’ exists for
consumers. Referring to the number of services currently operating in the digital
sector of the retail segment of the market, and the abundance of free or
near-free services, ‘there is no policy justification for governmental
intervention by price regulation or by trying to prohibit national differential
pricing’.[83]
4.84
The Committee notes that evidence was received from inquiry participants
which suggested that several aspects influencing competition should be considered
for possible remedies:
n competition in digital-only
markets
n mobility and rights
in ‘locked’ environments, and
n powers of the ACCC to
operate in IP markets.
Copyright in a digital-only environment
4.85
The Committee received evidence noting that existing competition
pressures in copyright markets may only be exacerbated if content is only available
in digital form. Consumers’ ability to access content at internationally
competitive prices may be severely constrained. If content is no longer
distributed via physical media which can be parallel imported, evidence from
some inquiry participants suggested that competition would likely be adversely
affected, and rights holders may come to exercise significantly increased
market power.
4.86
The Committee notes the views of the ACCC and others that this may result
in negative outcomes for consumers and the Australian economy more generally,
owing to the greater cost burden on Australian consumers. The Committee sought
additional advice from AGD as to whether the potential loss of the ability to
parallel import warranted any government action to maintain competitive
markets. In its response, AGD noted that the ‘marketplace is evolving very
quickly, in terms of method of content delivery, physical or digital form and
domestic and international markets’, and that:
Buying content in an electronic form is ultimately a
consumer’s decision. While ever content exists in a physical form such as CDs
and DVDs, parallel importation may still be a relevant option. However,
parallel importation applies only to hard copies, as the focus is on goods that
are imported at the border.[84]
4.87
The Committee notes that the ACCC has stated that it is aware of, and
adopting a watching brief in relation to, potential competition issues arising
from technological changes in respect of copyright markets:
Given there remains some uncertainty about whether exclusive
digital delivery models will become the only mode of delivery in the future,
the ACCC has not formed a view at this time as to whether such a move would
necessarily raise competition concerns. The ACCC notes that technological
change, including the emergence of exclusive digital delivery models may raise
concerns about the nature and extent of copyright. The ACCC considers that, to
the extent possible, copyright protection and exceptions should operate on a
technology neutral basis. The ACCC will continue to monitor developments in
relevant markets carefully to ensure that competition is not restricted.[85]
Mobility and rights in ‘locked’ environments
4.88
The Committee heard evidence to suggest that in order to increase
competition, some mobility in digital markets is necessary. Dr Suzor and Ms
Dootson suggest that in order to ensure that distributors do not engage in
anti-competitive behaviour, it is critical to limit their monopolies:
Consumers should be able to access digital content from a
range of suppliers, and creators should have a range of distribution channels
available to them.[86]
4.89
Dr Rimmer also addressed these issues in his submission, which contained
a quote from IT consumer activist Cory Doctrow in relation to Amazon’s e-book
cloud service:
...the Kindle is a
‘roach motel’ device: its license terms and DRM [Digital Rights Management]
ensure that books can check in, but they can’t check out. Readers are
contractually prohibited from moving their books to competing devices; DRM
makes that technically challenging; and competitors are legally enjoined from
offering tools that would allow readers to break Kindle’s DRM and move their
books to other devices.[87]
4.90
The Committee notes the views of Dr Suzor and Ms Dootson about the need
for the ACCC to take a more active role in investigating whether the contractual
restrictions vendors and distributors attach to content do not limit
competition or consumer rights. They also recommend that the government
establish a legally protected right of resale for digital content.[88]
4.91
The Committee notes the Australian Law Reform Commission’s ongoing
review of copyright in the digital economy, and AGD’s review of TPM exceptions,
and will continue to monitor developments in this area with interest,
especially with regard to the way in which consumers’ rights to legitimately
use legally acquired copyright material are affected.
