IT distributors and resellers awoke this morning to an industry where the rules have changed.
Following its announcement in Thursday's Budget, a repeal of the ban on parallel import of patent and copyright goods was rushed through Parliament under urgency over the weekend, in what most commentators see as a successful ambush by Commerce Minister John Luxton.
The change, which places New Zealand in a very small group of countries, including Japan and Singapore, that allow parallelling, will jolt a number of distributors, but may open up new opportunities for enterprising resellers. It will also see some users driven to choose between better pricing and local support.
The first reading of legislation to allow imported goods to be sold without the consent of the foreign manufacturer or official New Zealand distributor was originally listed on Parliamentary order papers as a possibility for late in the day on Saturday.
Instead, the debate was brought forward to Friday morning, catching Opposition MPs off guard. According to the government the move is based on a report commissioned by Luxton from a private think tank, the Institute for Economic Research, that was released to a select group – which does not appear to include anyone in the IT industry - in February.
National MP John Carter taunted Opposition MPs for not having seen the NZIER report on Friday morning, but MPs who tried to obtain the report were told it was not yet available. So, with Labour's copyright spokesman Judith Tizard out of the country, they had little more to go on than a three page response to the report from the Book Publishers' Association.
The government blocked moves from Labour to take the legislation to select committee for a week – providing a stark contrast to the preparation of the 1994 Copyright Act, which spent months in select committee.
Many of the local firms which could be affected by the new law were either unaware of the change or unsure of its implications on Friday. Among those willing to comments was Ian Jansen, general manager of Mt.Wellington based distributor Comtech, who believes the changes will affect distributors to varying degrees.
“We’re fortunate that we focus on one area, networking. People the most affected will be those in commodity products such as network adapter cards, low end hubs (which we do sell) but we also sell more complex products that require technical expertise.
“To be honest, a lot of customers do pricing comparisons and buy in Australia. That’s something we’ve lived with for a long time. So I think we’ve become pretty competitive from a pricing point of view.”
Jansen says customers looking to buy cheap goods from parallel importers will have to think twice about warranties.
“Comtech tracks every single serial number so if someone has acquired a product externally and expects us to do a warranty we won’t. And we’re talking about products that are key parts of the network, switches, network operating software - if it dies it affects many other devices. So I don’t think many of our customers will go down that path.”
Jansen believes the people that will hurt the most are those on the gravy train.
“Those with exclusive agencies that are abusing them. Having said that, I don’t think there are very many people doing that these days. If this had happened five years ago it would have really rocked the boat.”
Microsoft New Zealand marketing manager Steve Jenkins says his company's worldwide worldwide pricing model means it is unlikely to get caught in a price squeeze by importers.
"The only difference between the price of a Microsoft product here and the price of a product overseas is going to be around local margins," says Jenkins.
"Mostly it's going to affect distribution organisations," says Jenkins. "I feel concerned about local distributors – Quark Xpress, Qbus, Sealcorp – who have had to add a bit of margin to make the whole deal worthwhile when they've got to provide after-sales support. If you've got an overseas product being handled by a local distributor, how does that distributor make enough margin to cover local support issues, and give the channel the margin it wants too?"
Although one of the objections to unrestricted parallel importing is that it will make piracy easier, Jenkins says "the product is always available overseas if you want to do that. I believe that it will push people look at potentially buying from an overseas source. In the past, you might say grey market was piracy, now they're saying it isn't, it's just legally sourcing from an external source.
"The difficulty is that people want to buy from overseas, they demand local support when things going wrong. That's happened to me several times – not typically from a price point of view, but when people have come into the country with software they've bought overseas and expect to be able to pick up local upgrade offers."
MPA Technology Distribution’s Steve Macmillan says that at the end of day if a distributor is doing a good job they should not be “overly concerned”.
“I don't see that it’s going to cause us too many aches, or any other half-reasonable distributor.”
MacMillan says people have had the ability for some time, as end users, to go to large distributors around the world, buy products and bring them into New Zealand.
“I don’t think there’s been a huge uptake of that, but that’s not to say, now the Internet is taking off, that things won't change.”