Amazon Writes a Drama in Canada

It used to be easy to identify Canadians. They were quiet, law-abiding folks, partial to Wayne Gretzky’s hockey, Margaret Atwood’s novels and Leonard Cohen’s music. They shopped at Hudson’s Bay Co. stores and knew who the Canadian prime minister was. They had Canadian passports.

To keep Canadian culture as Canadian as possible, the government erected a multitude of barriers. One was that a non-Canadian couldn’t own a book publisher or distributor. The fear was that an outsider would promote the novels of John Grisham, say, over domestic talent.

Jeff Bezos, founder and controlling shareholder of Web retailer Amazon.com, was born in New Mexico and lives in Seattle. Yet ever since he launched a Canadian Web site in June, he’s been one of the biggest booksellers in Canada.

Canadian booksellers are annoyed with Bezos but furious with their government, which they say is treating the billionaire entrepreneur like a native. They want a federal court to restore those once-sharp distinctions between what is local and foreign.

“Amazon has the best of both worlds,” said Dave Hill of Munro’s Books, one of the most prominent independent stores in the country. “It has the benefits and the power of being a Canadian company without any of the responsibilities.”

The cultural laws were drawn up before Internet retailing was even a notion.

“Technology has blurred the edges of commerce,” lamented Hill. “How does one define Canadian in the Internet era?”

The Net long has been a modernizing force in developing as well as politically repressive countries. China is finding it impossible to control the Net and the news and ideas it brings. Artisans around the world use Web sites to sell directly to U.S. and European consumers.

In industrialized countries, the Net is having an equally pronounced but less noticed effect.

“It’s an extraordinarily powerful weapon for breaking down national cultures,” said Mel Hurtig, author of “The Vanishing Country: Is It Too Late to Save Canada?” “Canadians like Americans, but they don’t want to become Americans.”

With one-tenth the population of the United States, most of its citizens speaking English and living within 100 miles of the border, Canada has had to fight to maintain any sort of home-grown culture.

Over the last three decades, a variety of measures have been put in place to fund local artists and arts organizations, including publishers, and to keep the blockbusters from Hollywood and the bestsellers from New York from complete domination.

Canadian songs, for instance, are required to make up a minimum of 35% of radio stations’ airplay each week. At least 60% of TV programming must be produced by Canadians. Foreigners cannot own more than 49% of a book publisher or distributor.

When the tools of cultural dispersal were physical, the laws did what they were intended to do. A plan by U.S. bookstore chain Borders Group Inc. to open a superstore in Toronto in 1996 was nixed by the government.

Even though the store’s majority owners would have been Canadian, the government worried that Borders’ computerized inventory system would give less exposure to “Canadian stories, Canadian books, Canadian authors,” one government official said.

An attempt this year by a U.S. bookstore chain to open an outlet in the airport at Halifax, Nova Scotia, also foundered, booksellers here say.

What allowed Amazon to proceed was its virtuality. The company has no offices or employees in Canada. Warehousing and shipping are contracted out to a division of the Canadian postal service. The Web site, Amazon.ca, might appear Canadian, but it floats in the no man’s land of cyberspace.

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Passing Critical Tests

The Department of Canadian Heritage decided that Amazon was neither establishing a Canadian business nor acquiring control of an existing one -- the two triggers for review. The Web site literally was beyond the law.

“This was fairly black and white in our estimation,” said Heritage spokesman Len Westerberg, although he acknowledged, “Maybe it’s a little colorful for other people.”

The Heritage ruling brought together two traditional foes: the Canadian Booksellers Assn., made up of 1,000 independent stores, and the country’s sole bookselling chain, Indigo Books & Music Inc.

“We still don’t hug,” said CBA President Todd Anderson. “But in this case, we agree that the government isn’t doing its job.”

The CBA and Indigo have jointly filed suit in the Federal Court of Canada, seeking a declaration that Amazon has established a new business in Canada. If the booksellers pass that hurdle, the Department of Canadian Heritage would take up the issue of whether Jeff Bezos is Canadian.

“It’s a cop-out to say Amazon isn’t really in business in Canada,” Anderson said. “They have inventory here. The government is going to have to stand up and put the big-boy pants on and decide whether this is good or bad.”

