Ripped off and overcharged? Not necessarily

Published in The Courier Mail (Brisbane), 2 February 2010

Executives at retail giant Coles certainly have a good sense for PR. On Australia Day they issued a statement declaring an end to charging different prices for same products in their supermarkets – as if it were not only unfair but also fundamentally un-Australian not to have a nationwide pricing regime.

Clearly, to Australians who are always concerned about a “fair go”, the idea of different prices for similar products is hard to accept. Declaring Australia-wide pricing will win Coles much sympathy among consumers. No wonder Woolworths was quick to fire back with its own announcement of across-the-board price cuts. Yet apart from scoring PR points, all of this does not make much sense.

The pricing of products and services remains a mystery to many consumers. They feel overcharged when they pay more for confectionery at a convenience store than at a big store. It hardly occurs to them that it is this very convenience for which they are actually paying a premium.

With price variations within a chain of supermarkets, it is the same story. That Coles used to charge $3.49 for Lindt’s Excellence Chocolate at its Brisbane New Farm store, yet $3.66 for the same product in Darwin did not make it a crying injustice. There can be thousands of good reasons for this, not least transport costs and store rents. In any case, a 17c difference – or 4.8 per cent – is hardly outrageous. And Darwin residents could console themselves knowing that they could buy Squeezy Tomato Sauce 2c cheaper than in Brisbane.

The media, too, give Australians many reasons to feel outraged most of the time. A random news search of consumer interest stories of the past few days delivers two typical stories. According to one report, Apple was ripping off its Australian customers by overcharging them on iTunes downloads, which are cheaper in the United States. Another article revealed the “scandal” that allegedly Australia was the most expensive place to send mobile phone text messages.

Behind the seeming exploitation, the real substance of such reports is limited. Take the text message story. It suggested that Australians pay between 25c and 28c per SMS. This had the alarm bells ringing at the Australian Consumer Communications Action Network, a new agency established by the Federal Government. Its chief executive, Allan Asher, was quick to express his outrage at the big SMS rip-off.

Not so fast. If you think you pay too much for your text messages, you do not need a government-funded bureaucrat to help you. In fact, you can help yourself by just keeping your eyes open for a better tariff. At Optus, for example, even prepaid customers can get tariffs which allow them to text for 10c per message.

With the iTunes songs it is the same. True, Apple charges more here than in the US. Yet neither here nor there do they have a monopoly on selling music. Smart shoppers still have the option of finding different ways to get their favourite tunes for less.

It is probably only a matter of time until one of Apple’s rivals will make Australian music lovers a better offer. As always, a clever entrepreneur with a spirit of competition will do a better job at bringing down prices than a government busybody with the best intentions.

With all these stories about alleged over-charging it is easy to forget one thing: Consumers have no right to demand a certain price. But they have a right not to buy things when they find them too expensive. And that’s a message that even the most extortionate businessman understands.