Who Pays? Regulating Cannabis in Canada Estimated to Cost $546 Million

Compliance, enforcement, inspections, public education, and program management–there are a lot of factors contributing to the costs of legalization of cannabis in Canada.

Designed to offset the estimated $546 million cost associated with regulating and enforcing the Cannabis Act, Health Canada has designed a Cost Recovery Program that aims to “ensure that those who benefit from the new legal market will pay the costs of regulating cannabis, which will reduce the cost to Canadians.”  But will it have the intended effect?

A Barrier to Would-Be Producers

The cost recovery program imposes a number of fees on licensed producers for application screening ($3,277), security clearance ($1,654), import/export permits ($610), and an annual regulatory fee of 2.3% or revenues, or $23,000 for producers with less than $1,000,000 in revenues.

Added to the capital costs required to produce cannabis at a commercial level, the fees represent a ballooning burden for LPs which might not serve the interests of consumers.

The cost recovery program could stifle competition by acting as a barrier to entry for new players looking to enter the cannabis space. If this is the case, market consolidation is likely and could ultimately limit consumer choice.

Competition, particularly early on in legalization, is important to encourage a market that is geared towards meeting the needs of consumers. More competition means more product selection and availability, and better service and quality.

Passing the Buck

When the fee structure for the Cost Recovery Program was announced by Health Canada in early October, the agency justified the fees, and their regulatory system, because it is all designed to shift profits away from the criminals and organized crime networks that sell cannabis illegally.

Fees, although technically charged to licensed producers, will ultimately be passed on to consumers who are already finding themselves subject to a 10% excise tax, provincial taxes, and delivery fees (especially in areas where online retail dominates in the absence of physical retail stores).

High prices have already generated some irritation for would-be consumers. In New Brunswick, one of the first customers into a Cannabis NB store actually left without making a purchase, citing that prices were out of his price range.

These inflated costs could ultimately prove counterproductive to the government’s mandate to stamp out the black market. And yet, Health Canada’s cost recovery program will not benefit provincial or municipal governments who will have to shoulder costs of regulation themselves. More concerning still, the scheme, priced at over half a billion dollar, doesn’t include any law enforcement costs.

While it is understandable that the government would want to recover the costs associated with regulating the industry, the Federal Government’s approach has created a bloated system that further burdens consumers through inflated prices, limited competition, and ultimately, encourages the black market to persist.

Originally published at https://www.leafly.com/news/politics/cost-recovery-canada

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

Monthly update: October 2018

DIGITAL SINGLE MARKET CAMPAIGN

On 10 October, the CCC’s Luca Bertoletti and Bill Wirtz handed the Consumer Choice Center’s Digital Single Market research paper to the European Commission’s Head of E-Commerce.

TESTIMONY ON ONTARIO’S CANNABIS RULES

On 12 October, the CCC’s David Clement testified at the Ontario Standing Committee on Social Policy to provide comments on Bill 36, the province’s cannabis regulations.

CAPITOL HILL BRIEFING ON FDA REFORM

On 18 October, our Jeff Stier participated in a panel discussion dedicated to the FDA’s role in approving new consumer products that will improve countless lives. The event was co-hosted by Taxpayers Protection AllianceR Street Institute and the Consumer Choice Center.

PUBLIC CANNABIS CONSUMPTION BAN IN ONTARIO WAS REVERSED

On 26 September, Ontario reversed their decision to ban all public consumption for cannabis. Check out how the Consumer Choice Center contributed to the creation of a more equitable, just and consumer-friendly cannabis market in Ontario.

NICOTINE IS NOT YOUR ENEMY SOIRÉE

On 2 October, the CCC hosted the ‘Nicotine is Not Your Enemy Soirée’ in Genève (Switzerland) to celebrate the life-saving advancements in nicotine consumption technology.

BAN AWARD

The Framework Convention on Tobacco Control, a treaty of the World Health Organization (WHO), received the October 2018 BAN Award for preventing tobacco harm reduction and denying the science on life-saving e-cigarette and vaping technology.

