Ontario delivers yet another cannabis decision that hurts retailers and helps illegal dealers

Opinion: A monopoly on e-commerce benefits the government, and the black market, at the expense of consumers

On January 31st, the Alcohol and Gaming Commission of Ontario (ACGO) stated legal cannabis shops in the province will be prohibited from offering online retail options to consumers. This means that the initial 25 cannabis stores in Ontario and the multitude of stores that could open once the province lifts its temporary cap on retail licences won’t be able to offer consumers online ordering for store pickup (click and collect). Nor will they be able to offer any same-day delivery services.

The move to mandate that the province have a monopoly on cannabis e-commerce benefits the government, and the black market, at the expense of consumers.

Having the Ontario Cannabis Store (OCS) be the only online retailer for cannabis consumers doesn’t make much sense once you factor in that all legal cannabis sold in Ontario has to pass through the ACGO. The retailers who are selling cannabis are required by law to purchase cannabis through the ACGO, which means the government has ample opportunity to ensure regulatory compliance and generate tax revenue. The only justification for the government to monopolize e-commerce is that it allows it to impose additional markups on OCS sales, which uncomfortably resembles the pain that Ontario consumers already endure buying alcohol at the LCBO.

By mandating that all e-commerce be run through the OCS, the government is enacting policy that will empower the black market. This benefits the black market because it eliminates the prospect of private retailers offering click and collect, or same-day delivery. Both click and collect and same-day delivery are purchase options that significantly increase consumer access, which is key to curbing black-market sales. In order to truly achieve the goal of stamping out criminal actors, legal cannabis needs to be more accessible than illegal cannabis, which is something that click and collect and delivery can help with.

This problem is made worse by the fact that 77 Ontario communities have opted out of cannabis retail altogether. These “dry” communities will have no retail options within their city limits, leaving consumers to either drive to the closest opt-in community, order online through the OCS and wait three to five business days for delivery, or purchase cannabis illegally on the black market. Unfortunately, when faced with these choices, many consumers may choose to purchase illegally as a result of poor access to legal product.

If the government were to allow private retailers to engage in e-commerce such as click and collect or same-day delivery options, it would go a long way towards creating more access for consumers living in those Ontario communities where politicians made the foolish decision to opt out of letting cannabis retailers operate in their towns. In a scenario where private online retail options were legal, we could see consumers in “dry” suburbs ordering online to pick up on their way home from work, or even better, ordering for same-day delivery directly to their home. A delivery option for residents in dry communities would help meet their access needs, especially when compared to online ordering with the OCS, all while respecting the will of prohibitionist city councillors who don’t want cannabis retail. Unfortunately, the government monopoly ensures such a scenario is impossible.

Allowing for communities to opt out of cannabis retail was already a mistake, because it ultimately signals to black-market actors that those supposedly dry jurisdictions are still open for illegal business. Preventing online ordering and delivery from private stores outside those communities dogpiles on to that growing problem and makes the situation much worse.

Consumer access and consumer choice matter in terms of curbing the black market, but these policy failures could have larger implications. Those who never wanted cannabis to be legal to begin with will be front and centre arguing that legalization has failed to curb the black market and has failed to meet its objectives. Policies like community opt-outs and a government e-commerce monopoly act as a ball and chain for the legal market, limiting its ability to compete, which is a huge disservice to Ontario’s cannabis consumers.

David Clement is the North American affairs manager at the Consumer Choice Center.

Originally published at https://business.financialpost.com/opinion/ontario-delivers-yet-another-cannabis-decision-that-hurts-retailers-and-helps-illegal-dealers

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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.