The remaining agenda for free traders

Sony had also been active in the US, using litigation or the threat of it to stop software developers allowing Sony games to be played on ordinary PCs, and likewise for other games to be played on Sony Playstations. Restrictions on encryption have the immediate effect of denying a lot of the fair use exemptions that normally apply under copyright legislation, such as making back-ups and recording for later viewing, as well as activities undertaken for purposes such as criticism, comment, news reporting, teaching, scholarship or research. Those costs are of course not borne by the Sonys of the world who use technology restrictions to make sure that a game user has to buy a player from the same company in that example.

In the past, former ACCC chair Professor Allan Fels has expressed concern about the emerging practice of inserting copy protection measures into CDs, which has the effect of making illegal copying more difficult but also prevents the use of back-up copies and makes CDs unplayable on some equipment. However the complications have grown exponentially since then.

The trend is curious since in many ways video and audio are converging with computer goods and services and the computer industry has been at the forefront of pushing for common standards and interoperability; the ability of products from different vendors to be able to operate together—except Apple of course. The Australian Government also has a strong position on interoperability. In the main the policy involves developing and adopting the relevant international standards, which themselves reflect the pressure to make ICT software and hardware that can plug into each other without causing major problems for business users. It appears that business and other large users have been able to make gains with common standards and interoperability. However, interoperability seems to elude items designed for retail consumers.

Australian consumers were briefly able to overcome those restrictions on Sony Playstations by purchasing a ‘mod chip’ that overcame the region coding. Sony took action, but the Federal Court accepted that the effect of regional coding was to restrict the playing of games, not to restrict copying of games and was therefore not worthy of protection under law. That decision was appealed and eventually went to the High Court.

The High Court ruled in favour of the plaintiff. The High Court held that the owner of a legally acquired DVD has the right to enjoy it and the regional discrimination interfered with the rights of the consumer.

Despite that ruling, DVD players and games sold in Australia are generally restricted to playing only disks from region 4 or region B for Blu-ray. It seems that while the manufacturers cannot stop you modifying a DVD player in Australia, we cannot make manufacturers supply us with multi-region players but that is what is needed.  

Whatever the legal issues involved, it is clear that some of the industry practices are designed to maximise profits rather than prevent piracy. The economic argument would be overwhelming if such things as region coding were to make CDs and players from different Australian states or different Australian retailers unable to operate with each other. However, when national borders are involved the economic arguments seem to be missed.

The use of DVD regions can only be rectified by international action that makes it illegal to use technological fixes to discriminate against customers, no matter where they might be.

The DVD example shows how companies are willing to restrict the way people may use their products so as to preserve a monopoly or exploit a region. In principle the digital revolution means that storage and playback opportunities are virtually unlimited but society goes backwards every time restrictions are imposed on the technology in the interests of some corporate strategy designed to protect market power.

But there are other ways that companies restrict our choices when for example warrantees are not honoured if a product is used in a country different to the country in which it was purchased. Warrantees and other after-sales services are hardly an issue with some products such as CDs and DVDs, but they certainly are if an Audi is purchased overseas and brought to Australia rather than purchased from an Australian dealer. Motor vehicle importers are able to exploit those advantages and take the premium prices paid by Australian consumers.

Companies that do a lot of their business on-line are able to discriminate on the basis of the email address of the customer. For example offers made by UK travel agents and airlines are not available to Australian customers. Music from a US site often cannot be downloaded to an Australian email address.

To date the free trade agenda has been directed at the things that prevent foreign business from supplying to Australian consumers; mainly quotas and tariffs. Now the important barriers facing consumers are those imposed by business themselves. Traditionally competition policy has only been applied within a particular jurisdiction. However, the big emerging issues in international trade increasingly involve competition issues that span international borders. For that reason future trade agendas should include coordinated action to prevent multinationals manipulating their products so as to preserve their monopoly positions.