Recommendation 7 |
|
|
The Committee recommends that the Australian Government, in
conjunction with relevant agencies, 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. |
Powers of the ACCC to operate in IP markets
4.92
The Committee was interested during the course of the inquiry in the
effects of changing demands of markets, and ongoing suitability of legislative
frameworks. The Committee was advised that section 51(3) of the Competition
and Consumer Act 2010 (Cth) (CCA) exempts intellectual property (IP)
licenses from some parts of Australia’s competition law. While limited, the
exemptions are potentially significant. According to the ACCC:
Section 51(3) … provides a limited exception for certain
licence conditions from the competition provisions of the CCA (misuse of market
power and resale price maintenance are not exempted). While the extent of the
exception is unclear, it potentially excludes significant anti-competitive
conduct, with substantial detrimental effects on efficiency and welfare, from
the application of the CCA.[89]
4.93
The Committee notes the views of Dr Rimmer, who argued the section acts
to ‘constrain the circumstances in which the ACCC can investigate instances in
which there are restrictive trade practices in relation to intellectual
property rights’.[90] The Committee also notes
suggestions made by some inquiry participants that the section has the
potential to permit copyright holders to engage in anti-competitive behaviour.
According to the ACCC:
… section 51(3) has the effect of exempting the imposing, or
giving effect to, conditions of IP licences and assignments from the competition
provisions of Part IV of the CCA (except sections 46, 46A and 48) to the extent
that the condition relates to the subject matter of the IP.[91]
4.94
The section 51(3) IP exceptions were enacted with the then Trade
Practices Act (now the CCA) in 1974. At the time, according to the ACCC:
… it was likely that IP laws were believed to confer on the
owners of IP a limited economic monopoly. This led to a concern that the
unrestrained application of competition law to IP could undermine IP rights.
This original rationale is no longer relevant. It is now accepted that,
generally, IP laws do not create legal or economic monopolies.[92]
4.95
The ACCC has a long-standing position in favour of repealing section
51(3). In its submission, the Commission said that:
The object of the CCA is to enhance the welfare of
Australians through the promotion of competition and fair trading, and
provision for consumer protection. While recognising the importance of granting
and protecting exclusive intellectual property rights, the ACCC considers that
the subsequent licensing or assignment of those intellectual property rights
should be subject to the same treatment under the CCA as any other property
rights.[93]
Recommendation 8 |
|
|
The Committee recommends the repeal of section 51(3) of the Competition
and Consumer Act 2010. |
Options for removing geoblocking restrictions
4.96
Consumer groups have argued for the removal of geoblocking to reduce
pricing discrepancies between Australian and overseas markets. Choice, the
Australian Retailers Association and the Communications Alliance all supported
such a change, and the Committee notes the view of the Australian Information
Industry Association that geoblocking mechanisms ‘warrant scrutiny’.[94]
4.97
Mr Matthew Levey of Choice told the Committee that geographical
restrictions are ‘increasingly making no sense’ in a global marketplace. Choice
recommended further investigation and potential removal of such restrictions,
labelling the measures ‘anti-competitive when they result in significant price
differentials for Australian consumers’.[95]
4.98
The ADA/ALCC submitted that there should be ‘a general prohibition on
all geoblocking mechanisms … where these mechanisms serve to enforce different
prices and associated conditions of use of content by Australian consumers’.[96]
4.99
Industry groups argued that the government should be cautious in framing
a response to geoblocking. AIIA CEO Suzanne Campbell noted that:
The challenge for us though is that these arrangements are
legacies from other times when we were seeking to protect Australian content …
To the extent where we were prepared to be exposed to a global market, then
there may be a basis for negotiating a different outcome with international
providers of comparable content.[97]
4.100
Adobe’s Mr Paul Robson argued that government should be conscious of how
its policy on geoblocking could affect business confidence:
In relation to the first question on geoblocking I think that
as representatives of the people of this country and in relation to running and
governing the country you would need to take into account the impact that would
have on organisations globally being willing to invest in the country and run a
local operation employing staff and building an ecosystem that delivers inputs
and adds value to the economy.[98]
4.101
In response to consumer calls for action to remove geoblocking
mechanisms, and in its consideration of possible remedies, the Committee sought
input from three relevant government stakeholder agencies, and notes their
responses. Treasury cautioned against interventions in the market. Mr Geoff
Francis advised the Committee that:
Treasury is not a fan of geoblocking technology. We are
