Two representatives of the Consumer Choice Centre, a US-based NGO, travelled to Luxembourg in April to offer their advice on legislation.
One area of contention is whether to ban the use of cannabis in public, which risks discriminating against tenants and people of limited means. The officials recommended allowing use of the drug in specific public areas.
Curbing the black market for cannabis is something that everyone should endorse, regardless of their view on legalization.
It is far better to have consumers purchasing cannabis legally, as opposed to having them buy the product illegally, from sources possibly tied to organized crime. Unfortunately, new data from Statistics Canada shows that the price gap between the illegal market and the legal market is getting worse.
In the past three months, the price of a gram of cannabis purchased illegally has fallen from $6.23 to $5.93. Over that same time period, the average price of a gram of legally purchased cannabis rose from $10.21 to $10.65. A price difference of $4.72 is a huge problem, especially for those of us that want legalization to succeed, and the black market stamped out.
As such, there are largely two factors that determine whether or not the legal market will outshine the black market. The first, and most obvious, is the price, while the second is consumer access.
In order for consumers to be encouraged to buy cannabis legally, especially if they were buying cannabis prior to legalization, pricing in the legal market needs to be competitive with black market prices. Excise taxes, sales taxes, additional regional taxes, and onerous production regulations and fees quickly drive up the price of legal cannabis.
The illegal market, not having to comply with these taxes, fees, and regulations, gets the upper hand, but it doesn’t mean that the legal market won’t ever be able to compete.
There are some simple changes that can be made to drive down legal prices. In regards to excise taxes, the federal government could amend the tax formula to eliminate the minimum tax amount and simply tax cannabis on its wholesale value. Getting rid of the $1/gram minimum (combined federal and provincial) would immediately allow for discount products to hit the shelves, which could attract price-sensitive consumers.
The Federal government could also change the production regulations for licensed producers. Pivoting the industry to a food-grade, as opposed to pharmaceutical grade, regulatory regime would immediately help lower costs, which would be passed on to consumers via lower prices.
The second major factor is access.
The legal market needs to be as accessible, or more accessible, than the black market. This is increasingly true for cannabis consumers who were buying the product illegally prior to legalization. In order to break the purchasing pattern of those consumers, the legal market has to have something to offer that the black market doesn’t.
Changes to access largely falls on provincial governments, as they are the government bodies that handle online availability, storefront licensing, and consumption rules.
Provinces could expand consumer access by increasing and uncapping the number of storefronts, and utilize the private sector where possible. Provinces like Ontario should immediately uncap their licensing process so that the amount of storefronts available to consumers reflects what the market can bare.
As supply increases domestically and catches up to demand, it will be important for consumers to have access to that new supply through readily available storefronts. Uncapped licensing, with private stores where possible, allows for that change to be as dynamic and consumer-centric as possible, which is a big win in regards to access.
In addition to increasing storefronts, provinces across Canada should follow the lead of Manitoba and allow for private cannabis e-commerce and delivery. Consumers in Winnipeg can actually get same-day delivery from licensed dispensaries, something that is illegal in Ontario. Allowing for dispensaries to deliver, or for regulated third parties to deliver, significantly increases consumer access to the point where it can be as accessible as black market dealers.
The last, and arguably most impactful change to consumer access would be to make commercial consumption legal. By the end of the year, new non-smokable cannabis products will hit the market, including beverages and edibles. Consumers should be able to consume those products in commercial settings like bars, restaurants, lounges, and clubs.
Provinces should amend their current liquor licensing procedures to include cannabis products, and consumers should be able to purchase those products like they do beer, wine, or spirits. Expanding cannabis access to commercial settings would quickly provide consumers with something that the illegal market never could: a controlled and permitted space to consume. Treating these new cannabis products like alcohol and allowing commercial sale and consumption would considerably increase consumer access by creating regulated access points in every community.
Smart cannabis policy is a policy that puts the consumer first when creating rules and regulations. If the government fails to draft policies with consumers in mind, the black market will continue to thrive. Addressing how our current regulatory regime inflates prices, and dampers access would go a long way towards actually making legalization a success.
The entire world is watching how we regulate cannabis. Let’s do it right for Canada’s sake.
Originally published here
“The data from Stats Can is troubling, because it shows that the legal market is getting less competitive over time,” said David Clement, the North American affairs manager at Consumer Choice Center. “Luckily there are some simple solutions that could be enacted to help the legal market compete when it comes to price. The federal government could quickly get rid of the minimum tax amount, and simply tax cannabis on its wholesale value. This would immediately allow for discount products to hit the shelves, which will put downward pressure on prices.”
In addition to changing the excise tax formula, Clement said the government could change production regulations that are holding back industry efficiency.
“Shifting production regulations to be in line with food-grade rules, as opposed to pharmaceutical-grade restrictions, would go a long way in terms of reducing costs, which are passed on to consumers through lower prices,” he said.
“It’s time to re-evaluate the taxes on cannabis,” according to a Toronto-based North American consumer affairs group.
