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Ottawa probes Amazon.com's Canadian debut

Book firms cite flouting of ownership rules

With files from reporter Roma Luciw

TORONTO -- The federal government is investigating Amazon.ca as the Web site opened for business yesterday, enraging booksellers that say the U.S. e-tailer is clearly violating Canadian ownership rules.

The arrival of the Canadian version of the world's largest Internet retailer means customers pay in Canadian currency and will no longer have to pay duties.

Jeff Bezos, the founder and chief executive officer of Amazon.com Inc., characterized the new bilingual site, which has 1.5 million titles, as a boon for Canadian consumers and publishers, as well as a champion for Canadian culture as a whole.

"Anyone who is a proponent of Canadian culture should be ecstatic," Mr. Bezos said in an interview. "We are going to make it available to the world."

But home-grown rivals in the industry see the arrival of the U.S. e-commerce colossus a different way, and called on the federal government to take action.

The arrival of Amazon.ca "opens the door to all kinds of things and changes the whole nature of the Canadian industry," said Heather Reisman, chief executive officer of Indigo Books & Music Inc., the country's largest bookseller and the one observers say has the most to lose to the new on-line competitor.

Todd Anderson, president of the Canadian Booksellers Association, said Amazon.ca is clearly flouting federal laws.

"Here we have a book policy to protect booksellers, and Amazon is going to drive a truck right through it. Amazon is clearly a foreign bookseller selling books in Canada and not caring about the rules."

He said it would be "an embarrassment" for the federal government to ignore this action.

A spokeswoman from the Department of Canadian Heritage said the government is "actively examining whether the Investment Canada Act applies."

Under the act, Canadians must hold a majority interest in booksellers.

Mr. Bezos told reporters in Toronto yesterday that Canadian ownership rules are not an issue because Amazon.ca is a U.S. company without a Canadian office or a single employee in Canada.

Even Marven Krug, the Canadian-born general manager of Amazon.ca, has his office in Seattle.

"We have been very thorough and open with the Heritage Department and had many conversations with them, and they know exactly what we are doing," Mr. Bezos said. To do this, Amazon.com has teamed with a subsidiary of Canada Post in a contracting-out arrangement that will allow it to sell books in Canada. Assured Logistics, a wholly owned subsidiary of another Canada Post company, will fill the on-line orders from a warehouse in Mississauga that will be supplied by various Canadian publishers and distributors.

Canada Post will deliver the merchandise, which at first will be limited to books, CDs, videos and DVDs, but will expand to other merchandise in coming years, Mr. Bezos said.

The fact that Canada Post -- a Crown corporation -- has teamed with the U.S. retailer ignited opponents' tempers even further.

"Canada Post has never been a friend of booksellers," Mr. Anderson said.

Monique Smith, executive director of the Association of Canadian Publishers, said her members are concerned about the Canadian ownership issue and believe cultural regulations should be respected.

It is "hard to know" if this is good or bad news for the industry, she said. "We will have to wait and see." At the same time, many individual publishers have said they welcome the new outlet for their books in a market that is dominated by the Indigo chain.

Toronto retail consultant Wendy Evans shares this view.

"I would say that any competition at the retail end is good in Canada," she said. She said Indigo currently controls close to 70 per cent of the market.

Jackie Hushion, executive director of the Canadian Publishers Council, said that, given the tough times in the industry in the past, it is hard for publishers to "thumb their noses at a new customer."

Still, she said, the industry will be watching Amazon.ca "with a microscope" to make sure it does what it is promising and uses Canadian publishers and for its site.

© The Globe and Mail

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