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Consumers Worse Off Under Harsher Copyright Laws, Economists

Posted by: , 22:28 AEST, Wed September 17, 2014

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Leading economists argue against ISP piracy monitoring, saying it's not cost effective, won't help the economy and will mean higher prices for consumers
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Image/Photo Credit: Tobias Vemmenby @ Flickr, CC

As part of the Australian government's call for submissions on proposed changes to digital copyright laws, a leading economist along with the former chairman of Australia's competition regulator says that tougher copyright penalties will mean higher prices for consumers, with little benefit for the economy.

The Australian government is proposing new legislation that will put the onus on ISPs to police their own subscribers for infringing activities.

The submission, written by economist Henry Ergas and former ACCC chairman Allan Fels, and commissioned by digital industry lobbyist AIMIA, analysed the perceived benefits of a crackdown on piracy, and weighted it against the cost of running a policing regime, and found that there would be little benefit for the economy. In fact, consumers would be worse off if the legislation were made into law.

At the forefront of the argument against such a regime is the cost of running one, which based on Fels' and Ergas' analysis could cost as much as $148.8 million per year, or $20 to $30 per notice. These costs could be passed onto consumers in its entirely, if rights holders do not provide significant contributions.

Both experts also noted that even spending this full amount may not "do much to reduce piracy and significantly increase the incentives for creators".

And even the benefits to rights holders, if they materialize at all, may be offset by other factors to the detriment of the overall economy, and consumers.

"Stricter enforcement increases copyright holders' profit, but reduces consumer surplus by more - so the overall effect is a social loss through reduced consumption efficiency," the economists said.

"The increase in non-infringing demand is likely to increase the price the copyright holder can charge, making legitimate consumers worse off, which in turn increases the incentive for piracy, offsetting the effects of stricter enforcement."

In conclusion, Fels and Ergas called on the government to do their own cost-benefit analysis on the proposed changes, and called on rights holders to make content more widely available, more affordable and without the artificial delayed release windows common for content found in Australia.


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