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What Does France Have Against Amazon?

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France has had enough of (NASDAQ: AMZN  )  and decided to do something about it.

The country's lawmakers signed a bill last Thursday that will prevent the online retail behemoth from combining free book deliveries with discounts of up to 5% -- the ceiling on book discounts set by the French government in 1981.

The bill was approved unanimously, and it was the outcome of an anti-Amazon sentiment that's sweeping through the country. A couple of months ago in a speech to booksellers in Bordeaux, culture minister Aurélie Filippetti blasted the company for its disruptive policies. "Amazon, through dumping practices, smashes prices to penetrate markets only to raise prices again, once they are in a situation of quasi-monopoly," she said.

While her outburst was, more or less, understandable, I can't help but wonder what's worse: allowing a quasi-monopoly to emerge or supporting outdated businesses like traditional bookstores? More importantly, is protectionism the answer for not being competitive and creative enough?

Regulate your way back to innovation
France is fed up with Amazon not just because it considers the online retailer as the "destroyer of books," but also because Amazon has been dodging taxes by exploiting loopholes in the European states' tax regimes. It reports most of its European sales through a Luxembourg-based holding company, cashing in on this state's comparably low corporate taxes for earnings outside its borders.

The French government is pushing for the European Commission, the bloc's executive body, to revamp tax rules for digital companies, ensuring profits they make on the continent are subject to taxation. However, that's not all there is to it.

The Wall Street Journal, citing French briefing documents ahead of an EU summit later this month, notes that France also wants the EU to regulate a small number of platforms for Internet and digital applications. Amazon, Google, Facebook, and Apple are in the crosshairs.

"The current situation makes it difficult for European champions to emerge at a global scale," French digital economy minister Fleur Pellerin said in a recent interview. "Europe needed new regulatory powers to intervene much earlier, to level the playing field in the Internet economy and allow the emergence of alternatives in Europe to U.S. Web giants."

Apparently, France seeks to tackle U.S. Internet juggernauts' global dominance by setting more aggressive rules. But can you really regulate or even tax your way back to achieving a competitive advantage? What happened to dazzling the public with leading-edge products and innovative solutions?

Not enough conformists?
For the four-year period between 2008 to 2012, the Innovation Union Scoreboard -- the barometer that gauges the bloc's innovation performance -- showed an annual average growth rate of 1.6%. However, the bloc had a hard time keeping pace with major innovation leaders, including the U.S.

Source: European Commission, Innovation Union Scoreboard 2013 

So, it's not that Europeans are not creative, it's just that, as a whole, they don't perform as effectively as the U.S. Why is there this gap in innovation capacity?

An article published in the Harvard Business Review recently really got me thinking. Ella Miron-Spektor, the author and organizational psychology expert, suggests that conformists are a key to unlocking creativity and delivering innovation. "If you have the right proportion of conformists on an innovation team, they can dramatically increase its output of radical innovations," she mentions.

In general, conformists are useless when it comes to generating breakthrough ideas. Even so, as Miron-Spektor says, because they adhere to the rules, get along with others, and know how the system works, they can assist in turning those ideas into workable products.

Assuming that, in our case, the clusters of researchers, academics, entrepreneurs, and investors represent the conformists -- in other words, the people that can translate ideas into profitable ventures -- then, Europe definitely needs more of those.

According to the Scoreboard's individual performance indicators, innovation in Europe was mostly driven by license and patent revenue from abroad, community trademarks, as well as research systems that were mainly backed by non-EU doctorate students.

Overall, Europe lagged behind its overseas rivals in indicators that capture business activity, such as R&D expenditures, and venture capital investments, but also in the share of the population having completed tertiary education.

Fix the problem, not the blame
When it comes to achieving a competitive advantage, it doesn't matter how well you do something, you just need to do it better than others. But how are you going to stay on the cutting edge of global trends, especially in the age of feverish technological advancements, if you keep pointing the finger at Amazon for somehow destroying a business, but, at the same time, revolutionizing a whole industry? Why not try beating it instead?

Europeans are losing valuable time building a labyrinth of regulatory constraints, instead of focusing on what's really important: unlocking creativity and delivering innovation. 

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Read/Post Comments (7) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 07, 2013, at 2:32 PM, jeclav wrote:

    Very interesting article especially about conformists' contributions to developing innovation. I completely agree with the idea that a mix of personality types actually makes a great team.

