Winner of the 2019 English Langlois Prize

Marketing an Unmarketable Product: The need for a less stringent cannabis legal framework in order to develop a sustainable licit market

Beverly Cheung, JD/MBA Candidate, Class of 2020 Osgoode Hall Law School | Schulich School of Business

Introduction

Canada’s newly enacted legal framework for cannabis is aimed at protecting the health and safety of citizens and curtailing the long-standing illicit market that dominates the industry today. In drafting this regime, Parliament was faced with the difficult task of balancing the protection of public health and safety with the facilitation of a successful licit industry.  Although adopting a rather conservative approach that emphasizes health and criminal law concerns may have been appropriate to start with, the legal framework in its current form with respect to marketing restrictions unduly restricts the ability of cannabis producers to succeed in the long-run.  More importantly, an unsustainable licit market indirectly fuels the illicit market, further undermining public health and safety. This paper explores how the current cannabis framework, in practice, leads to unintended consequences that frustrate certain policy objectives outlined in the Cannabis Act.  Part I reviews the current marketing restrictions in the Cannabis Act.  Part II compares the cannabis framework to both tobacco and alcohol regulations.  Part III explores how the current marketing restrictions lead to the inability to meet the policy objectives of providing quality-controlled supply, combatting the illicit market, and protecting public health and safety. Finally, Part IV provides recommendations on key areas within the Cannabis Act that could be adjusted to better achieve the stated policy objectives.   

Part I: The Long-Awaited Cannabis Regime

a) Coming into Force

Canada’s new cannabis regime came together in a relatively short time frame. Although discussions about the decriminalization of medicinal cannabis and the creation of a licit recreational market made its way into Parliament as early as 1999,[1] the Task Force on Cannabis Legalization and Regulation was not formed until June 2016.[2] The first draft of Bill C-45 (now the Cannabis Act (“the Act”)) was published in April 2017 and received royal assent less than a year and a half later.[3]  Although the time required for a legislation to come to fruition may vary based on the issue at hand, some have commented that the Cannabis Act came about through a “hasty rollout,” and resulted in conflicting laws while leaving many questions unanswered.[4]

b) Policy Objectives and Restrictions on Marketing

The Act is predominantly a health and criminal law regime that aims to ensure Canadians are protected from the negative consequences of cannabis legalization.  The fundamental policies that serve as the foundation of the Act pertain to the protection of youth, enhancing awareness of the health risks associated with cannabis and eliminating the illicit market (i.e. illegal dispensaries).[5]  The purpose of the Act includes the following: 

  1. protect the health of young persons by restricting their access to cannabis;
  2. protect young persons and others from inducements to use cannabis;
  3. provide for the licit production of cannabis to reduce illicit activities in relation to cannabis;
  4. deter illicit activities in relation to cannabis through appropriate sanctions and enforcement measures;
  5. reduce the burden on the criminal justice system in relation to cannabis;
  6. provide access to a quality-controlled supply of cannabis; and
  7. enhance public awareness of the health risks associated with cannabis use.[6] [emphasis added]

These underlying policies led to the development of stringent marketing and advertising laws enforced on cannabis producers and retailers, particularly with respect to the third, sixth and seventh policy objectives.  

Under the current regime, it is prohibited to promote cannabis, or ancillary products or services by: (a) communicating information about price or distribution[7] (with the exception of communications on price and availability permitted at the point of sale);[8] (b) doing so in a way that appeals to young persons;[9] (c) through endorsements or testimonies;[10] (d) with the use of a person, character or animal;[11] or (e) in a way that associates the product or brand with emotions about a way of life including glamour, recreation, excitement, vitality, risk or daring.[12]  Promotion is defined broadly, and refers to any representation (other than the packaging and labelling) of the product that is “likely to influence and shape attitudes, beliefs and behaviours” about the product.[13]  Moreover, the Act prohibits sponsorship of events[14] and the use of brand names and images on facilities used for sports or cultural activities.[15]  Subject to provincial regulations, prohibitions on promotion apply to producers, sellers, and providers of cannabis-related products and services, with certain exceptions carved out for literary or artistic work, reports and commentaries, and business-to-business marketing.[16]

In light of the broad prohibitions on promotion, Parliament has allowed for two exceptions – information or brand preference promotion.[17]  These two types of promotions are permitted where communication is: (a) “addressed and sent to individuals over the age of 18 and identified by name;” (b) in places where young persons are not permitted; (c) communicated by means of telecommunication (after having taken reasonable steps to validate age); or (d) in a “prescribed place or in a prescribed manner.”[18]  Brand promotion is also permitted on non-cannabis related products such as apparel.[19]  However, outside of stating factual information about the product itself or promoting by way of a “brand characteristic” in restricted circumstances, marketing – a critical component of consumer education and successful product launches – is prohibited.

