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Analysis

Rip-off Britain: excuses exposed

Posted on 12 Jul 2007 at 10:54

Tech firms keep asking us to pay more than our American counterparts for the same products. But do their excuses have any merit? Stewart Mitchell asks the experts.

Computer companies have long seen Britain as a modern-day Treasure Island, where prices are bumped up as soon as goods arrive on our shores. The rip-off Britain campaign transformed the way cars are sold in the UK, and brought prices into line, but we're still an easy target when it comes to software, even in the global internet age.

Both Microsoft and Adobe recently released long-awaited upgrades to industry-leading software packages, but instead of being greeted with open arms by consumers, vastly inflated prices have prompted unprecedented animosity. "In the UK, a full copy of Vista Ultimate will cost you £350; in the US, it will cost you £195," says Paul Milne, a disgruntled consumer who set up a pricing petition on the Downing Street website. "The US version of Vista is exactly the same as the UK version. There's no difference, so I can see no reason for such a huge difference in prices between the UK and the US, other than Microsoft simply ripping us off."

Microsoft isn't the only company in the dock over price discrimination. Adobe, the biggest hitter in the world of graphics and web design, has riled its normally loyal community with an outrageous mark-up on this side of the Atlantic. Adobe Creative Suite 3 Master Collection costs $2,499 in the US. That's around £1,270 in UK money, but Adobe has priced the CS3 Master Collection at £1,969 excluding VAT - an astonishing £800 higher than the US price. "What surprises me is that there seems to be no coherence. It's only where they have little competition that the price difference is so extreme," says Danielle Libine, a financial analyst and critic of Adobe's pricing. "For example, it isn't so dominant in video software as it is in Photoshop or design software, and there's a smaller mark-up in Europe for video products."

The anomalies don't stop with Microsoft or Adobe: they can be seen almost across the board. Quark, for example, charges British customers twice the US price for QuarkXPress 7, while Corel puts a 91% premium on buying Paint Shop Pro in the UK. And it isn't only software; it's hardware and music too. When the PlayStation 3 finally arrived in the UK, it cost £425, compared with £300 in the US and £250 in Japan, while Apple is facing European court action for selling the same content at varying prices - with the UK once again topping the pricing charts.

The manufacturers have myriad excuses for why goods are so much more expensive in the UK. They vary from exchange-rate fluctuations to the cost of translating software into Flemish, but are these "factors" mere smoke and mirrors to hide an ugly truth; that we're charged more because they can get away it?

We'll examine the most common excuses in fine detail, asking economic experts to deliver their verdicts on the validity of the manufacturers' claims. We'll also look for loopholes where you can make the most of the weak dollar and buy direct from the US, helping to beat the great software rip-off.

The manufacturers' excuses:

1 - It's the retailers' fault: we don't set prices
2 - Fluctuating exchange rates mean we have to protect ourselves
3 - European taxes force up prices
4 - Economies of scale and greater competition mean US retailers sell for smaller margins
5 - We set prices according to local market conditions
6 - VAT makes UK prices look artificially high
7 - Regionalising software is a substantial additional cost
8 - The cost of doing business is higher in the UK
Conclusion

Author: Stewart Mitchell

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For more details about purchasing this feature and/or images for editorial usage, please contact Jasmine Samra on pictures@dennis.co.uk

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