Gov’t to decide if Amazon investment will “be of net benefit to Canada”

TORONTO — A decision to allow Amazon.com Inc. to open a distribution centre in Canada would set a precedent for changes to Canadian foreign ownership rules, the Canadian Booksellers’ Association says.

TORONTO — A decision to allow Amazon.com Inc. to open a distribution centre in Canada would set a precedent for changes to Canadian foreign ownership rules, the Canadian Booksellers’ Association says.

“We believe there’s a reason they’re in place…and we don’t believe that reason has changed” CBA spokeswoman Susan Dayus said of the foreign ownership rules for the publishing industry in Canada.

“We want to protect Canadian culture…a foreign entity isn’t going to have the same knowledge interest or concern about Canadian books, Canadian authors, regional presses.”

Dayus said a promise on Amazon’s behalf to deliver Canadian content wouldn’t be enough because she doesn’t believe the commitment would hold up over the long term.

Amazon was tight-lipped and a spokeswoman for the company said Tuesday the company doesn’t comment on its future plans.

The Canadian Booksellers’ Association has written to Heritage Minister James Moore in an attempt to quash Amazon’s (NASDAQ:AMZN) proposal to open a “fulfilment centre,” which is believed to be a distribution centre for the web retailer to ship products bought online in Canada without relying on the third-party service it currently uses.

Canadian Heritage spokesman Tim Warmington said Tuesday the government has ordered a review of Amazon’s proposed plans to open a business called “Amazon Fulfilment Services Canada Inc.” to determine if the investment “will be of net benefit to Canada.”

He added an investment is reviewable under the Investment Canada Act, “if it falls within a prescribed specific type of business activity that is related to Canada’s cultural heritage or national identity, and if the Governor in Council considers it in the public interest.”

Under the act, foreign investment in book publishing and distribution is limited to Canadian-controlled joint ventures.

The government signalled in the throne speech last Wednesday it is opening key sectors, including the satellite and telecommunications industries, to both venture capital and investment from outside the country, which could have implications for other industries.

Last year, Ottawa overturned a CRTC decision that would have prevented Globalive from launching its Wind Mobile wireless service.

Globalive is heavily backed by Orascom Telecom Holding of Egypt which operates the brand Wind Mobile in other countries.

Jeffrey Brown, a competition lawyer at Stikeman Elliott LLP, said the existing ownership policies are designed to promote Canadian cultural products.

But, he said, a review by Canadian Heritage could allow a foreign owner, like Amazon, to establish a business on Canadian soil if, for example, it agreed to offer a minimum number of books by Canadian authors.

“It’s a bit ironic because it can require non-Canadians to be more Canadian than Canadians might be, but it has been this way to promote Canadian culture,” he added.

Brian Pow, a retail analyst with Acumen Capital, said Amazon’s move to establish a physical presence in Canada may not have much of an impact on big names like Indigo Books and Music Inc.. (TSX:IDG), which have been competing with a Canadian version of the Amazon website since 2002.

“The people who have adjusted to Amazon have already done that,” he said.

“Booksellers that have a unique business model will be fine, it’s anyone who’s just hanging on in the industry today, they should be concerned.”