Recreational marijuana industry has high hopes for upcoming review Cannabis Act: Dentons lawyer

Delayed by a year, Eric Foster says review will be opportunity to assess health and industry concerns

Recreational marijuana industry has high hopes for upcoming review Cannabis Act: Dentons lawyer
Eric Foster, Dentons Canada

A long-awaited review of the federal government’s Cannabis Act, which legalized recreational marijuana in 2018, provides the opportunity to review any safety concerns and look at how the cannabis industry can survive and thrive as it matures, says Dentons Canada partner Eric Foster.

“People in the industry were looking forward to this review because it is the first opportunity to make any meaningful changes to the regulatory regime,” says Foster. He notes the legislation required a review after three years, so it is a year late in coming.

Minister of Mental Health and Addictions Carolyn Bennett said in mid-September that the review would help government officials readjust the law to meet Canadians’ needs, hearing from the public, government, Indigenous groups, youth, cannabis industry representatives and medical cannabis users. The panel will also hear from experts in public health, substance abuse, law enforcement and health care.

The review mandate will also examine the social and environmental effects of the Cannabis Act, the impact of the legalization and regulation of medical cannabis and the impact on racialized communities and women.

Morris Rosenberg, the former deputy minister of justice, will chair the expert panel. The panel also includes other experts, as yet unnamed.

Foster acknowledges that between the COVID-19 pandemic and the fall election in 2021, it’s understandable why the review was delayed for a year, “so a better late than never perspective is a good thing.” Still, from the perspective of cannabis industry members he has worked with, “there’s a lot of questions from stakeholders on improving the legislation on a number of fronts.”

With Canada the second country to legalize cannabis nationally, Foster says, “there is a lot in the legislation that is right – but no one expected it would be perfect.” The industry has greatly changed since the legislation passed, “so this is a good opportunity to move forward.”

Foster says there is not “a ton of clarity” on the details of the review announced in September. But according to the Cannabis Act, the review must focus on the law’s impact on Indigenous people, on cultivating cannabis in a housing complex and on the health and consumption patterns of young people.

“Young people are at increased risk of experiencing harms from cannabis such as mental health problems, including dependence and disorders related to anxiety and depression,” Bennett said when she announced the review in September.

“While a lot of progress has been made on the implementation of the Cannabis Act and its dual objectives of protecting public health and maintaining public safety, we need to assess the work that has been done and learn how and where to adjust to meet these goals.”

However, Foster says those in the industry are worried that the government might take a “very technical” view of the act and “won’t step back” to look at the broader picture that would help the industry.

The Cannabis Act has two main goals, Foster says. The first was to preserve the health and safety of Canadians, and the second was to establish a competitive legal recreational cannabis industry that would take away business from the illicit market. “So, the overarching goals of any review would be towards meeting and improving those two goals.”

To meet the latter goal, Foster argues that the act should provide “the establishment of a competitive legal industry to replace the illicit market.”

Foster adds that while “you could talk to ten people who know the industry and get ten different answers on what is needed,” a few key issues stand out for cannabis businesses. They include:

  • The THC limit for certain cannabis products. Not only are the low legal limits making it hard to compete with the illegal market, but for those using cannabis for medicinal purposes, Foster says “it creates an economic burden because they have to buy more to achieve the desired effect.”
  • Restrictive marketing provisions - everything from indistinguishable storefronts to drab packaging - that doesn’t allow the various players to create a “brand” for their product. “Companies are doing what they can market a brand, but it’s hard if you can’t create a bit of flair and excitement that is also still responsible to social and health issues,” Foster says. “That is how you can try to pull away people from the illegal market.”
  • The tax regime is burdensome and creates “all sorts of economic and administrative difficulties for cannabis companies.” Foster notes the excise tax on cannabis represents about 30 to 35 percent of the selling price. “So, the higher prices could lead to people deciding to use the illicit market.

Foster says he believes that changes in these areas could be done without harming consumers from a health perspective and would reduce the prevalence of the illicit market “by bringing more people into the fold of the legal market.”

Health Minister Jean-Yves Duclos has said that since that legalization, 70 percent of Canada’s cannabis market has moved from the illegal economy to legal and regulated sources of supply.

Foster says the exuberance that greeted the legal recreational use of cannabis back in 2018 led to exponential growth in suppliers and retailers. Still, the industry faces severe challenges as it undergoes a “shakeout” that will leave the strongest players standing.

“There was a time when I couldn’t walk down certain streets without seeing a cannabis store every few minutes,” Foster says. “It’s not the same now, as many have closed.”

He adds: “No one is clamouring for this review to devolve into a scenario where rules are changed that don’t consider the health and safety aspects of legal cannabis. At the same time it’s important that the government look at this from an economic lens as well, to look at how we can make this a large and successful industry.”

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