(Bloomberg Gadfly) -- The European Commission has hit Amazon.com Inc. with a 250 million-euro ($294 million) bill over what it deems to be illegal tax breaks from Luxembourg. It's the latest signal from Brussels that it has Big Tech in its sights, following a record 13 billion-euro swoop on Apple Inc.
But it's also an opportunity for Amazon to throw politicians a bone and secure friends in high places as it reportedly sets its sights on empire-building in Europe -- especially France.
Amazon's bill
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€250 million
Fresh from its purchase of upmarket rival Whole Foods Markets, Amazon is said to be targeting France, a country that once declared yogurt to be a strategic asset. Shares of French grocers Carrefour and Casino have outperformed in recent days, fueled by reports that Amazon approached the retailers over a possible deal.
As France's new tech-savvy president, Emmanuel Macron, signals his openness to big cross-border deals, and activist investors sniff opportunity in Europe, there's a sense that old taboos about selling France's corporate jewels might be on the wane.
Amazon is burnishing its credentials as a job-creator, not a job-killer: It will open a new distribution center in France in 2018, creating about 1,000 jobs, according to AFP. What's not to like?
The problem for Amazon is that the language of the Commission's press release is in kilter with how French politicians, retailers and even the public view Big Tech. Emmanuel Macron said last week that he wanted "ambitious" regulation of internet giants that he says aren't playing by the rules on tax. Public opinion looks to be similar: a September survey published by Le Monde found that Amazon's brand was less well regarded than those of French retailers. French consumers won't fight Amazon's corner.
A tax dispute, however financially manageable for Amazon, gives extra ammunition to politicians and incumbents who are twitchy about takeovers. French retailers are apparently in no mood to tango with Amazon right now, with one telling Le Monde: "Amazon is not our friend: Their aim is to eat us. We aren't going to open the door and give them the menu."
Industry executives have done battle with U.S. e-commerce in the past: Carrefour's CEO Alexandre Bompard's last job as boss of books-and-electronics retailer Fnac Darty made him the "French face of the Amazon fightback," as Gadfly noted. Given Carrefour's recent profit warning, the pressure to resist is no doubt rising.
Yet if Amazon pays the bill and commits to boosting the French economy -- which shouldn't be too hard given its cash pile and growth ambitions -- this could be the start of a negotiation, not the end of the road for ambitious takeover plans.
Politicians aren't omnipotent in the face of market forces. The disapproval of President Donald Trump wasn't enough to stop Amazon swallowing Whole Foods whole. And France is trying to shed state-owned assets, not expand them. Despite its tough talk on protecting strategic industries, the government has limited cash to actually block a takeover: the Macron administration spent 80 million euros extracting a better deal for its STX shipyards. That sum wouldn't even cover 1 percent of Carrefour's market value.
Demanding back taxes from Amazon could be seen as a way to extract concessions from a retail behemoth -- not bar its path -- reckons French investment banker Guillaume Sarlat. That view may turn out to be overly optimistic if Amazon decides to fight back. But this is its chance to play nice.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net.
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