Strict edibles guidelines could bog down nascent industry, say lawyers

Though cannabis edibles, extracts, lotions, balms and oils will be legal Oct. 17, consumers will have to wait until December to taste them and, as expected, producers will have to work around strict guidelines, say lawyers in the cannabis sector.

Strict edibles guidelines could bog down nascent industry, say lawyers
The intent of the strict regulations around edible cannabis are to protect minors, says lawyer Susan Newall.

Though cannabis edibles, extracts, lotions, balms and oils will be legal Oct. 17, consumers will have to wait until December to taste them and, as expected, producers will have to work around strict guidelines, say lawyers in the cannabis sector.

On June 14, the Government of Canada announced amendments to the Cannabis Regulations to establish the rules by which cannabis edibles, extracts and topicals will be produced and sold. The amendments come after a 60-day stakeholder consultation, late in 2018. Though legal in October, because license-holders are required to give Health Canada 60-days notice, Canadians will not be able to purchase edible cannabis until mid-December, at the earliest.

Susan Newall is an corporate commercial lawyer in Osler Hoskin & Harcourt LLP’s health industry and cannabis groups. She says if edible cannabis is being produced, packaged, labelled or stored on site, regular food for retail sale cannot be manufactured there unless the cannabis and non-cannabis products are in different buildings.

Though alcohol companies, with the experience in a highly regulated industry, may be participants in the edible cannabis market, cannabis-infused beverages can’t contain alcohol, can’t be marketed under alcohol brands and can’t be likened to alcohol products in advertising, Newell says.

“So that means that it's not just alcoholic beverage brands. But it this would preclude branding flavours with terms that we would associate with alcohol such as IPA or Chardonnay,” she says. “You wouldn't be able to say this cannabis infused beverage is chardonnay-like.”

The regulations also prohibit flavours, sweeteners and colours that would appeal to minors. Ingredients which would “increase the appeal” of the product or encourage overconsumption are also not allowed. Ingredients which “increase the appeal,” risk food-borne illness or “encourage overconsumption” are prohibited. A single package of edible cannabis or capsule of cannabis extract, can have no more than 10 milligrams of THC and packages of topicals have a limit of 1,000 milligrams. No health or cosmetic benefits can be advertised on the label, which – like smoke-able cannabis – needs a health warning and standardized, government cannabis symbol.

Licensed cannabis producers will need an amended license to produce edible cannabis and Health Canada will accept their submission beginning July 15, says Dominique Hussey, partner and head of the intellectual property litigation practice group at Bennett Jones LLP.

Other than as a food additive, meat, poultry and fish cannot be a cannabis edible and edibles can’t contain caffeine, unless it is naturally occurring and present at no more than 30 milligrams and cannabis edibles cannot be such that they need to be refrigerated, says Hussey, who advises clients in cultivation, processing, marketing, branding and retail of cannabis.

The regulations before the new amendments had already prohibited promotion except through certain channels inaccessible to minors and in permitted cases cannot depict a person, character or animal, involve a testimonial or endorsement or evoke an emotion or way of life, says Hussey. The new regulations add more. Promotion creating the impression of cosmetic, health or energy benefits is not allowed, nor that creating the impression the edible cannabis is intended to meet dietary requirements, she says. The advertising also cannot “be seen or heard outside of a place where young persons are not permitted,” she says.

“Some of the marketing regulations are arguably too strict, particularly when already limited to channels to which young persons cannot have access,” Hussey says. “The regulations are aimed at consumer protection but, as an IP lawyer, I have a bias toward the value of distinctive branding even in this context. There is a strong argument that distinctive branding could function to protect consumers by providing a shortcut to allow them to determine the source of the product they are purchasing, and to locate high-quality product from a known and trusted source.” 

Mahdi Shams is in MLT Aikins LLP’s cannabis group in Vancouver and says the edible cannabis regulations put Canada’s industry at a disadvantage globally, because of the marketing and production restrictions.

“We're talking about anywhere between, $2 to $3 billion market in Canada over the next five years. I think we shouldn't be blinded just to be focused on the Canadian market, but actually think about it globally, because our rules and laws that have been enacted, since legalization have put us at the forefront,” Shams says.

The biggest problem Shams’ clients have with the regulations are the limit of 10 milligrams per unit for edibles, he says, adding that those who take cannabis medicinally for a chronic illness, for example, may take 100 milligrams in a day.

“So that restriction, in my opinion, is a bit silly,” Shams says. “I understand the fact that we want to protect some of the potentially vulnerable users out there. But at the same time, I think we're forgetting the fact that the medical aspect of THC is very important to users that have been using it for decades.”

Shams’ clients are also frustrated at the restrictions on marketing and branding, he says.

Edibles legalization will help alleviate the current retail shortage as it will divert consumers who are coming up empty handed at cannabis stores across the country, by giving them a new option, he says. He also expects that depending on how regulations are amended, the edibles market will surpass the smoked cannabis market.

“You can go into a restaurant and consume a bottle of wine, are you going to be able to go into a restaurant and consume some edibles or an edible drink? I think at the municipal level, some cities including the city of Victoria is very seriously looking into that,” Shams says.

Potential cannabis marketing may be widened by amendments in the future, but Hussey says it will likely be a slow process.

“Because, above all else, Health Canada is concerned about taking steps to ensure that young persons are protected,” she says.

Though some of Hussey’s clients have been “a little frustrated” by the strict rules on marketing, promotion and branding, she says they appreciate the aim.

“The appeal to youth is, of course, the overarching concern that that the Canadian government has with with any of these regs in legalization. That's a primary theme that we see throughout,” Newell says.

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