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The battle over foreign ownership is about to take a literary turn.

Internet bookseller Amazon.com Inc. is poised to open a "fulfilment centre" in Canada - believed to be a means by which the Web firm can distribute products bought on its site without resorting to a third-party shipping service.

But that decision - because it entails Amazon having a physical, rather than virtual presence in Canada - means the company is subject to myriad reviews relating not only to foreign ownership, but also to Canadian cultural industries, such as bookselling.

"It sets the potential to reshape the landscape," Heather Reisman, chief executive officer at Indigo Books & Music Inc., said Thursday. "This is evolution. … It just needs to be transparent and evenly applied."

The government has ordered a review of Amazon's proposal to create a business called Amazon Fulfilment Services Canada Inc. "to determine if the investment by Amazon.com will be of net benefit to Canada," according to Tim Warmington, a spokesman for Canadian Heritage.

Not all proposals are reviewed automatically, Mr. Warmington said, but they can be investigated under a section of the Investment Canada Act "if [they fall]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," he said.

Amazon has been operating a Canadian arm ever since it launched Amazon.ca in 2002. But the government review of its proposed distribution business has wider implications. Indeed, a host of competitors, lawyers and industry groups are waiting to see if the government's decision on the matter essentially opens the door to foreign ownership in what has traditionally been one of Canada's most protected cultural industries.

Ms. Reisman this week sent a letter to the Minister of Culture asking for clarification of the government's position on foreign ownership in the book sector.

"Indigo's only point on this is to inquire whether this is a fundamental change in the government policy," Ms. Reisman said. "Previous policy was book retailing fell under cultural industries and therefore needed to be majority controlled by Canadians. Our request was to determine whether this is a change in policy indicating that book retailing no longer needs to be controlled by Canadians."

More than a decade ago, Ms. Reisman was the victim of the foreign ownership restrictions. In 1996, before Indigo was launched, Ottawa blocked her attempt to team up with the U.S.-based bookseller Borders because of the ownership rules.

Amazon.ca currently does its shipping in Canada through SCI Logistics, a subsidiary of Canada Post. A representative from the company would not discuss the details of that contract or whether Amazon had indicated it wished to end that agreement in the near future.

Amazon spokeswoman Mary Osako would not comment on anything to do with the new proposed Canadian business, saying in an e-mail: "We don't discuss future plans for any of our businesses."

Industry insiders agree that Ottawa's approval of Amazon's request could turn the industry on its head - and put pressure on a wide range of retailers beyond booksellers.

"Amazon is a massive retailer and right now they're only participating in a portion of retailing in Canada," said Humphrey Kadaner, president of music retailer HMV Canada, which also sells books. "This would bring Amazon into competition with pretty much every retailer in Canada, assuming they expand their product offering as they have in the States. They really would become much more of a general retailer."

And for booksellers specifically "it just changes the rules," Mr. Kadaner added. "It's almost like some of what happened to the mobile phone industry recently, in terms of the element of foreign ownership. … If there is a change that takes place with Amazon, it changes how any foreign company might look at the Canadian marketplace as it relates to books."


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  • Updated January 17 4:00 PM EST. Delayed by at least 15 minutes.

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