Cannabis is poised for review as industry faces hurdles

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Nearly four years after cannabis was legalized in Canada, the federal government will finally announce its plans Thursday for a long-awaited overhaul of the country’s cannabis laws.

The legislative review was due almost 12 months ago and calls for reform are echoing from coast to coast to coast.

According to Health Canada, the statutory review must examine the impact of the law on public health. In particular, it must look at the impact on young people’s health and consumption habits with regard to cannabis.”

With so many unlicensed weed providers operating storefronts across the country as well as online, some industry leaders tell the government that the health and well-being of consumers is being put at risk.

When weed was legalized across Canada in October 2018, it sparked a “green rush,” but fears are now mounting that parts of Canada’s cannabis industry could go up in smoke.

CTV National News spoke with the former CEO of cannabis behemoth Canopy Growth, the president of the Cannabis Council of Canada and an expert in brand partnerships who currently works for a company that connects consumers with products on the black market.

While almost everyone working in the marijuana game agrees that wholesale change is needed, finding a consensus on how to move forward remains difficult.

Industry complaints range from sky-high taxes, excessive government efforts and advertising restrictions to the prevalence of the black market.

Leafythings, an online cannabis catalog, was recently awarded the “best innovative technology” award at a national industry gala, though their big win turned heads largely because the products they offer online come from both licensed companies and unregulated retailers — which lawmakers still point out as illegal.

Nima Derak, the company’s director of brand partnerships, characterizes those in the black market as “independent operators who want to enter the market – most of these people want to enter the (legal) market, but because of the government’s financial barriers they “really fight for it.”

In major urban areas across the country, regulated pot shop owners are sounding the alarm, claiming that provincial governments are handing out too many retail licenses, resulting in city streets becoming saturated with shops. Look no further than Toronto, which now has more weed shops than Tim Hortons locations.

“A lot of these mom-and-pop businesses are going to go out of business, they’re going to lose their life savings,” Derak adds, though many legal, regulated cannabis shop owners point to the black market as a big part of the problem.

George Smitherman, the president of the Cannabis Council of Canada, believes that “the playing field is nowhere near level. There are illegal retail shops, there are also significant illegal delivery services that are also largely ignored (by the authorities).

A report commissioned by the Cannabis Council of Canada notes that every gram of weed in Ontario is taxed more than 27 percent collectively by the provincial and federal governments. An additional markup of nearly 19 per cent is then applied by the Ontario government – that’s all before a product hits the market for sale. “No other sector could handle a tax bite like that,” claims Smitherman.

Meanwhile, the black market operates without paying a dime in taxes for their products. Smitherman believes that authorities and prosecutors must find a way to shut down illegal operations. “There is a significant regulatory body, but there is not enough law on the books to stop blatantly illegal operators and nobody is doing anything about it,” he said.

Large-scale regulated growers and cannabis producers also have a smaller share of the pie, with mass layoffs and plummeting shares of major Canadian industry players such as Aurora Cannabis and Canopy Growth.

In 2019, Canopy Growth’s stock hit nearly $70, today it has fallen to around $4 per share. stock. The company declined our request for an interview, but their former CEO, Bruce Linton, sat down with CTV National News and noted that Canopy’s “actual sales numbers, dollars of cannabis sold, have been declining while the market is growing. So they’re actually selling less total revenue.”

Linton wants to see the easing of government restrictions on marketing and advertising so that regulated growers and producers can compete with the black market, which has no restrictions on their packaging or the strength of their edible products.

“If you want a legal, regulated, secure system to succeed, it has to be able to sell a product that you can identify, associate with and build off of,” notes Linton.

Derak and his colleagues at Leafythings believe that there is a way for everyone to be successful. He’s calling for a “system similar to Canadian food standards to be created where growers and brands are able to retain samples of their product and send samples to independent labs for testing and distribute directly to regulated businesses.” He also claims that many of the black market businesses would be open to paying tax if “overreaching” government regulations are dropped.

Smitherman, a former Ontario health minister, believes Derak and others are “trying to make the illegal market work better for themselves,” not the industry and consumers as a whole.

“Our focus is legal-age consumers, giving them the right to choose where they buy and what they buy,” Derak countered, pointing out that Canada’s cannabis industry “as a whole is a $6 billion market and we’re neglecting half the market. It’s time to bring that money in and start contributing to Canadian society.”

When cannabis was first legalized in Canada, the federal government downloaded regulatory responsibilities to each provincial government, creating a patchwork system with different laws and regulations depending on where you are in the country.

For an industry spinning its wheels as the world watches, all eyes will now turn to the Canadian government’s cannabis law review. In an email to CTV National News, Health Canada states that “the government is committed to putting in place a credible, evidence-driven process for the legislative review that will assess the progress made towards achieving the objectives of the Cannabis Act.”

With the government set to announce its plans for how it will review cannabis law, Aurora Cannabis this week reported a loss of just over $600 million in the fourth quarter.

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