To further restrict the ability for cannabis producers to market their brand, plain packaging is mandated across all cannabis products.[20]  The brand name and logo occupy a small portion of the label,[21] and from a distance, brands are hardly distinguishable.  Several provinces including Alberta, Manitoba and Saskatchewan also require all cannabis products to remain sealed until sold and stored behind a locked display case.[22], [23]  However, some provinces have allowed for sensory “smell” jars for a limited number of strains (in Alberta, for example, a maximum of 15 jars is permitted at the retailer’s expense).  This means that retailers will likely put their top performing products in sensory jars while the rest remain sealed.  Although some provinces like Manitoba, Saskatchewan and Vancouver do not stipulate a maximum number of smell jars, it may be expensive for retailers to set up smell jars for every strain available, given the limited shelf life of cannabis.[24]  For the most part, products remain sealed until sold, meaning consumers may not be able to rely on visual and tactile inspection to help guide their purchasing decision.   

***

Stringent marketing laws can be a real impediment to the growth of an infant industry and the education of consumers.  Striking the right balance between the protection of public health and safety and the facilitation of an efficient market is a difficult task, and it appears that Parliament focused predominantly on the former.  Before exploring the various consequences of a “conservative” legal framework with respect to marketing, it is first useful to provide some context and understand whether these stringent laws put in place are consistent with current laws by way of comparison to the two closest substitutes – tobacco and alcohol.

Part II: The Spectrum of Regulation – Tobacco and Alcohol Marketing Legislation in Canada

Tobacco and alcohol are regulated quite differently when it comes to marketing in Canada.  On a spectrum of how restricted a legal regime is, tobacco regulations sit on the most restrictive end of the spectrum, while alcohol rests on the least restrictive end.  Tobacco is often associated with a negative stigma given the well-documented health concerns, while alcoholic beverages are deeply engrained in Canadian social culture and culinary consumption habits.  This polarity led to the development of two very different legal frameworks in Canada.

a) Marketing in the Tobacco Industry – Snuffed in the Ashtray

From a policy perspective, the goal of tobacco legislation is three-fold: (1) minimizing tobacco consumption (which includes the protection of underage persons); (2) reducing harm to those who consume tobacco products; and (3) minimizing the effects of second-hand smoke.[25]  The first policy objective is the key underlying factor for marketing restrictions and is achieved through regulations that address both demand and supply reduction.[26] In particular, demand reduction is achieved through the use of mandatory taxes, price floors and various marketing bans.[27]  Marketing restrictions at both the federal and provincial level reduce demand by prohibiting certain types of marketing (including in-store advertising) and setting strict requirements for packaging. 

The federal legislation is set out under the Tobacco and Vaping Products Act (“TVPA”), which clearly mandates a restriction on the promotion of tobacco.  Similar to the provisions in the Cannabis Act, “promotion” is defined broadly as any representation of a product, including price or distribution, “that is likely to influence and shape attitudes, beliefs and behaviours about the product or service.”[28] The TVPA restricts specific types of promotions including: testimonials,[29] endorsements,[30] “lifestyle advertising”,[31] advertising that could appeal to young persons,[32] the display of tobacco brands on non-tobacco products,[33] sponsorships,[34] and gifts with any purchase, contest or sampling promotion.[35] Several restrictions on the types of advertising in the tobacco industry appear to have been closely mirrored by the Cannabis Act (with the exception of brand marketing on non-cannabis products like apparel, which the Act does allow for).  In this respect, the legislature adopted a framework for cannabis that falls squarely in the restrictive end of the spectrum.    

Branding, for the most part, is also highly restricted.[36]  However, the TVPA and provincial regulations allow for certain exceptions.  It allows for brand-preference advertising either through direct mail to adults or in places that are restricted to adults,[37] and retail signs and displays are acceptable where permitted by provincial regulation.[38]  In British Columbia, any advertising that interferes with a government initiative to reduce tobacco consumption or to “prevent injury to the health of the consumer” is strictly prohibited.[39] Interestingly, several provinces prohibit or considerably restrict the display of actual tobacco products, despite the fact that it is permitted federally.[40]  On the surface, the restrictions on in-store advertising and product display outlined in the TVPA appear to be stricter than the provisions adopted in the Cannabis Act.  However, this is largely due to the fact that cannabis is sold either online or at stand-alone stores accessible to adults only, whereas tobacco is sold at locations easily accessible to underage persons.  By establishing stand-alone cannabis retail stores, Parliament created a space that permits a wider range of in-store marketing, and therefore, a more lenient application of the legal framework.  As such, although the law itself on in-store marketing for both cannabis and tobacco fall on the more restrictive end of the spectrum, the application works out to be less stringent for cannabis products.