The Consumer Choice Center said the growing gap in price between legal cannabis and illegal pot shows that it’s time to re-evaluate cannabis taxes.
Earlier this week, Statistics Canada released data on the price differences between illegal and legal cannabis. It found that over the past three months, the price of a gram of cannabis bought illegally has fallen from $6.23 to $5.93 but over that same time, the average price of a gram of legally purchased cannabis rose from $10.21 to $10.65.
“The data from StatsCan is troubling, because it shows that the legal market is getting less competitive over time,” said David Clement, manager of the Consumer Choice Center.
He said there are some simple solutions that could be enacted to help the legal market compete when it comes to price. Clement said the federal government could get rid of the minimum tax amount, and simply tax cannabis on its wholesale value, which would immediately allow for discount products to hit the shelves and decrease prices. He added the government could also change production regulations to make the industry more dynamic. Clement said shifting production regulations to be in line with food-grade rules, as opposed to pharmaceutical-grade restrictions, would go a long way in terms of reducing costs, which are passed down to consumers through lower prices.
“The taxes and fees create prices that are high out of the gate, and then a lack of competition prevents those prices from being slowly pushed down,” David Clement, the North American affairs manager for the Consumer Choice Center, told CBC Radio-Canadaat the time. “It costs half a billion [over five years] to enforce the rules and regulations in the Cannabis Act, so in order to generate the revenues to cover that, they’ve implemented fees and licenses on licensed producers.”
The Ford government’s decision to hold a second lottery for retail cannabis store licences is drawing a mixed review from the Consumer Choice Centre.
The centre said it is pleased Ontario plans to open another 50 stores, on top of the 25 operating across the province now, but criticized the decision to maintain a cap on the number of stores.
North American Affairs Manager David Clement said the announcement is both good and bad news for Ontario consumers.
“It is great the government is moving to increase the number of storefronts, but the existing cap, and the prequalification criteria, miss the mark,” he wrote in a release. “We don’t see any justification for the cap to continue to exist when the province has stated that it is committed to uncapping the retail market in the long run.”
The centre said the confirmation of $250,000 in cash or the equivalent, a letter of credit for $50,000, and a secured retail space is “a huge barrier to entry, and significantly increases costs for retail operators. Those costs will ultimately end up being passed on to consumers.”
It pointed out that other businesses like bars, clubs, restaurants, corner stores, and grocery stores that sell alcohol and cigarettes do not face the same heavy burdens.
The centre believes the increased cost for consumers and the limit on locations to buy legal cannabis will drive users to the black market.
“A very simple solution would be to approve all applicants who already have retail space acquired, and do so without a cap on the number of stores — This would ensure that applicants are serious, without the heavy-handed financial requirements,” the statement said. “Doing so would drastically improve Ontario’s retail market for cannabis, which would significantly increase the likelihood of Ontario consumers purchasing cannabis legally.”
Yael Ossowski, deputy director of the Consumer Choice Center, described himself as being “on the side of consumers” and called for the FDA to set some standards and regulations but also “allow companies and brands to exist. That’s the only way consumers can differentiate between good products and bad products.”
Also likely to take a hit are consumers. The U.S.-headquartered Consumer Choice Center (CCC) argues the new licensing process will hurt consumers. “This move is a significant blow for Canada’s cannabis market, especially cannabis consumers nationwide,” David Clement, the CCC’s Toronto-based North American affairs manager, says in a statement.
“The process to qualify as a licensed producer is already incredibly rigid. These changes will simply make it harder for new producers to enter the market, which, ultimately, ends up hurting recreational consumers and medical patients,” Clement argues. “More red tape will translate into higher prices for consumers, and less product availability. Higher prices and poor access will encourage consumers to continue to purchase in the black market, which runs directly against the federal government’s stated goal for legalization.”
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Just this week, Health Canada announced that it would be making significant changes to the process for approving licensed producer (LP) applications. Specifically, it stated that all new applications will have to have a fully built and regulatory compliant facility at the time of their application. Health Canada has justified the move by citing that 70 per cent of preapproved applications have not ended up having their production site built and compliant with current production regulations. This change is incredibly problematic for the cannabis industry, and more importantly, for cannabis consumers nationwide.
The first issue with this policy change is that it will make it significantly harder for new producers to enter into the cannabis market. Now, because of the change, entrepreneurs and firms looking to enter the market will have to get financing without any indication from government that they will be approved. From a financing side, this makes investment into new cannabis firms extremely risky, with the potential for millions in sunk costs if an applicant doesn’t get approved after already building a fully compliant facility. This will drastically increase upfront costs for those who do enter the market, and those costs ultimately end up getting paid by consumers via higher prices.
The second issue with the change is that by adding more red-tape into the production process, Health Canada is actively limiting supply. Supply issues have been a dark cloud over Canada’s legalization process, and this change will only make that worse. As consumers, we want a free and fair market with appropriate access. This is important because appropriate access and product availability is what will help shift consumers away from the black market. Making it harder for new producers to get approved is yet another example of federal policy tying the hands of the legal market. If the legal market cannot properly compete with the illegal market, it is naive to think that consumers will shift their purchasing behaviours.