    I used to teach college classes on secondary and tertiary effects of policy and technology. One effect of looking actual bookstores is less browsing and less exposure by potential readers to similar books. As a result we continue to drift toward a more superficial society that substitutes shallow, flashy ideas for deep thought. We have more and more bright young people who have no experience in thinking carefully about the different levels of implications of policy and technology. The author's superficial analysis in some ways exemplifies this very trend. Will retaining book stores help with this - I don't know for sure, but people at bookstores often seem more thoughtful than commentators online.

  • Report this Comment On October 07, 2013, at 2:58 PM, SeniorMoment wrote:

    Amazon aren't just unpopular in France-their tax busting tactics aren't endearing themselves to the UK either.

    Neither are the Germans in love with them from either their anti-tax regime or their ant-union stance.

    Somehow I think if a European company went into the USA and employed the type of tactics Amazon are using across Europe I wonder how the Americans would react.

  • Report this Comment On October 07, 2013, at 10:56 PM, radu62s wrote:

    I agree more with the comments than with the article.

    The problem with Amazon, Facebook, Google, Apple and a few others is not of innovation but of dominance. Obviously, the French have some national interests to defend. Aside from that, the monopolistic approach these companies have in everything they do metamorphosis them from benefactors into enemies of the society.

    From an investors' perspective, you want to put your money into a monopoly, to use their product/service and wait for nice returns. Though, if this will cost your job I am not sure you made a wise choice supporting the monopoly.

    Not everything that is new is good. Innovation is good when the society as a whole benefits. A cheaper price is not a benefit to society if involves cutting a lot of jobs. A lot of what is considered innovation for this companies I'd rather call it fashion; the "cool" factor. Though fashion does not last very long.

    Twenty First century's problem will be how to give people what to do and not to be idle. Past centuries had the need to increase efficiency and productivity.

    If "protectionism" means limiting the power of a few very powerful companies in order to allow thousands of other businesses to survive, than YES! Protectionism is the answer to preserve the Market, and the fabric of our society.

    Disclosure: I am an engineer and value highly R&D, I work as a software developer, I just traded in my Iphone5 for a basic phone, I do not buy on Amazon though I buy a lot on line. I do not use Facebook.

  • Report this Comment On October 08, 2013, at 3:30 AM, Insanity1981 wrote:

    Quote-"Amazon, through dumping practices, smashes prices to penetrate markets only to raise prices again, once they are in a situation of quasi-monopoly," she said. While her outburst was, more or less, understandable, I can't help but wonder what's worse: allowing a quasi-monopoly to emerge or supporting outdated businesses like traditional bookstores?

    Places like support traditional bookstores that spread the wealth over a MUCH larger base than Amazon! I think traditional bookstores are GREAT!

  • Report this Comment On October 08, 2013, at 6:14 AM, CharlieTea wrote:

    I would like to make an alternative proposal. Innovation typically follows the potential profit. When taxes and regulations are high, there is less possibility of profit. Given the choice between a salaried job and the founding of your own business when the odds of making it a success are high, most people will choose the salaried position. To improve innovation, decrease regulations and taxes on businesses.

  • Report this Comment On October 08, 2013, at 8:58 AM, shirlsview wrote:

    If only Amazon was running all that is broken in governments, here and abroad. Companies and entities that do not have the foresight to remain relevant, have got to fail. Government entities always resist change and want to protect outdated services and products. Yes books are wonderful and many will always want real books. And there are niche markets for books in many forms. It is not up to the government to protect that, it is up to the free market. Should there be an even playing field, of course. But there never will be while governments pick winners and losers. If a tax is good for one, it should be good for all. Folks flock to Amazon because they can get their goods in a timely manner and in some cases without the burdensome taxes. Amazon is a "monopoly" because they are wildly successful. Many, many companies have emulated their formula and are just as successful, on a smaller scale. Order an American Girl doll....on your doorstep the next day. It is called customer service and when you provide customer service along with products people want, you will be successful. And that is whether there is a tax or not.

  • Report this Comment On October 08, 2013, at 1:38 PM, whippoboy wrote:

    Is the opposite of change stagnation or stability? Perhaps some of both. Is all destruction creative? Certainly there are profit opportunity from even acts as clearly 'bad' as the bombing of the Twin Towers or Hurricane Katrina.

    Americans perhaps think 'all change is good' because they see no alternative to an economic system that disregards long-run negative effects of certain changes that are profitable. Perhaps the French simply value engagement on these issues are define themselves less as consumers. There is no reason why they should not do so even if such activity fails to be accounted for in GDP.

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