Not quite. Amazon will make more profit than it does by removing the shipping subsidy. Then, given their preexisting market position and logistics/delivery network, it's still likely to be faster to get a book from Amazon if a local store doesn't have a copy. If you don't have to have the book right now and are already a regular Amazon shopper, Amazon still has a significant advantage.

Amazon is never going to be just another purchase option. That requires them to only compete on price. They have plenty of other advantages, and a legal mandate to increase their profit margin on book sales might shift book buyer's shopping habits a tiny bit, but it's not stopping the trend, and I doubt it's slowing things much either.