Canada Doesn’t Want U.S.-Based Bookseller to Cross Its Borders

Under heavy pressure from the Canadian publishing industry, government officials have blocked the U.S. bookselling giant Borders Group Inc. from opening stores in Canada, it was disclosed Friday.

Borders was to launch its Canadian affiliate later this year with a 50,000-square-foot superstore in Toronto’s most exclusive shopping district. However, regulators in the Industry Ministry ruled that Borders had failed to meet Canadian ownership regulations for book retailers.

Ever since news of Borders’ Canadian expansion surfaced last year, elements in the publishing industry here have lobbied hard to stop it. They say the company, which operates both Borders and Waldenbooks in the United States, would drive small, independent bookstores out of business and would order from U.S. rather than Canadian publishers.

The Borders decision is the latest in a series of controversial protective measures taken by Canada against U.S. publishers, broadcasters and other distributors of entertainment, who, it is argued, are trying to elbow aside Canadian companies in their own cultural market.

Borders, headquartered in Ann Arbor, Mich., recruited three Canadian owners who would have held majority interest in the Canadian affiliate. However, the government ruled that Borders’ centralized, computer-driven book-ordering process gave operational control to Americans, regardless of who was sitting on the board of directors, according to Heather Reisman, the Toronto retail executive heading the firm here.

Reisman declined interview requests from American journalists Friday but was quoted by the Toronto Star newspaper as disputing the government conclusions.

“The joint venture contemplated would have been Canadian-controlled and would have provided Canadians with the biggest selection of Canadian authors and would have brought book prices down meaningfully,” she said.

Reisman added that company executives were deciding whether to present an alternative proposal to the government.

Government officials in Ottawa, citing confidentiality rules, declined to comment other than to affirm the decision. The action could also affect reported plans by New York-based Barnes & Noble, the world’s largest book retailer, to expand into Canada.

Canadian booksellers argued that the sheer size of Borders--the company has 1,000 Waldenbooks outlets and 117 Borders superstores in the United States, with annual sales of almost $1.8 billion--would overpower small bookstores with volume and discount pricing. Publishers here had also demanded that the government require that titles with both Canadian and U.S. publishers be ordered in their Canadian editions rather than drawn from Borders’ U.S. inventory.

A leading opponent was Chapters Inc., Canada’s only nationwide bookstore chain, with 400 outlets. Chapters Chairman David Peterson told a parliamentary committee last year that the entry of U.S. behemoths represented “a major threat to Canadian culture. We need to hang on to the threads that bind this country together.”

The two countries’ interests have clashed frequently in the Canadian cultural market in recent months:

* The Industry Ministry is reviewing complaints that West Sacramento, Calif.-based Tower Records, which just opened its first Canadian store in Toronto, is violating Canadian law by selling books and magazines ordered from U.S. rather than Canadian distributors.

* For more than a year, U.S. and Canadian trade officials have sparred over Canada’s decision to drop U.S.-owned Country Music Television of Nashville, a programmer of country music videos, from Canadian cable TV systems and replace it with Canadian-owned New Country Network. Efforts to resolve the dispute by permitting CMT to buy into the Canadian broadcaster continue.

* Canada’s Parliament recently adopted a law intended to force Sports Illustrated to limit publication of a Canadian edition of the magazine. The law, which placed an 80% tax on Canada-only advertising, was sought by Canadian magazine publishers. They asserted that Sports Illustrated Canada, published 12 times a year, was drawing advertising revenue from Canadian publications while providing only a marginal amount of editorial material from Canada.

* Canadian film distributors, who distribute the 15% to 20% of films shown here that are not produced by major Hollywood studios, have petitioned the government to prevent foreign-owned companies from entering their market.