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Canada’s Cannabis Industry: One Year Later

Almost one year ago, Canada officially legalized recreational cannabis federally.  With sunrise provisions contained in the Cannabis Act that have yet to come into effect, there are still some unknowns and moving targets.  Our philosophy is that knowledge is power.  This article provides a comprehensive overview of Canada’s cannabis industry: where we’re at and where we’re headed.  Please note that this article covers the cannabis industry from a federal and Ontario legal perspective.  

What’s the Big Deal?
Canada is only the second country in the world that has legalized recreational cannabis on a country-wide basis.  Given that Canada is the first G20 country to do so, there is a lot of interest in how our industry is regulated.  Simply put, Canada’s cannabis industry is booming.  It has created an entirely new economy, which has had a trickle down effect to other industries that enable the cannabis industry to thrive. (Cannabis law being a prime example!).  

What is Canada’s Legal Regime?

The primary legislation governing the cannabis industry is the Cannabis Act, which is federal in scope.  However, it is not so simple.  There are multiple layers of governing authorities that complicate the governance structure.  The federal government oversees setting industry standards and production.  The provinces have been granted the authority to regulate the distribution and sale of recreational cannabis, as well as setting standards relating to consumption (i.e. minimum age, places) and personal cultivation.  In addition, municipalities can also weigh in to set local bylaws that can impact public consumption and retail locations.  As such, it is important to also understand all governing federal and provincial legislation, as well as municipal bylaws.  In addition the Cannabis Act, in Ontario, you should also consult the Cannabis Control Act and Cannabis License Act.  

Who Governs the Cannabis Industry?

Health Canada oversees the commercial cultivation of cannabis.  In Ontario, the Alcohol and Gaming Commission of Ontario is in charge of the retail sale of recreational cannabis. Each province governs retail store and e-commerce sale of recreational cannabis differently.  As such, each province deals with e-commerce and brick and mortar sales differently vis a vis private and public sector.  In Ontario, the Ontario Cannabis Retail Counsel exclusively governs the e-commerce sale of recreational cannabis, whereas the private sector is able to sell cannabis in brick and mortar locations.  

What Kind of Licenses do you Need?

The cannabis industry is a HIGHLY regulated industry.  A license is required to produce, cultivate, transport, distribute and/or sale recreational cannabis in Canada.  Note that even the sale of cannabis accessories is governed under a license.  

How Can I Own a Private Sector Retail Store in Ontario?

The phase in of cannabis retail stores in Canada was a sunrise provision.  In order to set up a brick and mortar retail store in Ontario, you must obtain several licenses from the AGCO, including a retail operator license and a store authorization license.  Retail store managers must also obtain a license.  In order to qualify for the license, several criteria/information must be met/provided including financial history, store location, store layout, proximity to schools, etc.  Also, bear in mind that municipal bylaws may also impact whether a retail store location is allowed in the city/town.  There are restrictions as to how many private retail store locations a single entity may own.  In addition, there are restrictions as to what can and cannot be sold in private retail store locations.  Proximity of a proposed retail store to a school must also be taken into account.  

When Do Cannabis Edibles and Topicals Phase In?

The phase in of governance of cannabis edibles and topicals on a commercial level is expected to occur in October 2019.  There are restrictions on the types of ingredients that can be combined with cannabis.  For example, the combination of nicotine, caffeine and/or alcohol with cannabis is restricted.  With respect to topicals, products cannot be used on the human eye or applied in a way that pierces the human skin.  

Are There Restrictions in How you Can Market Cannabis in Canada?
Yes, yes and yes!   Branding, marketing and advertising cannabis products, services and accessories in Canada is STRICTLY governed.  Packaging and labelling requirements set out for cannabis products are precisely set out.  When marketing and advertising cannabis products, services and accessories, there is a razor thin line as to how creative the brand and its  marketing techniques can become.  There are stringent restrictions on marketing in a way that is appealing to young persons, branding in a way that evokes particiular emotions associated with cannabis, there are strict restrictions against testimonials and endorsements, as well as sponsorship activations.  Even what is allowed in logos and trademarks is regulated.  Trust me, it’s challenging.  There are, however, allowances for informational or brand preference promotions.  

Summary 
All in all, Canada’s cannabis indsutry is rife with opportunity, but because of the extreme amount of regulations governing the industry, it is also rife with challenges.