“The taxes and fees create prices that are high out of the gate, and then…
Opinion: About 80% of all cannabis bought in Canada is being purchased on the illegal market, far from the 50% figure claimed
The federal election is just a few months away, which means Canadians are going to be bombarded with claims from the government about its apparent successes, while at the same time hearing endless counter arguments from opposition parties. In this sea of endless noise, it can be difficult to parse out where the federal government actually stands on its claims, and whether the opposition parties have legitimate grievances, or are just opposing for the sake of opposing.
When election day does come, Canada will be a year in to cannabis legalization, which gives us a good opportunity to reflect on how things have gone thus far. Legalization is smart policy overall. That said, at nearly the one-year mark, there is lots to reflect on regarding Canada’s cannabis legalization experiment.
Just last week new StatsCan figures came out in regards to consumer behaviour and cannabis usage. Some interesting facts emerged, like the fact that men are two times more likely to consume cannabis than women are, and that men are more likely to use cannabis for non-medicinal reasons. In addition to usage patterns, StatsCan revealed that 48 per cent of cannabis consumers surveyed said they purchased some of their cannabis in the legal market. As soon as the report came out, Trudeau’s right-hand man, Gerry Butts, and senior policy adviser Tyler Meredith, were quick to pat themselves on the back for “wiping out half of the illegal market.” Wiping out half of the illegal market would be incredible, and something worth congratulating, if it were true.
The first issue with their claim is that Canadians surveyed had to self report, meaning they had to admit to committing an illegal act in order to fall into the “purchased illegally” category. Anyone who has taken an introductory research methods course knows that this percentage is almost certainly undervalued, with the real percentage of illegal purchasers being much higher. In fact, StatsCan data from the same report hints at that very fact, with 37 per cent of consumers saying they got their cannabis from family and friends. Facing the reality of admitting to a crime, it is likely that many of those surveyed opted for the family and friends option, over admitting to making illegal purchases. Ironically, the report cited by Butts and company actually explains that less than 30 per cent of cannabis consumers purchase exclusively in the legal market.
Beside the issue of self reporting, both Butts and Meredith made their 50 per cent claim based on data that doesn’t actually mean that half the illegal market is gone. It is fantastic that nearly 50 per cent of consumers self reportedly purchased some cannabis legally, however, that figure doesn’t actually mean that half the illegal market has been wiped out. This type of analysis is incredibly sloppy, because it doesn’t take into account the quantity of cannabis purchased. The past StatsCan quarterly snapshot showed that Canadians spent $5.9 billion on cannabis, with the black market accounting for $4.7 billion of that total. Thus, approximately 80 per cent of all cannabis bought in Canada was done so in the illegal market, which is far off from the 50 per cent figure being touted by Liberal party brass.
There are a variety of reasons why the illegal market is still persistent in post-legalization Canada. Those reasons largely come down to three factors: price, access and product variability. For each of those factors, the federal government failed to put consumers first when creating Canada’s legal framework. For price, it has been well documented that illegal cannabis is getting cheaper, while legal cannabis is heading in the opposite direction. The price gap between legal and illegal cannabis is largely a combination of poor federal policy compounded by provincial mistakes. Legal cannabis, at the federal level, has GST applied to it, a 10 per cent excise tax, and half a billion dollars in compliance fees for producers. These taxes and fees, in addition to provincial boutique taxes, are in large part why legal cannabis is upwards of double the price of illegal cannabis.
For access, the federal government’s overly cautious approach has significantly hampered the consumer experience for those who do purchase legally. Anyone who has been into a legal store right away sees the sterile nature of Canada’s legal market. Products can’t be seen in advance by consumers, and when they do get their product, their purchase is in overly paternalistic plain packaging. On top of that, the marketing and advertising restrictions for legal cannabis more closely mirror tobacco restrictions, when they should be more in line with how alcohol is marketed. All of these federal rules treat adult consumers like children, and take the fun out of the legal industry. This matters because the legal industry has to be more attractive than the illegal industry, and it’s hard for the legal industry to do so with its hands tied behind its back.
Lastly, is product variability. The federal government made the mistake of legalizing only dried cannabis and oils on legalization day. It misguidedly gave itself a one-year buffer to roll out edibles, extracts and topicals. Failing to legalize all product varieties only serves the black market. Simply put, the more variety in products available to consumers on the legal market, the easier it is to pull consumers away from the black market. Again, stamping out the black market, like the Liberals claim they have, depends on making the legal market more attractive, but that becomes nearly impossible when federal policy is wrapped in paternalistic nonsense.
The federal election is on the horizon, and the SNC-Lavalin scandal is back in full force. Fictional ad man Don Draper once said, “if you don’t like what people are saying about you, change the conversation.” This appears to be what Liberal party brass are trying to do with their braggadocious cannabis claims. The problem is that Canadians are smart enough to know when their government is telling half truths for the purpose of misdirection. This is exactly what is happening, and we can all see it.
David Clement is the North American Affairs Manager with the Consumer Choice Center.