Consensus IT Writers Awards
27 March 2001
The Australian IT and www.australianIT.com.au
Submitted for Most Controversial category
REGIONAL restrictions on DVDs could be an anti-competitive practice and a breach of the Trade Practices Act, the Australian Competition and Consumer Commission has warned.
DVD hardware and software makers encode DVDs to play in one of six regions around the world as a means of controlling release dates and fighting piracy. Australia – along with New Zealand, Central and South America – is region four. The United States is region one and Japan is region two.
The restrictions mean that Australian consumers wanting to buy imported titles must buy a DVD player from the appropriate region or modify their machines. Legal advice obtained by The Australian IT is that it is legal to put a chip or smart card in a machine to play imported DVDs, as long as the it does not also allow the machine to play copied discs.
But such a change usually voids the product warranty.
ACCC chairman Allan Fels said the commission was investigating whether restrictive region coding breached the Trade Practices Act.
"If the manufacturers have an agreement to do that, it looks like an anti-competitive agreement breaching not only Australian law but laws in other countries," Professor Fels said.
The commission would make recommendations to federal Parliament in a few months, but there were jurisdictional issues, he said.
"It is a breach of Australian law to make an agreement offshore that harms competition in Australia," Professor Fels said.
"In practice, it may or may not be easy to enforce the law against overseas countries."
Possibilities included international co-operation to force the DVD industry to change its ways, or legislation to declare Australia a market that would only sell multiregion DVD players.
"I would like it to be region zero here, but it depends on co-operation," Professor Fels said. "I'm not opposed to a law that would have that effect.
"I would consider that."
Warner Home Video Australia managing director Marc Gareton said the decision to encrypt DVDs by region was made by the DVD Forum in Tokyo – a committee of hardware manufacturers and movie studios. The original members were Toshiba, Panasonic parent company Matsushita, Warner Brothers and Sony.
Mr Gareton said region restrictions allowed movie importers to ensure DVDs were not available in a country before a movie's release in cinemas.
"There are a lot of reasons why movies can't be released in cinemas all round the world on the same date – mainly the cost of film prints and marketing," Mr Gareton said.
"If a DVD is released in the US six months after the US cinema release and plays on every machine around world, we would have a situation where DVDs would be available in countries before cinema release. If that happened it could shut down large numbers of cinemas.
"If it's available on DVD, I'd be surprised if people would go to the movie."
Mr Gareton said piracy was another concern, because a DVD made a good master copy – unlike VHS video, which degraded with each copy.
South-East Asia and China each had their own regions because of rampant piracy.
Another reason was compliance with national censorship ratings.
"The Australian release could have cuts of scenes with violence and sex," he said.
"The distributor might be happy to release a movie in Australia as MA, but the original movie would have been an R."
Warner had conducted market research and consumers did not seem to have an issue with region coding.
The issue of different formats for different regions was not new, because videos were released in either PAL or NTSC format, he said.
Consumers keen to watch imported movies could always buy a second DVD player for the appropriate zone.
"As a free consumer you can buy what you want as long as the machine can play what you buy, but as a retailer you cannot import without permission from copyright owner," Mr Gareton said.
Mr Gareton said it would be problematic for governments to force the DVD industry to change.
Region coding was specifically included in the DVD patents so it was possible a manufacturer selling a multi-region machine could not legally call it a DVD player.
Also, some DVDs did not play in multi-region players.
"A region-four disc might not play in a modified machine because it's supposed to check that the machine is coded the same as the disc," he said.
"If the Government took the decision to only allow multi-region players in the country, they would be inviting the consumer to spend $300-400 on a machine and then buy software that would not play.
"That would be an interesting decision – I would find it difficult to believe."
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