In 2018, Canada legalized recreational cannabis, but at the time, its potential impacts on healthcare, industry, and the nation as a whole were largely unknown. To address this uncertainty, the government pledged to conduct a review of the law after three years to ensure the effectiveness of its policies.
However, when the three-year mark arrived, the COVID-19 pandemic had shifted attention to more urgent public health concerns. Meanwhile, the cannabis industry faced numerous challenges, with companies having to downsize, merge, or even close down in desperation for legislative changes.
Finally, in September 2022, the government initiated the review, and a preliminary report was recently published summarizing feedback from various stakeholders, including industry, healthcare, and community groups. Notably, the initial report did not provide any recommendations, and the final report is not expected until March.
Cannabis stakeholders express concerns that implementing legislation based on the review’s findings could further prolong the process, which could exacerbate the industry’s struggles. Several issues are at the heart of these challenges, including the significant market share held by illicit sellers (40%), a burdensome excise tax, fierce competition leading to plummeting cannabis prices, and restrictive advertising regulations that hinder consumers’ ability to find suitable products.
Former Ontario deputy premier and prominent mayoral candidate George Smitherman aptly characterizes the cannabis industry as “not for the faint of heart.” Members of his council were among the 500 individuals from 200 organizations who provided feedback to the Cannabis Act review panel, chaired by lawyer and former deputy minister of foreign affairs, Morris Rosenberg.
The feedback received by the panel ranged from small-scale cannabis cultivators to discussions about Indigenous involvement in the industry and hospitalizations related to cannabis use. For many businesses, the acknowledgment that they have faced substantial challenges was of utmost importance.
Beena Goldenberg, the CEO of Organigram Holdings Inc., a licensed producer based in Moncton, calls for a reconsideration of the excise taxes imposed on cannabis producers by federal and provincial governments. Originally, these taxes were calculated based on the assumption that a gram of cannabis would sell for $10, resulting in a 10% tax rate, but fierce competition with the illicit market has driven prices down significantly. This has led to an effective tax rate of 30% to 40%.
While these taxes generated substantial revenue for the government, many cannabis companies struggle to meet their tax obligations, with the Canada Revenue Agency indicating that $200 million in taxes remains unpaid.
Goldenberg also advocates for relaxing packaging and advertising restrictions designed to protect youth but which, she believes, also limit companies’ ability to educate consumers. These regulations prohibit the communication of essential information about cannabis products, such as terpenes and cannabinoids like THCV.
Other retailers echo her sentiments, suggesting that they should have the freedom to label products as family-run, organic, or sun-grown and to promote cannabis in a manner similar to tobacco or alcohol companies. However, some experts, like David Hammond from the University of Waterloo, argue that this could inadvertently lead to promoting cannabis use, which is against the current Cannabis Act.
Moreover, studies have shown that most people do not want more cannabis advertising, and they can find the information they need at cannabis shops or on provincial distributor websites. The medical community remains cautious about making changes that might compromise public health, with some advocating for even stricter limits on cannabis possession, distribution, and purchase due to concerns about increased emergency department visits and hospitalizations related to cannabis. Despite the challenges, George Smitherman suggests that the increase in such incidents may be partially due to decreased stigma and fear of legal repercussions following legalization.
When asked about the industry’s calls for change and the delays in the review process, a spokesperson for the Minister of Health emphasized that the Cannabis Act aims to safeguard the health and safety of Canadians and displace the illegal market.
Beena Goldenberg remains concerned that convincing the government to implement changes will be a slow process, and some companies may not survive the waiting period, as many are already on the verge of bankruptcy. The report also highlights that 2022 saw a significant number of cannabis companies applying for creditor protection, with 14 out of 35 applications being from the cannabis sector, and as of April, 166 cannabis license holders had left the market, representing 15% of licenses issued to date.
Google Play and the Google Play logo are trademarks of Google LLC.