EFFECTIVE STAND AGAINST THE FAIR FEES ACT

The FAA reauthorization is off to the White House, after the Senate voted 93-6 to clear the legislation without the FAIR Fees Amendments. Airlines can keep offering modularized services to different passengers with different preferences and price sensitivity. This is a win for consumer choice and competition in the airline industry.Check out how the Consumer Choice Center helped to keep the skies free by effectively opposing the FAIR Fees Act. #FreeSkiesAreFAIR

Opinion: advertising rules for cannabis in Canada are too strict

Cannabis legalization passing on October 17th means that the Federal Cannabis Act is in full force and that the industry will have to follow extremely strict restrictions when it comes to marketing, branding, and advertising practices.

The goal of these restrictions is to avoid cannabis being exposed to young people. Although that goal is noble on its face, the restrictions that will be in place far exceed what could be considered sensible regulation. This is especially true when you consider how other age prohibited goods, like alcohol, are advertised and promoted nationwide.

Here are some of the most problematic restrictions on the advertising and promotions listed in the Cannabis Act:

Prices

Among the most glaring issues listed in the Cannabis Act is the prohibition against advertising with information about a product’s price, as well as any promotion based on inducement. The price provision essentially means it will be illegal for producers and retailers to advertise the prices for the products they sell.

Prohibiting price advertising will leave consumers unaware of potential sales until after they have actually entered a cannabis retail space, whether that be in person, or online. This significantly limits consumer knowledge and discourages competition which is essential to ensure that consumer demand is appropriately met.

For inducements, it will be illegal for cannabis producers and retailers to have any marketing efforts that offer additional products, accessories, or services with purchase. That means product giveaways, the inclusion of free promotional items, and various other forms of product marketing will be against the law.

This is stricter than how alcohol is treated. Across Canada, consumers can regularly see ads that reveal prices for various products. These advertisements happen whether alcohol is sold by government or private retailers. In addition to that, producers of alcohol are permitted to advertise product giveaways or promotional items that might be included with their products at the point of purchase. For example, many popular beer companies include promotional items like t-shirts, miniature Stanley Cups, and various other “swag” items in their cases of beer. It’s clear that there’s a double standard at play.

Event Sponsorships

The disparity between how the alcohol industry is treated and how the legal cannabis industry will be treated is also evident with the prohibition on event sponsorship. Cannabis companies will not be able to use their branding to promote events or offer event sponsorship for venues or festivals.

The hypocrisy here is that alcohol companies are allowed to provide such sponsorships, while cannabis companies won’t be. All of this begs the question; why can producers of alcohol sponsor events and venues, like Toronto’s Budweiser Stage, while the legal cannabis industry can’t?

Testimonials and Endorsements

The other major issue with the Act is the prohibition on advertising with testimonials or endorsements. In the absence of packaging that promotes therapeutic uses and efficacy–also prohibited–testimonials and endorsements are important tools for consumers because those testimonials put assurance behind a brand and its impact on the user. This is even more important given that many consumers of cannabis will be new to the product, and ultimately uninformed, or ill-informed. Cannabis producers and retailers should be able to convey a product’s desired impact, via testimonial or endorsement, so that consumer knowledge can be enhanced, which ensures consumers make appropriate purchases based on their preferences.

One example of why this is misguided is how we treat advertising for non-prescription medicine. Numerous popular pain medication, allergy, and cold medicine brands regularly advertise their products to the general public and make use of testimonials explaining the drug’s impact and designed use. Again, we have a clear double standard that puts unnecessary and inconsistent restrictions on the legal cannabis industry.

Lifestyle Marketing

The last, and most obnoxious, marketing and branding restriction is the complete prohibition on depicting persons or animals, whether fictional or not. This means that all cannabis marketing or promotion can not have any instances where they depict a person. The goal of this is to prevent lifestyle marketing.

Preventing lifestyle marketing is obviously inconsistent when we look at alcohol marketing in Canada. That said, the ridiculousness of this can be seen in the example of New Brunswick. New Brunswick’s online retail outlet, run by the province, initially depicted a woman doing yoga, and people socializing. Health Canada has now warned the province that they are violating the marketing rules set out by the federal government. Heaven forbid adult cannabis consumers see a picture of an adult doing yoga.

