Rip-off Britain

Rip-Off Britain is an expression coined by the tabloid press in the late 1990s to describe dissatisfaction with certain products costing more in the United Kingdom than in some other countries, especially certain members of the EU and the United States. Such complaints are particularly prevalent in the media when the Pound is strong, as this makes overseas prices lower in sterling terms.

Origins

The phrase Rip-Off Britain came out of a campaign run by the Consumers' Association in 1998 aimed at lowering car prices in Britain, which were at the time, and despite legislation outlawing it, significantly higher than the EU average.

The Consumers' Association hired a stand at the British International Motor Show, only revealing on press day its true purpose. The organizers (SMMT, Society of Motor Manufacturers and Traders) decided not to fan the media flames by ejecting the Consumers' Association.

The phrase, "Rip-Off Britain" had already taken a hold on the media and it became a term in frequent media usage, used to describe anything that was wrong with Britain. Along the way, it proved to be one of the elements that led to a tipping point for car prices, with prices harmonizing with the EU very quickly.

The campaign was devised by UK advertising agency Claydon Heeley, who are known for this type of "guerrilla" work.

Rip-Off Britain Today

Other products which still cost significantly more in Britain include:

*CDs and DVDs
*Computer Software - the most notable example being Microsoft Windows Vista
*Books
*Electrical Goods
*Houses
*Petroleum and diesel fuel

For example: The PlayStation 3 costs approximately £120 more in the UK than the US.

The defence generally used by companies subjected to "rip-off" complaints is that some of their fixed costs are higher in the United Kingdom than elsewhere. The amount of substance to this defence varies from case to case. Also, the level of indirect taxation applied to some products, such as alcoholic drinks and tobacco, varies widely from country to country.

While the UK rate of VAT is 17.5%, price differences are often far larger than this. For example when Playstation 2 was launched it cost $300 in America and £300 [Playstation 2#Price history] (this equated to around $435 dollars in November 2001) in the UK; about 38% more than the US price, once an average 5% ($15) US sales tax is added. Something else that is often not taken into consideration is that US prices are quoted before tax, while UK prices generally already include VAT. This would put the £300 UK Playstation 2 at about £255 before VAT or $370.

However, the VAT argument is something of a red herring. Firstly, the UK rate of VAT, while high, is by no means the highest in the EU - indeed all but three EU countries have higher standard rates of VAT than the UK. Secondly, the three UK Crown Dependencies - Jersey, Guernsey and the Isle of Man - are the EU's most significant VAT-exempt zones. Retailers such as Play.com operate from Jersey specifically as a means of VAT avoidance, but this has little impact on the prices UK customers continue to pay for goods.

However, the price differences compared to the US and Asia are also existent in other European countries.

Another example is Microsoft Windows Vista, where upon release it had an RRP (Recommended Retail Price) of $249 (£127) in the United States and £249 ($487) in the United Kingdom. This makes it almost twice as expensive to buy in the UK than in America, which tax differences alone cannot account for. [http://www.pcadvisor.co.uk/news/index.cfm?newsid=8214] .

The Apple iPhone provides another dramatic example. At its introduction on 11 Nov 2007 the British were asked to pay 40% more for the phone than their American counterparts. The phone was sold in the UK for $562 (£269) while the same device could be bought in the USA for $399 directly from AT&T. Apple clearly views Britain as "Treasure Island", the Apple TV was sold in Feb 2008 for $229 to US customers (http://apple.com/appletv) but for a much higher $391 (£199) to UK customers visiting the same site (http://www.apple.com/uk/appletv/). Other Apple products have a similar price ratio, UK customers expected to pay a heavy premium.

Yet another example is books. Amazon.com provides a good opportunity to research the "rip-off Britain" effect because books are an international commodity item whose price is unaffected by tax in the UK. As an example, John Grisham's book "The Broker" is listed at £6.99 ($13.74 on Feb 2, 2007) at the UK Amazon site and $7.99 for the same item at the US site. A strong pound cannot explain away this 71% price difference. However, the same book could be purchased at UK hypermarkets such as Tesco Extra and Asda for less than £3.99.

Also, the IKEA 2008 catalogue carries products priced at more than double that of European versions of the catalogue. Examples include a kitchen pictured in the German catalogue costing €1275 ( = £954.37 - www.exchangerate.com). In the UK catalogue, page 103, it's massive £2115 ( = €2825.5 - www.exchangerate.com) which is obviously more than double. Another example, page 6 "BESTA Bench Combination". In the UK costs £258 (= €344.68), costs in Germany €152 (= £113.78) which is again less than half. IKEA cite "shipping costs & taxation of goods" as reasons for the price difference.

Effect on Internet Retail

Perceived or actual higher prices in the UK often have the effect of making British consumers order goods from the Internet, whether from UK businesses claiming to break a pricing cartel (e.g. CD WOW! for CDs, TheHut.com and Play.com for CDs, DVDs, videogames and books, and Glassesdirect in the prescription spectacles business) or directly from abroad, including via eBay and other online auction sites. See UK internet businesses.

Most USA internet retailers are happy to ship directly to consumers in the UK which provides a welcome relief from the heavily inflated UK prices. Many believe that true competition from the internet and from abroad will eventually normalize retail prices and put an end to the suffering of an angry population tired of being referred to as "Treasure Island".

However, there are significant exceptions to the rule. The biggest player in music downloads, Apple's iTunes, operates a model where purchases can only be made in a domain where the users' means of payment is registered. UK customers are therefore tied to the offerings in the UK iTunes store - a disadvantage both in price terms (79p/download in the UK is significantly more than 99c/download in the US) and in terms of available choice. On 9th January 2008, however, Apple conceded that this was unfair practice and promised to harmonise prices with Europe within 6 months, citing the record labels wholesale music price as the reason.

See also

*Regional lockout
* [http://de.wikipedia.org/wiki/Teuro de:Teuro] - similar complaints in Germany after introduction of the Euro currency

References

External links

* [http://www.britishripoff.org www.britishripoff.org - Great British Rip Off Community web site.]
* [http://money.uk.msn.com/guides/salarycentre/article.aspx?cp-documentid=4750492 msn money: "Are Brits being ripped off?" (Feb 2007) ]
* [http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/30/nripoff30.xml Telegraph: "Rip-off Britain back with a vengeance (Jan 2007) ]
* [http://news.bbc.co.uk/2/hi/business/2266939.stm BBC News investigates 'Rip-off' Britain (2002) ]
* [http://www.rip-off.co.uk/ 'Rip-Off Britain' website]
* [http://www.macworld.co.uk/ipod-itunes/news/index.cfm?newsid=17010 Macworld article on iPod nano pricing in Britain (Jan 2007) ]