The Cannabis Act's Legislative Review is underway!
Nearly 4 years ago the Canadian Government, under Liberal leadership, authored the Cannabis Act. This piece of legislation opened the door for legal cannabis and created a new industry (legal and taxable).
Whenever something like this occurs, there are inevitably aspects that need amending. The Cannabis Act is no different. Fear-not, as authors of the Act knew that its' approval would require a review – and that is happening now.
While the Act was written with the best intentions for the industry, stakeholders, and legal-aged Canadians (note: much of the act is written to protect children from obtaining or consuming cannabis products), there were some assumptions that have slowed the industry’s growth. Two aspects of the Act need to be re-addressed: edible concentration limits, and the impact of legalization on Indigenous peoples and communities (many indigenous reserves operate 'illicit' retail locations, as is their right).
Edibles are a rapidly growing medium for consuming cannabinoids. While not a new format, their potency limits (part of the Cannabis Act) are handcuffing the industry. At present, there is a 10mg per package limit on cannabis edibles. For many, this is ample to enjoy the evening, help you sleep, or alleviate your physical ailments. For others, this 10mg limit is laughable. Regular consumers and ‘seasoned’ vets of the industry may (and often do) require a stronger dose. These discerning consumers are extremely limited in their options – and have a tendency to shop where there are products more in-tune with their needs: the illicit market. For those of you who are unfamiliar with the purpose of the Cannabis Act – one of its main goals is the elimination of illicit cannabis products.
According to Headset.io and first reported on by MJBizDaily, nearly 78% of edibles packages sold in the USA in 2021 contained 100mg of THC, and additional 10% was 50mg. When you think about these numbers for a second, what comes to mind? For us North of the border, it’s that US consumers can purchase 10 times the amount contained in a single package. Now, the 10mg limit was put in place to help protect children from consuming large doses of cannabis. We vehemently support keeping cannabis away from kids, but does this mean that doses over 10mg should be banned? The simple answer is no.
The reality of the industry is that unregulated products are likely the ones that attract children the most: the ones with cartoon characters, the ones made to look like a child's favorite candies and gummies – these are the products that kids are tempted to eat. Some brands have gone a long way to protect their intellectual property from being used to market cannabis products (re: Mars Canada Inc. v. John Doe #1 (King Tuts Cannabis), 2022 FC 1193). In the short term, this ruling helps save face for Mars Canada, as they have 0 involvement with cannabis production or sale. In the long view, it has helped remove some dangerous products from the illicit market – limiting the number of products and opportunities for children to be faced with tasty looking products that can negatively affect their health. Moreover, the questions begging to be asked are: where were the parents? Why were the cannabis edibles visible or accessible to kids? Where is the cannabis education for parents? We honestly don’t know any of the answers, but we are working on some literature to help parents speak to their kids about cannabis.
There are many aspects of the Cannabis Act that the government got right, and many that need amending. We believe this review is an opportunity to look at the roll-out and growth of the cannabis industry, but also an opportunity to highlight areas that need attention. While much of the review is focused on the impact on the people, it has provided no clear indication that the review will look at the industry, and its' continued growth. For those unaware, cannabis companies are struggling (we would say the industry is struggling; however the provincial governing bodies are part of the industry, and they are doing very well for themselves).
One of the biggest concerns that (likely) will not be address in this review is the Excise Tax. Presently benchmarked at approximately $1 per gram, the excise tax is strangling the industry – small and large companies alike. Setting excise at $1 per gram sounded great when prices were expected to be $10 per gram throughout the industry, but with producers entering the industry in droves, a price war has started, leading those same producers to lower their price point – effectively increasing the share of taxes to be submit.
With so many companies being forced to close their doors (or anticipating it), seek-out massive influxes of cash from angel investors, or sell off their assets, one must question how the structure of the Cannabis Act is helping support the growth of the industry.
At the time of publication, the four companies with the highest income were government owned business – reaching nearly $500 million in income from the time of legalization until March 2022. To provide some contrast, over the same period of time, private-sector cannabis companies have a cumulative loss exceeding $16 billion.
It remains to be seen how and what Health Canada will do with their review of the Cannabis Act. Fingers crossed that they also look at the industry, not just the people. After all, everyone deserves to eat at this table.