The third reason why this policy change is misguided is that it demonstrates a complete and utter lack of self-reflection on the part of federal regulators. One of the biggest issues with Canada’s legal market is that the regulations, for the most part, have not changed since the medical cannabis industry was formalized under the Harper government. When his former Conservative government had to deal with the reality of medical cannabis, they created a regulatory framework that mirrored how pharmaceutical products are produced. Those regulations were over-the-top and heavy-handed then, which makes them downright ridiculous now in the context of recreational production and use.
Unfortunately, the federal Liberal government never picked up on those regulatory mistakes. In fact, their own release on this policy change justifies the change because it bringscannabis production regulations more in line with pharmaceutical regulations. It is baffling that in the face of supply issues, and a prevalent black market, the Trudeau government has decided to further cement Stephen Harper’s mistakes.
The final issue with this change is that the proposed solution does nothing to address the problem that Health Canada was trying to fix. If Health Canada has an issue with the amount of preapproved applicants who end up with approved production sites, then they should address the hurdles these applicants are facing that prevent them from being build-ready. The solution here would be to liberalize the production regulations so that these paper-reviewed applicants can get to the production stage as soon as possible. Instead of going the route of liberalizing, Health Canada has doubled down on red tape, which benefits nobody.
All of this stems from the fact that the federal government has never really known how to properly regulate cannabis. When it comes to production, all the federal government would need to do to help solve these issues would be to have production regulations that mirror how breweries, distilleries, and wineries are regulated. Or, better yet, the government could simply apply food-grade production restrictions on legal cannabis. Simple changes in production regulations, as opposed to more red-tape, would go a long way to creating a more dynamic and responsive cannabis market here in Canada, one that best serves the needs of patients and consumers, while stamping out the black market.
The global crusade against cannabis is finally beginning to falter. As the attitudes of citizens and lawmakers alike begin to soften, the prospects of full legalisation have gone from a stoner’s pipe-dream (if you’ll pardon the pun) to very feasible in only a couple of years. With a fifth of the US legalising the plant for recreational use, alongside Canada and Uruguay, as well as numerous European states opting to decriminalise its use, progress has been quick and promising.
This is cause for optimism. Newly-legal markets in the US and Canada have already seen booms in market growth and innovation, not to mention the positive effects of decriminalisation on the harm felt by users. In decriminalising or outright legalising cannabis, legislators in such countries have helped foster an environment in which entrepreneurship and consumer well-being are welcomed and encouraged.
But there’s still work to do. In many countries, reluctance to embrace cannabis is preventing them from enjoying the benefits felt by more committed nations. Legislators are, all too often, unable or unwilling to properly ride the green wave, preferring instead to watch from the pier.
Italy, for example, is a victim of this lack of commitment. Vagueness surrounding the legality of Italian hemp and cannabis has made it far more difficult for entrepreneurs and investors to know where they stand, damaging their confidence and potential to create a flourishing market. As such, progress has been far slower in Italy (a country which once held the number two spot worldwide for industrial hemp production), than in countries which are more willing to commit.
In the UK, the story looks rather familiar. Despite the nearly four-decade long prohibition on medical cannabis being overturned by Home Secretary Sajid Javid last year, access to the drug is still hampered by heavy-handed restrictions and high costs. Patients will have to wade through a sea of bureaucracy and extortionate bills to have access to the drug legally, rendering any benefits this would have over continued use of the black market very hazy.
Growers and entrepreneurs, too, are deterred by legal ambiguity. With the British government reluctant to go any further than this somewhat-legal medicinal cannabis, the country is at risk of following Italy’s footsteps and missing out on what seems poised to be one of the most promising markets of our time.
There is a silver lining though. While patients and consumers may have their wellbeing overlooked by the government in Westminster, an unlikely source shows far more promise when it comes to protecting their welfare. Across the UK, members of the police are beginning to relax their approaches to cannabis offences.
Rather than prosecuting those caught with small amounts of the drug, many police officers are instead opting for warning and recommendations for how to quit. This has prompted accusations that the police are pushing for de facto decriminalisation outside of the realm of legislators.
In practice, however, such action might be the saving grace for British cannabis consumers. A more relaxed approach from police allows for a far safer environment, with police attention shifted to the darker, truly criminal side of the market, and away from nonviolent consumers.
Moreover, the controversy surrounding this ‘blind-eye’ approach could be just the thing needed to get the ball rolling on higher-up decriminalisation. Rather than shell out thousands for legal medicinal cannabis, or to risk buying on the black market, some are now pushing the cause of growing the plant at home for treatment of certain ailments.
While the British cannabis scene is still hampered by a stubborn government, changing attitudes from law enforcement could revitalise the debate on harm-reduction and smart drugs policy, all the while making life easier for consumers. It may be early days, but there’s hope that legislators will see sense in the police’s decision.