certainly not enthusiastic about price discrimination where it results in
Australians paying higher prices. But we are wary of forms of intervention
which may end up being counterproductive.[99]
4.102
Mr Francis noted that legislation which seeks to ban geoblocking may be
counterproductive:
We would be very wary of more interventionist measures that
seek to dictate the terms on which consumer and business transactions take
place. We believe that they may stifle innovation and reduce competition
further … Those types of measures should only be considered if there is a
significant market failure that would cause what we would term a substantial
and persistent consumer detriment. We do not believe that such a market failure
has yet been demonstrated in this space.[100]
4.103
AGD also cautioned against an attempt to ban geoblocking. To prevent the
use of geoblocking it would be necessary ‘to be satisfied that such legislation
would not introduce adverse or unintended consequences such as having the
effect of limiting content available to Australians’.[101]
The AGD noted that any legislation would only impact geoblocking used on
Australian websites, and that a possible outcome of a move to ban geoblocking
would be ‘that offshore suppliers may not provide goods to Australia, or there
may not be any local distributors, which may ultimately drive up prices for
Australian consumers and lead to further online piracy’.[102]
4.104
Mr Marcus Bezzi from the ACCC argued that Australian consumers’ efforts
to circumvent geoblocking – including through illegal downloads – would tend to
undermine geoblocking over time, and that this might make a legislative
response unnecessary:
From our point of view as a competition regulator, these
things—and I should say the illegal downloading capacity, which is well-known
to many Australians, including probably the majority of teenagers—operate to
put some competitive tension into the market. If the methods start to become a
big enough way in which consumers are circumventing the limitations that are
imposed by the companies on consumers, those methods can start to have an
impact on sales, and we are aware that that can have an impact in the market.[103]
4.105
While the Committee acknowledges that in some cases geoblocking is a
necessary business practice, it also notes 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 considers this form of geoblocking to be
a significant constraint on consumer choice.
Recommendation 9 |
|
|
The Committee recommends 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 this report. |
Options for voiding contractual arrangements
4.106
The Committee notes that AGD also addressed suggestions from consumers
and consumer groups that Australia should deny copyright protection to products
sold on websites utilising geoblocking technology:
From a copyright perspective, Australia has obligations to
provide copyright protection in most circumstances where a work satisfies the
basic elements required for copyright to subsist. Where copyright would
otherwise subsist in material, the international agreements to which Australia
is a party would not allow Australia to deny copyright protection to a
copyright owner purely because geoblocking was used in the sale of a work (most
likely by someone other than the copyright owner such as a licensee or
distributor).[104]
4.107
The possibility of using the unfair contract provisions of the
Australian Consumer Law (ACL) to void contractual terms that seek to enforce
geoblocking was also raised during the inquiry. In response, the Treasury noted
that such measures may not be easily enforceable:
It may be possible to draft a specific law that voids
contract terms that seek to enforce geoblocking. However, as with any
Australian law, the effectiveness of such a measure on the rights of Australian
consumers engaging in contracts internationally may be impacted by the laws
applying in the relevant international jurisdiction. This may include: where
the foreign law was the proper law governing the contract in question; when the
requirement was imposed on an Australian distributor by an international IP
rights holder (such as through an exclusive licensing agreement); or if the geoblocking
mechanism was already embedded in the product prior to sale in Australia. In
such circumstances an Australian law voiding contract terms may be ineffective.[105]
4.108
The Committee notes, however, evidence from the ACCC suggesting that it
is possible to regulate aspects of international trade. Mr Marcus Bezzi of the
ACCC said:
If there is any anticompetitive purpose associated with the
policies that the companies are applying then there is something that can be
done, from our point of view. And that is the case whether the supplier is in
Barton or in Botswana. From our point of view, if the supplier is engaging in
business in Australia, supplying services to Australians, and it is doing
things to stop people from getting access to lower priced goods and it is doing
it for an anticompetitive purpose, then action can be taken against them.[106]
Recommendation 10 |
|
|
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. |
Banning price discrimination
4.109
In response to views from consumers which suggested that price
discrimination could be removed by legislative change, the Committee investigated
options, noting a former legislative provision which prohibited price
discrimination.
