In today’s day and age, how dumb are laws that prevent foreign ownership of certain businesses? In almost every case, really dumb.
I usually harp on how such laws are keeping competition low and prices high in the telecommunications sector, but they’re equally as outdated in the business of selling books. As the rules go, no foreign entities are allowed to operate physical bookselling operations in Canada, although there are loopholes.
Amazon famously skirted those laws when it opened up shop here in 2002, much to the outrage of Canadian booksellers, a.k.a Indigo Books & Music. Amazon kept its staff and computer servers in the U.S. and essentially rented warehouses and distribution through Canada Post and other third parties. Last year, the federal government allowed the American company to finally establish a “fulfillment centre” on Canadian soil.
Keeping most of its operations in the U.S. meant higher costs for Amazon to do business in Canada than in its home country, yet the company managed to sell stuff cheaper across the board anyway, forcing Indigo/Chapters to match. Had the government interpreted the law in favour of Indigo, there’s every reason to believe Canadians today would be paying much higher prices for books. (This isn’t so different from telecom – Wind Mobile, anyone?)
A good summary of Amazon’s Canadian history can be found here. A few other big companies, such as Walmart and Costco, also sell books and they have to jump through similar hoops, doing their business through a Canadian wholesaler. While the companies’ respective sizes allow them to achieve some cost savings that can then be passed on to buyers, those costs are still likely higher than if they were allowed to operate their own setups.
In any event, I walked into a Chapters store the other day. It had been a while, so I was surprised to see that more than half the floor space was devoted to non-book stuff. Candles, rugs, a whole toys section that even had Star Wars Lego. What the?!?
With books comprising the minority of the goods sold there, can the store really even be called Chapters anymore? More importantly, why are foreigners not allowed to operate bookstores in Canada when the country’s biggest chain is obviously not interested in doing so?
Fortunately, much of this is moot as more and more books are being bought in digital format through global distributors such as Amazon and Apple. An Ottawa insider told me that even these e-book retailers need special dispensation from the Department of Heritage to operate if they employ people in Canada as part of their operations.
In the end, does it really make any sense to keep foreigners out anymore?
Canadian Heritage Minister James Moore launched a review of the laws last year and was supposed to make a ruling in 2011. There’s only a month to go. I asked him the other day if he was going to make any sort of announcement, but I didn’t get a response.
This is serious business. While it’s nice that Canadians have a good number of e-book retailers to choose from, a good proportion still want to buy physical copies. Publishers and the authors they hire are also dependent on physical bookstores, which are drying up in favour of Star Wars Lego.
As with the foreign ownership issue in telecommunications, this is another example of the government either being asleep at the wheel or simply paralyzed with fear.