The French Booksellers’ Union launched its case against Amazon in 2004, alleging that the company’s ‘free shipping’ policy constitutes an illegal discount on books. According to a 1981 law designed to protect France’s independent publishers and bookstores, no discount on books can exceed five percent off the publisher’s recommended price. If resellers cannot adjust prices to respond to consumer demand, they cannot unload unpopular items and accommodate new stock. As a result, citizens pay to prop up unwanted products, while crowding out new and creative works.
Not surprisingly, this policy angers French consumers who have been stripped of their ability to shop for the best product at the best price. An online petition created by Bezos and sent to amazon.fr customers garnered over 120,000 signatures in its first two days. Unfortunately, these complaints are not likely to resonate with French government officials.
Shortly after last summer’s election of pro-business, pro-globalization President Nicolas Sarkozy, France’s Prime Minister declared, “we are going to make France a country where it’s easy to do business, where you can concentrate on running your company without hassle or pressure other than those of the market.” After only one month in office, however, Sarkozy successfully led an effort to modify the EU constitution, eliminating its commitment to a “market where competition is free and undistorted.” Instead, Sarkozy suggested changing this goal to a “social market economy aiming at full employment.”
The French government remains steadfast in its commitment to protecting domestic interests at the expense of innovation. Last week,Sarkozy proposed taxing the Internet to subsidize state-owned television stations. Last month, regulators filed a lawsuit to shut down eBay at the behest of France’s auction industry. In 2006, French lawmakers voted to force Apple to share proprietary digital music technology with competitors, eliciting threats from Apple that they would abandon the French market altogether. Punishing innovators threatens to deter investment, suppress new ideas, and forestall the country’s participation in an increasingly global digital economy.
In the aftermath of the European Commission’s antitrust victory over Microsoft, French-style protectionist policies are rapidly spreading across Europe. Earlier this week, the EC launched two new Microsoft antitrust investigations, seeking to remove applications from the Windows operating system in the name of ‘competition’ (see previous post here). In Europe, competition has increasingly become a justification for handicapping popular products to protect inferior technologies. Just as Amazon must convince French lawmakers that discounts are good for consumers, Intel last week responded to EC charges that offering its customers a good deal amounts to anticompetitive behavior.
Consumers benefit from more choices and lower prices. By following France’s lead, the EU risks becoming an inhospitable environment for innovation. Not only will these policies suppress growth in the European technology sector, but they risk shutting consumers out of the global information age. The French government in particular should understand the consequences of depriving its citizens of liberty. Vive la révolution numérique!