Limiting cannabis exposure to minors is important, however; these restrictions are heavy handed and ultimately hypocritical once the advertising practices of other industries are taken into account. Instead of these inconsistent restrictions, the Federal Government would be better to spend their efforts cracking down on any advertising considered to be false, misleading, or deceptive. For legal products, like cannabis, that is the proper role of government when it comes to consumer protection.

The Federal Government, although legalizing cannabis, appears to be desperately holding on to the remnants of prohibition through these overly restrictive advertising rules. That’s bad for consumers and bad for Canada.

David Clement is the north american affairs manager for the Consumer Choice Center. He has written for outlets such as the Globe and Mail, Toronto Star, and Hamilton Spectator. He is regularly featured as a commentator on CTV, Global News, and the CBC.
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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

Quebec should embrace cannabis to promote the economy

The CAQ’s anti-pot stance is sure to hurt consumers and citizens in Quebec.

The new Quebec premier Francois Legault of the Coalition Avenir Quebec says he wants to put more money in the pockets of Quebecers.

And now that the CAQ has the mandate of a majority government, his words will soon turn into actions.

Legault and the CAQ have already declared they want more of a role for the private sector in health care and want to eliminate bureaucracy. Added to that, they want to cut taxes across the board.

In addition, the CAQ has put the Société des alcools du Québec (SAQ) on notice, saying that the state agency “profits from its monopoly status to take advantage of consumers,” and the time has come to privatize it.

Each of these proposals represent historical opportunities for consumers and entrepreneurs.

But when it comes to cannabis, which was legalized on Wednesday nationwide, the CAQ is wrong. Their anti-pot stance is sure to hurt consumers and citizens in Quebec.

The Most Restrictive Laws

As the Globe and Mail detailed last week, Quebec will have the most restrictive laws in the country when cannabis is legalized.

In the cannabis regulations passed by the previous Quebec Liberal Party, consumers in Quebec will be banned from growing the plant at home, and will only have 25 stores to choose from across the province, including just four in Montreal. Even more, prices will be fixed by the new SQDC and customers will only be allowed to have 150 grams of dried cannabis at home. Ontario, on the other hand, will open up 40 stores by July 2019, allowing consumers to buy online in the meantime. In Saskatchewan, up to 60 permits will be handed out to private retailers. Manibota is the only other province to ban home growing.

The CAQ voted against the Liberals’ provincial plan in June and have indicatedthey want even more regulations, including a ban on public consumption and an age limit of 21 years old.

For Legault and the CAQ, the “commodification” of cannabis is a bad idea that Quebec has been forced to accept.

That said, will the CAQ’s sour opinion on cannabis ensure Quebec is left behind in the green economic boom?

An economy both green and strong

In 2019, the cannabis market is expected to reach $1 billion, representing a fourth of the national total.

That represents not only millions in additional revenue for the province via taxes, but also an invitation to innovation for hundreds of entrepreneurs and innovators who will respond to the new demand of the population. That’ll mean more investment and more jobs across the economy. Cannabis stores will need goods and services they’ll receive from the market, and all businesses around them will benefit. It’s a win-win scenario.

As such, it’s a reality that will only come to fruition if we have a government that offers us simple, effective laws that prove conducive to the new market of cannabis.

The problem with a restrictive cannabis law regime is simple: the more restrictive it is, the more likely consumers are to stay in the black market to acquire the product. According to Deloitte, only 47 percent of Quebecers have the intention of even using the legal cannabis market. The majority will still in the black market, far from government’s regulations and taxing authority.

Is that the CAQ’s grand plan? We hope not.

The legalization of cannabis in Canada is a historic occasion to demonstrate our capacity to be an innovative, smart, and entrepreneurial country with sound and effective public policies.

That’s the economic message the CAQ wanted to send voters at the last election. If they want to continue flying that flag, they’re going to have to open up to the wonders of cannabis.

Yaël Ossowski is an economic journalist and deputy director of the Consumer Choice Center.

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.

District of Elkford Approves Cannabis Bylaws

SUMMIT 107 FM: After the District gave second and third readings to the smoking regulation bylaw, the Consumer Choice Centre told Summit 107 that they feel these rules “unfairly target the poor” since lower-income residents tend to rent their accommodations. Landlords have the ability to ban cannabis use on rental properties, so the group argues that, for those individuals, it will essentially be as if legalization is not happening at all.