4.110
Section 49 of the Competition and Consumer Act (the CCA, known at the
time as the Trade Practices Act 1974), ‘made it illegal to offer or
attempt to induce discriminatory pricing if the discrimination was of such
magnitude or was of such a recurring or systematic character that it was likely
to have the effect of substantially lessening competition’.[107]
4.111
Section 49 was repealed after a number of reviews found that it operated
to reduce price flexibility, had inflationary effects, and that other sections
of the act (especially the provisions on anti-competitive agreements and misuse
of market power in sections 45 and 46 of the CCA) would likely address breaches
of the section.[108]
4.112
Treasury’s Mr Geoff Francis noted that price discrimination laws may
function differently to the way they are intended:
Anecdotally, the suspicion is that it [a price discrimination
ban] reduces price flexibility rather than increasing it, because typically the
activity you see is one company taking another company to court to stop them
from discounting.[109]
4.113
Consequently the Treasury recommended against reintroducing a provision
similar to section 49. The Committee concurs with this view.
Prospects for international cooperation
International warranties and standards
4.114
Consumer groups argued in submissions to the inquiry that more
Australian consumers would shop online if they had confidence that goods they
bought overseas were still covered by a warranty. At present, in many cases,
such products are either not covered or warranties are difficult to enforce. While
chapter 2 looked at consumer perceptions of warranties, and chapter 3 described
cost impacts on industry, in this chapter they are considered in terms of
international harmonisation.
4.115
Mr Madison Cartwright from Choice advised the Committee that some larger
IT companies, particularly Apple and Dell, already provide international
warranties,[110] but Ms Erin Turner from
ACCAN warned that making overseas purchases can also involve some risk:
What these consumers may not know is that Australian consumer
law possibly does not extend to these international purchases or, if it does,
the law would be extremely difficult to enforce. This matters because if
something goes wrong it can be difficult to seek redress. These consumers may
not have access to repairs, refunds or replacements, as they would if they had
purchased the product in Australia.[111]
4.116
Ms Turner called for an international warranty regime to be developed,
to provide ‘at least some security in shopping elsewhere and accessing lower
prices—hopefully, bringing competition to Australia’.[112]
Ms Turner also acknowledged that:
Not every consumer at the moment feels competent about
shopping online. … Knowing that there is an international warranty for a
purchase can go to help ease some of that stress and nervousness.[113]
4.117
Warranty protection is of particular concern for businesses that are
heavily reliant on IT products to operate. Mr Russell Zimmerman from the
Australian Retailers Association (ARA) told the Committee that in search of
cheaper prices, many businesses would look overseas for their hardware and
software needs. However, the after sales service and support offered by
Australian suppliers is a major issue for businesses that are dependent on IT
products for their operation.[114]
4.118
Choice argued that warranties provide an indirect mechanism for IT
suppliers to reinforce regional market segregation, and that ‘some companies
explicitly state that that will not recognise a product’s warranty if it was
not bought in Australia’.[115]
4.119
In its submission to the Committee, ACCAN urged the Australian
Government to encourage the ‘development of international warranties, product
repair and replacement rights through international trade agreements and
discussions with international companies’. ACCAN further recommended that
‘education campaigns to inform consumers about the limits of Australian
Consumer Law for international purchases’ be undertaken by the ACCC and
consumer protection bodies.[116]
4.120
The Committee also heard evidence suggesting that the Australian
Government could relieve some pressure on IT prices by pursuing international
agreements that would reduce localisation costs for IT products. The Australian
