It may just end up being a warehouse or a couple of cubicles in an office building, but Amazon.com Inc.'s attempt to start a new Canadian business has shone a light on the paradoxical nature of Canada's foreign ownership and cultural content rules.
The Internet retailer is attempting to start a business in Canada that is believed to be responsible for stocking and shipping products. But Amazon has run into a hurdle, as the Department of Canadian Heritage has chosen to review the proposed business "to determine if the investment by Amazon.com will be of net benefit to Canada."
Ironically, that review comes almost eight years after Amazon launched the Canadian version of its website - the Amazon.ca online shopping hub that Canadian Heritage ruled was not a Canadian business because it didn't have a physical presence here.
That disconnect between the digital and physical world has industry insiders noting that Canada's foreign ownership rules are outdated.
"It's full of contradictions," said Carolyn Wood, executive director of the Association of Canadian Publishers. "It does highlight how the meaning of national borders is changing in a digital world."
Ms. Wood said Amazon.ca is subject to no restrictions. "It is essentially only a domain name," she said. "There are no offices or warehouses. ... They aren't subject to any restrictions in terms of carrying Canadian content or anything else."
When Amazon launched the Canadian version of its website in 2002, Canadian Heritage conducted a review of Amazon.ca. Ultimately, however, the department concluded that the Investment Canada Act didn't apply to the website - thus allowing Amazon to enter the highly regulated Canadian bookselling industry. Canadian retail chain Indigo and the Canadian Booksellers Association (CBA) took the case to court, but to no avail.
The key argument that the Canadian Heritage review rested on was the fact that Amazon had no employees or offices in Canada. It currently has a Canada Post subsidiary handle its shipping in Canada, but that relationship was deemed a contractual relationship.
But the proposed establishment of Amazon Fulfillment Services Canada Inc. changes all that. Even though the new company likely has almost no impact on Amazon.ca's relationship with Canadian customers or the way the website's front end operates, it does represent a physical business in Canada - that technicality prompted Canadian Heritage to revisit the 2002 issue.
Canadian Heritage spokesman Tim Warmington confirmed yesterday that the department's review of Amazon's proposed business was not spurred by a complaint from a third party.
An Amazon spokeswoman did not respond to a request for comment yesterday.
Traditionally, books have been one of this country's most protected industries. However the Web has turned traditional regulations upside-down.
"Its certainly a time of enormous transition and it's not an industry that's seen a lot of transition in 500 years," Ms. Wood said. On the one hand, Canadian publishers appreciate any channel that spurs more book sales, she said. On the other hand, publishers like Canadian ownership in the book industry because it tends to encourage the production and purchase of Canadian-written books.
Stephen Cribar, president of the CBA, said his group is worried about Amazon's bid to expand in this country.
"We're concerned on a number of levels," said Mr. Cribar, sales manager at the University of Western Ontario's book store. "We need to protect our businesses and Canadian literary culture."
The association, which wrote to the Culture Minister yesterday asking for more information on the Amazon situation, is concerned that the Web firm's move would open the door to foreign ownership in book retailing, he said.
"It's been a tough few years for the independents," he said. "But we're fighters. It's kind of a new landscape."
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