McKerracher declined the opportunity to comment on the Consumer Choice Centre’s statements.

READ MORE

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

Federal Government Plain Packaging Regulations Completely Disregard Consumers and Limit Product Choice

The Federal Government of Canada is enacting strict branding and packaging restrictions on the legal cannabis market. More specifically, Health Canada has taken the framework of plain packaging tobacco products including cigarettes and cigars, and applied many aspects of that legislation to how legal cannabis products must appear. This mandate from Health Canada limits consumer choice, according to the Consumer Choice Center, and more importantly, prevents consumers from selecting products based on their personal choice.

Speaking at news conference yesterday held in the Centre Block on Parliament Hill, David Clement, North American Affairs Manager for the Consumer Choice Center (CCC) said the Federal Government seems committed to treating adult consumers like children. The branding restrictions placed on tobacco products, and now cannabis products, shows a disturbing trend of paternalism creeping further into the lives of adult consumers. It’s a dangerous precedent and raises the question of what products will be targeted next.

“What we’ve seen is that Health Canada and our federal government are regulating products with complete disregard for consumers, and complete disregard for a continuum of risk. Our worry now is what started with tobacco has moved to cannabis, and now will move to other products, such as soft drinks, alcohol and various other food items,” said David ClementToronto-based North American Affairs Manager for the Consumer Choice Center (CCC).

CCC has launched the Smokers Vote initiative where consumers of cannabis, tobacco products and cigars can raise their concerns about plain packaging regulations directly with their elected representatives and engage in direct democracy.

About the Consumer Choice Center

The Consumer Choice Center is a global advocacy group focused on consumer choice and market access. The CCC monitors regulatory trends around the world, works with consumers in over 100 countries, and engages with policy makers to highlight how certain regulations impact consumer choice.

For more information: http://www.smokersvote.org

Originally published at http://www.tacticsmagazine.com/landingpages/cnw-global-retail-news/?rkey=20181012C2227&filter=5491

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

Minor changes could have a major positive impact on Ontario’s cannabis plan

On Aug. 13, Ontario Finance Minister Vic Fideli announced the government’s plan for cannabis legalization. The keystone of the Progressive Conservatives’ policy is a reversal of the public retail monopoly model proposed by the former Liberal government, to instead opt for private retail provincewide. Although cannabis will be legal in October this year, storefronts won’t be available for consumers until at least April 1, 2019, after the government has gone through a public consultation period. In the meantime, Ontario cannabis consumers will only be able to order legal cannabis through an online outlet created by the Ontario Cannabis Store (OCS).

Along with the private retail announcement, the government stated that municipalities would be able to “opt out” from cannabis activity, meaning that cities and towns will have the opportunity to prohibit cannabis retail outlets from being established within their municipal boundaries.

Lastly, in addition to strict age-of-purchase and impaired-driving restrictions, the PCs will enact a complete public consumption ban, similar to how alcohol is treated provincewide. This means all cannabis consumption will have to take place either in one’s home or on one’s private property.

Mr. Ford should be applauded for embracing private retail, but there are some key missteps with the plan as described. Luckily, these flaws can be easily remedied with simple policy alterations.

The move toward private retail is definitely a win for consumers, given that private retail enhances access, which helps stamp out the black market. That said, not having storefronts available on legalization day all but guarantees consumers will continue to purchase cannabis illegally until storefronts are available. Hundreds of thousands of Ontarians consume cannabis recreationally and all of them currently purchase it via illicit dealers. The thought that a government-run online outlet will be more accessible than how consumers currently purchase the product is optimistic at best, but unrealistic and destined to fail. Instead of delaying, Mr. Ford’s government should fast-track the retail permit process so that storefronts are available on Oct. 17.

Not having storefronts is just one of the major flaws with the government’s cannabis announcement. The second is the opt-out provision allowing communities to ban retail outlets within their municipal boundaries. While the desire to decentralize decision-making to local governments is understandable, all the Ford government is doing is giving cities and towns permission to recreate prohibition at the local level. This is exactly what is currently happening in California, where local retail bans are creating pockets of prohibition. Banning cannabis retail at the local level isn’t going to stop consumers from buying the product. It’s just going to prevent them from purchasing it legally, which ends up lining the pockets of organized crime.

