The letter of the law
As mentionned by Viet above, when you setup a branch of your business in a foreign country, you are expected to respect the laws of that country. Whether you consider those laws good/bad, smart/stupid, fair/unfair is neather here nor there: you are meant to respect them. Don't be surprised if you end up in court when you don't.
As for this particular law, it tries to address one of the major problems you have with free markets. A free market works wonderfully well when all the players in that market are of a similar size. But once some of the players have reached a critical mass, they can use economies of scale that smaller players can't afford and compete agressively on price. You then end up with a small number of very large players or even a monopoly, at which point you don't have competition anymore. Insert the name of your favourite monopoly here for an example.
What the French law tries to do is to remove price as a competing factor so that bookshops have to compete on other aspects of the sale, such as service, choice, etc. so that it levels the playing field for smaller players. It doesn't mean big business can't compete: in most French towns, you will find a branch of FNAC, a large chain that sells books, CD, DVD, cameras, electronics and computers and that has an online presence as well. They got there because their choice was genuinely better than the competition and their service was good, rather than because they slashed prices. Conversely, if you go to my home town, you will find that the largest bookshop in town is an independant one that was started as a family business. They are succesful because their staff is very knowledgeable and approachable, clearly love books, will be able to advise you on any subject or order any title that they don't have in stock for you, even if it means ordering just one copy. Without this law, they would have disappeared a long time ago.
Now, is this a good or a bad thing? Well, it depends. It means that you can't buy 3 books for the price of 2 to stock up on easy reading for the beach holiday but you tend to get much better service and choice in a French bookshop, even in small towns, than in London where I now live.
You can argue for either approach equally well but when it comes to books, music or cinema, the French will choose competition on choice and quality over competition on price any day. Any company that wants to sell in France should respect that and the laws that go with it. There's no reason why Amazon couldn't compete on these terms. They'll just have to offer more choice and better and faster service than the competition, while charging the same price. Surely they can do that? Oh wait... service? Customer service?