Industry Group (Ai Group) argued that the government should:
… ensure that Australian regulation harmonises with
international approaches where possible to reduce the need for Australian
specific product requirements.[117]
The Trans-Pacific Partnership
4.121
The TPP is a proposed trade agreement being negotiated by Pacific Rim
countries including Australia, New Zealand, the United States, Singapore,
Mexico, Peru, Canada and Chile. It is envisioned that the treaty will cover
around 20 subject-matter areas, including competition, customs, e‑commerce,
intellectual property, investment, industrial relations and trade.[118]
4.122
Although no official draft text has been released, a draft of the TPP’s
proposed intellectual property chapter was disclosed by US Congressman Darrel
Issa in February 2011, and has caused widespread concern particularly among
intellectual property academics, including Dr Rimmer. Dr Rimmer describes the
content of the leaked draft chapter as ‘alarming in terms of the impact in
respect of copyright law and exceptions, parallel importation restrictions,
technological protection measures, and, more generally, consumer rights’.[119]
4.123
Given that the draft IP chapter contains provisions which would appear
to require legislative changes to enact in Australia, the Committee wrote to
the AGD seeking clarification on the Department’s statement that the TPP would
not require legislative change and did not represent an expansion of copyright
protections. AGD responded:
Your letter refers to a document made public by US
Congressman Darrell Issa which purports to contain text of the intellectual
property (IP) chapter of the Trans-Pacific Partnership. This document has not
been acknowledged by the US Government as official text. As such, and as the IP
negotiations are ongoing, it would not be possible or appropriate for me to
address the clauses identified in your letter or speculative comments made by
academics on the purported text.[120]
4.124
The Committee notes concerns about the potential impact of the TPP on the
Australian copyright regime. Article 4.2 of the draft TPP IP chapter, if
adopted, would appear to entrench parallel import restrictions in an
international agreement.[121] It has also been
suggested it would more tightly constrain Australia’s freedom to adopt its own
regime governing the use of technological protection measures (TPMs).
4.125
The Committee sought a response to these concerns from the AGD, as the
agency that administers the Copyright Act. In response, Mr Matt Minogue,
First Assistant Secretary of AGD’s Civil Law division, said:
We are aware of those views. Our position is that the TPP in
terms of copyright would not require any amendment to the Copyright Act for
Australia to implement—subject to it still being negotiated. So they are not
views that we share.[122]
4.126
The Committee notes failed attempts in the US to enact expansive
copyright regimes similar to that suggested by the leaked draft chapter. In 2011
and early 2012, two pieces of IP-focused legislation – the Stop Online Piracy
Act (SOPA) and the Protect Intellectual Property Act (PIPA) – were abandoned
after significant public protest against them. Similarly expansive provisions
were contained in the proposed Anti-Counterfeiting Trade Agreement (ACTA) which
foundered after the EU refused to ratify it and the Australian Parliament
highlighted significant problems with the treaty.[123]
4.127
The Committee notes the observation made by the Joint Standing Committee
on Treaties in relation to the secrecy with which DFAT conducted negotiations
for the Anti-Counterfeiting Trade Agreement:
…confidentiality is not common or appropriate in IP
negotiations which impact directly and in minute detail on domestic law and
domestic innovation policy.[124]
4.128
The Committee further notes that the Australian Law Reform Commission is
currently conducting a review into copyright and the digital economy, and that
the Attorney-General’s Department is currently reviewing Australia’s TPM
exception regime. The Committee agrees with the Joint Standing Committee on
Treaties that any international agreement relating to intellectual property
should not pre-empt the outcome of, nor be incompatible with, those reviews.[125]
Mr Nick Champion MP
Chair