Copyright, Parallel Imports and National Welfare: The Australian Market for Sound Recordings

For more than a decade now there has been considerable, often heated, debate over the issue of the parallel importation of sound recordings into Australia. Citing anti‐competitive monopolistic distribution, an increasingly integrated global market and the challenges of new technologies, the Australian government recently passed the Copyright Amendment Act (No.2) 1998, which permits the parallel importation of ‘non‐infringing’ copies of a sound recording. This paper investigates the economic rationale underpinning this regulatory change and, using a partial equilibrium model, attempts to measure the likely welfare effects on consumers, copyright owners and the nation. In addition the paper examines the likely welfare impact of piracy within the new regulatory framework. This paper demonstrates that in a global music market characterised by exclusive territorial licences and price discrimination, the removal of parallel import restrictions by a small net‐importer of intellectual property may be welfare enhancing for the nation. This welfare gain is at the expense of largely foreign copyright owners.