Just 48 hours ago, the online retailer Amazon was doing
battle against California to save the new economy from the tyranny of taxation.
They were spending millions on a referendum to block a piece of the budget.
They were fighting off a supposed legislative dirty trick to prevent such a
referendum. And they were arguing that high principle and jobs were at stake.
Now, well,
in the words of the 20-year-old Nirvana album: Never mind.
Amazon’s
deal to end its referendum – in exchange for a one-year delay before it begins
paying sales taxes – was designed to save face. But this was a deal in the same
way that the deal the Japanese signed on the U.S.S. Missouri was a deal. It was
a surrender, by an utterly vanquished company.
Has any
company so bungled relations with a state?
Amazon did
almost everything wrong. It chose threats (of taking jobs and shutting partners
out of California) over engagement. And when it did engage on the issue, it
engaged late, allowing Wal-Mart and other retail competitors to get a jump.
And once Amazon did engage, it came
off as bullying. Yes, California politics looks like bullying from afar – and
even up close. But ultimately, companies and other big interests that want to
do business here spend the time in Sacramento, hire people, and keep making
their case to key policymakers inside and outside of government – when their
issues are hot, and also when their issues aren’t. You have to play ball. Key
players in Sacramento were left with the impression that Amazon’s nasty
attitude in California spoke volumes about the people running the company, and
the corporate culture they created.
The
company’s referendum only dug its hole deeper. The effort was expensive, and,
while taxes are never popular, it was an uphill fight that was creating more
problems for the company than it solved. The referendum divided Amazon’s own
industry – retail – at a time when industries would be wise to stick together
and speak as much as possible with one voice. A referendum on the ballot also
would have caused headaches for Amazon’s supposed allies in the Republican
legislative causes, who would have been forced to choose between their anti-tax
stance and defending local businesses they represent.
In the end,
Amazon made enemies and hurt its image in Sacramento – without getting very
much. The retailer offers a case study in how not to do business in
California.