The last significant issue with Ontario’s cannabis plan is the complete ban on public consumption. At first glance, the restriction may seem reasonable. Cannabis is an intoxicant and can be consumed in an obnoxious manner that bothers others. Despite this, banning public consumption for cannabis is heavily regressive and unfairly targets the poor. For Ontarians who rent, a growing group in today’s housing market, smoking indoors is almost always prohibited. Now, for those renters, outdoor consumption is prohibited as well. Both of those restrictions are worsened by the fact that the province currently doesn’t have any plans for indoor consumption in commercial settings. Without legal cannabis lounges, Ontarians who rent are almost entirely excluded from legal consumption, which is particularly unfortunate and cruel given that low-income neighbourhoods have historically been the ones most terrorized by the government’s faulty war on cannabis. To solve this, Mr. Ford could backpedal on the ban or simply legalize regulated consumption lounges. Mr. Ford has already shown willingness to halt the status quo with his move to suspend the progression of the Smoke Free Ontario Act. Allowing for cannabis consumption lounges would let people consume cannabis in licensed and controlled settings, where they aren’t bothering the public at large.

Even these slight changes could help ensure Ontario makes serious progress toward stamping out the black market while creating a legal cannabis market that is more equitable, just and consumer-friendly.

David Clement is the North American affairs manager at the Consumer Choice Center. Follow him on Twitter: @ClementLiberty

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

Health Canada announces fees to recover costs of regulating cannabis

CHEK: The government says cost recovery will reduce the costs to Canadians, but the Consumer Choice Centre (CCC) says the new fees will just be passed on to consumers.

“Why are they estimating that it will cost over half a billion dollars in expenditure, not including law enforcement costs, to enforce the Cannabis Act?” CCC North American Affairs Manager David Clement said in a statement.

“This raises some serious red flags regarding the overly bureaucratic, and burdensome, framework that has been created in Ottawa. Surely there has to be a way that legalizes cannabis, enacts sensible consumer-focused regulation, without it costing half a billion dollars.”

READ MORE

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

‘Cruel and overly punitive’: Experts say Manitoba’s fine for growing pot at home misses the mark

CBC NEWS: David Clement, North American affairs manager for the consumer-advocacy group Consumer Choice Center, called the size of the fine “incredibly cruel and overly punitive.”

“Realistically, if someone violates the homegrown law, they’re not really harming anybody. In theory, they may be harming themselves, but cannabis is going to be legal so that should be out of the question,” Clement said in an interview on CBC Manitoba’s Radio Noon.

“The fine doesn’t match the infraction.”

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About David Clement

David Clement is the North American Affairs Manager for the Consumer Choice Center and is based out of Oakville, Ontario. David holds a BA in Political Science and a MA in International Relations from Wilfrid Laurier University. Previously, David was the Research Assistant to the Canada Research Chair in International Human Rights. David has been regularly featured on the CBC, Global News, The Toronto Star and various other major Canadian news outlets.

New REIT to provide real estate capital to cannabis industry

BISNOW: “If entrepreneurs in the cannabis industry will be able to access capital and loans similar to firms in practically every other industry, that will be a huge boon to businesses and to consumers alike. At present, the current situation requires business owners in the cannabis space to operate in incredibly risky territory: the federal government considers them outlaws, banks won’t even touch their money and they’re forced to deal only in cash,” Consumer Choice Center Deputy Director Yaël Ossowski said.

“Even where cannabis is legal under state law, this means consumers are still encouraged to turn to the black market rather than the new legitimate market for cannabis,” Ossowski said. “If firms in the cannabis industry are able to access capital fast and easily, through legal means, that means they will be able to grow their operations, hire more employees, make investments and consumers will be better off for it.”

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About Yaël Ossowski

Yaël Ossowski is a journalist, activist, and writer. He's currently deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter and chief Spanish translator at Watchdog.org, and worked at newspapers and television stations across the country. He received a Master’s Degree in Philosophy, Politics, Economics (PPE) at the CEVRO Institute in Prague. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria.