Amazon puts the moves on France

In the Pixar movie of the same name, a Provençal dish called ratatouille serves to save the soul of a crotchety old food critic in France. The stewed vegetables produce an epiphany, hitting the critic like the madeleine hit Proust, and transport him back “in search of lost time” or to a “remembrance of things past.” It appears that for the past three years, Amazon has been trying to serve up something similar to the French public.

According to a report in Bloomberg, citing anonymous sources within the company, Amazon has been running a public-relations campaign that internally goes by the name “Ratatouille” and comprises about a dozen initiatives, among them television ads, promotion of the French-made products sold through its Amazon.fr marketplace and studies the company has commissioned to demonstrate the economic benefits for France of its operations.

For instance, 84 percent of the store owners recently surveyed by Roland Berger in a region of northeastern France declared that the effects of having an Amazon warehouse nearby would be neutral on their own business, while 80 percent of the Amazon employees recently surveyed by IFOP said they would recommend getting a job with Amazon.

The company wants to be seen as a benefactor, a “Frenchified” benefactor.

The history

Amazon entered France at the turn of the century. Since then, it has swelled its national staff to 20,000 and seized the lion’s share of the national e-commerce market, and since 2010 it has poured €16 billion into “local innovation and infrastructure.” For customers, though, as Bloomberg observes, it has remained less popular in France than it is in Germany or the U.K.

In Business Insider’s summation, Amazon has had to deal with “various controversies in France over the past several years,” such as the suspension of operations at six of its warehouses during the Covid lockdowns. But things didn’t start there.

For the root of all evil reputations…

…is the love of tax-free revenues. In 2021 Amazon Europe, headquartered in Luxembourg, posted a loss of €1.2 billion “despite billions of euros in sales,” as the French magazine Capital put it last year, and “even received $1 billion in tax credits,” according to documents reviewed by Bloomberg. To be exact, sales amounted to €51.3 billion, up 17 percent year-on-year.

In The Motley Fool’s colorful language, “Amazon’s international business has been historically indifferent to profits as it hoovered up market share.” This appears to be true – and accords with Amazon’s overall history. Back in the 1990s, the business press was always wondering when the online bookseller – then hoovering up market share from the likes of Barnes & Noble, which had hoovered it up from the independents – was going to turn a profit.

Amazon’s financial statements do not break down revenues by country, only by segment. One of these segments, however, is called “International,” and it has been operating at a loss in all but one of the past six years. The exception was 2020, the year much of the world shut down and stayed home. The latest figure for annual international operating loss is $7.746 billion (for 2022).

News of high revenues and no taxes is the sort of thing that goes down poorly in a land where various forms of the word “solidarity” are in everyday use. But Amazon’s business in France – along with its business in the U.K., Germany, Italy, Spain, Poland, Sweden and the Netherlands – is subsumed under Amazon Europe, and the taxes to which Amazon Europe is subject are based not on revenues but on profits. A spokesman for the company told Capital that in exchange, Amazon had made massive investments throughout Europe, establishing 50 new sites and increasing its workforce by 65,000 to a total of 200,000. This does not appear to be persuasive.

Two years ago, as we then reported, there was the “Make Amazon Pay” movement, led by 401 parliamentarians and public officials, many of them from Europe, not to mention unions, NGOs and progressive groups. Their open letter deplored the rise in Jeff Bezos’s net worth along with the company’s “dangerous working conditions,” especially in light of the pandemic; its “monopolistic practices”; its undermining of “democracies and their capacity to respond to collective challenges”; and its environmental effects. Amazon’s carbon footprint, they claimed, was “greater than [that of] two-thirds of the world’s countries.”

As it turns out, European regulators, too, dislike high revenues that generate low or no taxes. According to Capital, some of them believe that the tax accords it signed with Luxembourg in 2003 amount to illegal government aid.

Back in 2017, Europe’s General Court ruled against Amazon Europe in this matter, ordering it to pay €250 million in back taxes to the government of Luxembourg. But Amazon got the decision overturned on appeal in May 2021. In response, the European Commission made a plea for an international agreement on the taxation of multinationals.

The European Commission stepped into the fray in 2019, conducting an antitrust investigation. The next year it announced that Amazon had violated competition rules because large quantities of non-public seller data were “available to employees of Amazon’s retail business” and flowed “directly into the automated systems of that business,” which would “aggregate these data and use them to calibrate Amazon’s retail offers and strategic business decisions to the detriment of the other marketplace sellers.” The Commission then opened a second investigation into the Amazon “Buy Box” and the Amazon Prime loyalty program.

The scrutiny of French regulators

In October 2017, France’s minister of the economy and finances (Bruno Le Maire) and secretary of state for digital matters (Mounir Mahjoubi), in consultation with the National Council on Consumption (CNC), decreed as follows:

• Platforms hosting content, goods or services from third parties, such as search engines, social media networks and comparison websites, shall specify the criteria they use for referencing and classification.
• Websites publishing consumer opinions shall specify whether they have been verified and, if so, how the verification was conducted.
• Marketplaces and collaborative-economy websites shall provide essential information to orient the choices of consumers, such information not always being accessible at present: i.e. the quality of the vendor (professional or not), the fees charged by the platform for its service as a middleman, the existence or non-existence of a right to cancel an order, the existence or non-existence of a legal guarantee of conformity, and method of dispute resolution.

This soon led to an investigation by the Ministry of the Economy’s General Direction of Competition, Consumption and Repression of Fraud (DGCCFR). Of all the major e-commerce platforms it investigated – Cdiscount, Fnac.com, eBay, Rue du Commerce, etc. – the DGCCFR singled out Amazon for having “the most serious” infractions of the commercial code.

In September 2019, the Commercial Court of Paris fined Amazon €4 million for “unbalanced” clauses in its contract for marketplace merchants, and in December 2022, the DGCCRF fined Amazon another €3.3 million for tardiness in amending the relevant terms of service.

A glancing blow in the book market

In 2014, in part to repair some of the damage done to its merchants of culture by a certain American corporation, France amended its law governing the price of books by adding two sentences: “When the book is sent to the buyer and not collected at the store of a book retailer, the sales price shall be that set by the publisher or importer. The retailer may apply a discount of up to 5% of that price on the delivery fee that it establishes, but shall not offer delivery free of charge.”

As the French website Journal du Net pointed out at the time, the amended law’s phrasing left the door open to a steep reduction in delivery fees, which in turn played to the economies of scale of the law’s two chief targets, Fnac and Amazon – especially as the law did nothing to restrict subscription programs such as Fnac Express+ and Amazon Prime.

For years now, Amazon Prime has been dispatching books within France for a delivery charge of €0.01 per order, with no floor on book price or number of books ordered.

As Journal du Net also pointed out, Amazon has maintained the legality of its traditional offer of free delivery for orders of at least €25 in cultural products by excluding orders that contain books. For those, it adds the same €0.01.

No independent bookseller can compete with this. In October, though, the French government will be raising that €0.01 to €3 for orders of up to €35, according to Le Figaro. The independents were holding out for €4.50.

Such is the situation in a country that prides itself on its literature, its literary commerce and its literary television talk. High-brow authors are a regular presence on the big TV channels. This is hard to understand for Americans, who haven’t seen the like since the original Firing Line, which ended in 1999, or C-SPAN’s Booknotes, which ended in 2004.

The Parisian Urbanism Workshop (APUR) ran a study for city hall in 2014 and found that Paris proper had 756 bookshops (new and second-hand) crammed into its 40 square miles. This no doubt excluded the hundred or so “bouquinistes” who sell from their picturesque green boxes along the Seine, heirs to a tradition that stretches back to the 16th century.

By comparison, the U.S. – the entire country, with its 3.5 million square miles – had between 2019 and 2021 some “2,023 independent bookselling companies running 2,506 stores,” according to Statista. Of course, this does not include 4,700 or so stores operated nationally by Walmart, or the 600 or so operated by the aforementioned Barnes & Noble, but France has similar, bookselling big-box chains like Auchan and Carrefour, not to mention Monoprix. Few of these operate in Paris proper. They are irrelevant to the literary scene. Until recently, there were but two chains in Paris that resembled Barnes & Noble in the scale of its stores – the twins Gibert Jeune and Gibert Joseph, which began as one, separated, reunited and, after the lockdowns, slimmed down both their retail footprint and their name. The one company is now called Gibert.

It is worth pointing out, too, that Gibert and Barnes & Noble are similar only on the surface. Gibert’s main store is located on prime real estate in the Latin Quarter, near the Sorbonne, and its selection ranges from new to second-hand and from pulp to the most rarified intellectual productions. The only comparable Barnes & Noble to exist was the old flagship on Fifth Avenue at 18th Street in New York City. Nowadays, Gibert’s peer in New York would be The Strand, if The Strand weren’t independent.

That said, Barnes & Noble appears to be winning back its soul as a bookseller, thanks to CEO John Daunt, a former investment banker who founded Daunt Books, in London’s Marylebone, in 1990 and has since become CEO of Waterstones as well. How? In part by treating each store as an independent with respect to selection and in part by becoming the anti-Amazon. As he told The Guardian this month, “Amazon doesn’t care about books … a book is just another thing in a warehouse.”

This is not an uncommon opinion in France, where the love of books and booksellers has roots in the very government.

A ministry to minister

There exists in France a National Book Center (CNL). It is a branch of the Ministry of Culture, and the appointment of its president falls under the purview of the President of France. The center’s purpose is to help in the creation, expansion, moving, purchase and transmission of bookshops on the national territory. This body allocates to booksellers subsidies of €4,000 to €100,000 and loans of €8,000 to €300,000.

There are similar arrangements in France for cinema, the theater, and what have you. Because all of this is close to common knowledge in the land of Proust and Balzac, Renoir and Godard, Racine and Molière, you might feel a twinge of conscience in France as you proceed to checkout on Amazon.fr.

Annus horribilis, for all but Amazon

It is hyperbole to pin the “transfer of wealth” of 2020 on one company, but Amazon, for better or worse, became its symbol. After all, the company has its own fleet of delivery trucks and brands its very cardboard boxes with a logo that, right side up, resembles both an upward arrow (revenues!) and a wry smile (heh!).

And who was visible on the streets during the lockdowns? The Amazon delivery man. In France, though, other things occurred to drag Amazon under public scrutiny.

Business Insider is right about the suspension of activity at the company’s French warehouses and distribution hubs. A Court order on April 14, confirmed by the ruling of the court of appeals in Versailles on April 24, required Amazon to evaluate professional risks from Covid-19 and, in the meantime, to limit its business to essential products (IT supplies, health, nutrition, groceries, etc.) – under penalty of a €100,000 fine per infraction. Rather than risk the fines, Amazon decided to shut six warehouses and continue deliveries from hubs abroad or from French sites unaffected by the injunction. This immobilized a staff of 11,000, who were kept on salary – because the French government refused Amazon’s request to put them partially on the dole.

Negotiations ensued with four of France’s biggest labor unions – the CFDT, the CGT, FO and SUD – which did not want Amazon imposing rules unilaterally for the hygienic conditions of locker rooms and warehouse entrances. The deal they struck with Amazon provided for a gradual reopening a month after the fact through a mixture of volunteering and incentives.

The dispute made the news, and the CFDT commented at the time: “The positive evolution of these negotiations is an important step in this company’s acculturation to our country, to its rules, and to the requirements of the CFDT for a livable and dignified world of labor” [emphasis added].

Amazon embraces “le terroir”

This past March, Amazon did something it had never done. It rented a booth at the famous Salon de l’Agriculture of Paris – a trade show that families attend to see prize cows and hogs and sample the fruit of France’s sun and land. And this booth Amazon manned with French farmers. They were there to represent the 400 French of so producers that sell some 13,000 products through Amazon’s French marketplace.

Interviewed by BFMTV, director Patrick Labarre laid out the marketplace’s advantages over traditional retail – namely, direct access to Amazon’s 35 million unique visitors in France, international reach, the freedom to manage the product assortment and pricing as vendors see fit, and the elimination of heavy up-front expenses. The monthly subscription costs €39 a month, and there are sales commissions of 10 to 15 percent per sale.

Labarre summed up Amazon’s offer as an easy way for SMEs to penetrate the complexities of digitalization, mentioning along the way the company’s “Digital Accelerator” (Accélérateur Numérique), a free online course in e-commerce (sponsored in part by BFM). The course is under a structure called Amazon Academy, which has an extensive, for-pay counterpart in India specializing in board exams for IT. The American version, AWS Academy, is itself geared towards certifications and offers some of its curriculum free of charge.

Amazon has been running an online “Fabriqué en France” (Made in France) boutique since 2021, and its seven categories go beyond food into household items, games & toys, baby supplies, hygiene & beauty, and fashion.

Also in 2021, in a non-Ratatouille initiative, Amazon Prime secured the broadcast rights to most of France’s football matches.

In short, Frenchify Amazon and deliver France through Amazon.

When in France…

The inspiration for “Ratatouille,” according to Bloomberg, was not just Pixar but McDonald’s, which in the late 1990s ran into similar reputational trouble in the country that gave us the term “cuisine.” Fast food was bad food and produced with sub-par ingredients by a gigantic corporation – once again, American.

While the burgers still rank below the food of the average brasserie, McDonald’s is no longer top of mind in France. It has settled in and found a way to do business by adjusting its menu to French taste (inventing the McBaguette), striking supply deals with French farmers, making its packaging recyclable, and making sure the public knows.

Last year, though, it was still fined €1.25 billion in France for tax evasion. According to Le Monde, government investigators had since 2014 been scrutinizing “fees paid by McDonald’s French operation to its European parent company in Luxembourg” [emphasis added]. The suspicion: That McDo, as the French call it, was using these fees to reduce the profits on its books.