Amazon officials say the Amazon.ca Web site, despite not being owned by Canadians, is one of the best things to happen to Canadian culture in a long time.

“What we’re doing is helping Canadian publishers, Canadian authors, Canadian artists reach out not only to Canadians but all across the world because Amazon.ca will make Canadian products available to people all over the world,” Bezos said in June. He declined to be interviewed for this story.

The biggest, most aggressive and most innovative e-commerce company, Amazon sees international expansion as a key to growth. It owns one of the two big online book sites in Britain and operates the other. Germany, Japan and France have their own Amazon Web sites.

In the year before Amazon.ca was started, the company says, 250,000 Canadian customers bought from the U.S. Web site. By providing direct access to Canadian material and eliminating customs delays, Amazon hopes to make deeper inroads into the $2-billion Canadian book market.

Although Amazon didn’t break out Canadian sales in its recent third-quarter report, sales in the North American books, music and video division rose 17%. In earlier quarters, the unit’s growth had been minimal.

Amazon is famous for having lost billions of dollars in its short life. It can’t be recouping much of those losses in Canada, where it has been engaging in a price war with Chapters, the online division of the Indigo chain.

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Feeling the Competition

At Bolen Books, a 27-year-old store in a Victoria shopping mall, customers have started coming in with computer printouts of pages from Amazon, asking whether Bolen will supply the same book at the same price. Amazon discounts can be as high as 40% on a few bestsellers, although many older titles aren’t discounted.

“We try to explain that we don’t match prices,” said co-owner Samantha Holmes. “We try to tell them what we have to offer -- that we’re a locally owned, family-run business. That we employ 60 people here, pay taxes here, give to their baseball teams, support their hospitals. Sometimes that convinces people.”

But it doesn’t convince all of them. Special orders at the store are down about 30% since Amazon.ca started.

“It’s a real long-term business threat,” Holmes said. “If we were going to expand our Web site, that’s stifled.”

The Web is a seductive place, where promises are easy to make but can be hard to fulfill. The hottest book in Canada at the moment is Yann Martel’s “Life of Pi.” Last month it won the Mann Booker Prize, the most prestigious literary award in the British commonwealth, affirming the vitality of Canadian writing. Bolen sold 144 copies in two days.

The publisher said it would be weeks before more were available. But Amazon was telling its customers it could ship in two to three days. Holmes ordered one, trying to determine whether the publisher was playing favorites.

After a week, Amazon sent her an e-mail saying it would be several weeks before copies came in. Meanwhile, Bolen’s copies arrived early. It was a modest victory for physical stores.

“We’re adaptable. We’ll be OK,” Holmes said. “But why after 27 years are we still fighting and fighting and fighting for our place? I suppose business just isn’t fair.”

If the booksellers lose their request for government review, they say, soon the cultural laws will be further eroded. Indigo is losing money, and there probably aren’t many Canadian companies that would like to acquire it. A much better prospect to buy Indigo is the U.S. chain Barnes & Noble Inc., which would be able to argue that Amazon already was operating north of the border.

Pretty soon, said “Vanishing Country” author Hurtig, “someone will walk into a big Barnes & Noble in Toronto or Calgary and ask, ‘What do you have on the history of our prime ministers?’ And they’ll be told, ‘Would you be interested in a book on the great American presidents? How about something on how the Americans won the second world war single-handedly?’ ”

Hurtig, a former chairman of the Committee for an Independent Canada, thinks the battle to save the Canadian identity already has been lost. “Canada will become a northern Puerto Rico,” he predicted.

Even those booksellers who aren’t quite so pessimistic say they feel betrayed whenever they see a Canadian postal service delivery truck. The sides of the trucks display advertising for Amazon.

“The government has made these rules and laws that you have to buy Canadian, but on the other hand a government company is putting out that Americans are great,” Holmes fumed. “It’s incredible.”

As for Amazon, the company is serene, confident of ultimate victory. Time is on its side, Amazon.ca General Manager Marven Krug said in a September interview with news agency Canadian Press.

The more time the matter spends in court, Krug said, the more customers Amazon will have a chance to acquire.

“I think it would be completely absurd at that point to try and shut us down,” he said.