From a packaging standpoint, tobacco companies are now subject to the same type of restrictions faced by the cannabis industry.  Following the royal assent of Bill S-5, the TVPA replaced the former Tobacco Act.[41]  The TVPA applies many of the tobacco regulations to vaping products and gives Health Canada the power to mandate standardized plain packaging for all tobacco products.[42]  Although details of the new standardized packaging have not been released, the packaging is anticipated to be even stricter than that of cannabis packaging – plain, with a standardized font size and colour, and most definitely, no logos.[43]  On the spectrum of regulation, the packaging for tobacco, even more so than cannabis, falls on the restrictive end – to the extreme.

There is no doubt that the regulation of cannabis with respect to marketing bears many similarities to the legal framework for tobacco. However, in comparison to tobacco and cannabis, the regulations for alcohol are a stark contrast.

b) Marketing in the Alcohol Industry – Bottoms Up

Alcohol advertising in Canada shows up on television, online, radio, billboards and even on the side of a public transit vehicles.  Commercials are humorous, heartwarming, dramatic, and even patriotic, with individuals screaming “I am Canadian!”.  While the ability for alcohol companies to advertise is not unlimited, it is certainly not overly restrictive and companies have more than enough room to develop innovative marketing campaigns.

For the most part, alcohol advertising (and marketing more generally) is regulated at the provincial level.  At the federal level, the Canadian Ratio-Telecommunications Commission (“CRTC”) establishes ground rules and content restrictions for all broadcast advertising.  For alcohol, the restrictions include “advertising to youth and encouraging alcohol consumption or promoting certain lifestyles.”[44]  More specifically, the CRTC code establishes six restrictions that companies must follow:

  1. Advertising must not encourage the general consumption of alcohol
  2. Advertising must not promote the irresponsible or illegal use of alcohol
  3. Advertising must not associate alcohol with social or personal achievement
  4. Advertising must not be directed to persons under the legal drinking age
  5. Advertising must not associate alcohol with the use of motor vehicles or with activities requiring a significant degree of skill or care
  6. Contests and promotions cannot be conditional on the purchase or consumption of alcohol[45]

The restrictions outlined by federal legislation are directly linked to policy objectives with respect to responsible consumption, health risks associated with drinking, the protection of underage persons and responsible driving.  It does so without putting a blanket restriction on most forms of advertising and is not restricted to certain locations permissible only by persons of legal age.  As far as restrictions go, alcohol regulation is far more lenient than restrictions for tobacco and cannabis marketing, and falls on the least restrictive end of the spectrum.  At the provincial level, some provinces publish explicit guidelines whereas others are less vocal and rely more on the federal regulation.  In Ontario, the Alcohol and Gaming Commission of Ontario (“AGCO”) publishes advertising guidelines that explore the federal rules in more detail.  For instance, the AGCO sets floor prices for alcohol bottles sold at restaurants at each standardized packaging size (for example, a 500-ml bottle of wine must be sold at a minimum of $7.20), and prohibits volume promotions like “two for one drinks” that encourage consumption.[46] 

The AGCO advertising guidelines also outline several requirements and restrictions for alcohol manufacturers.  Advertisements must not attract underage persons, or be associated with motorized vehicles or illegal behaviour.  Outside of these restrictions, advertising of alcohol is permitted where: (1) it is “consistent with the principle of depicting responsibility” in consumption; (2) it is brand promotion (that does not promote the general consumption of alcohol); (3) “it does not imply that the consumption of alcohol is required in or enhancing” social, professional or personal success, athleticism, sexual appeal, enjoyment of activities, goal achievement, or the resolution of physical or social problems; and (4) it does not appeal to underage persons.  In addition, unlike the tobacco and cannabis regulations, sampling and gifts of a nominal value (less than 20% of the retail price) are permitted under certain restrictions.[47]

To ensure that advertising is aligned with federal regulations and AGCO guidelines, Advertising Standards Canada (“ASC”), an industry supported agency in Ontario, offers compliance pre-screening for various types of marketing including broadcast materials, print, web advertising and promotional materials.[48]  The availability of pre-screening adds tremendous value to alcohol producers.  Instead of avoiding certain marketing campaigns out of fear that the company will be reprimanded or forced to retract their promotional materials, firms can proactively seek approval and guidance before fully committing to marketing expenses. 

Overall, the legislature took a much more practical approach with respect to the marketing regulations for alcohol in comparison to cannabis.  The regime selectively places specific restrictions on types of marketing that could potentially frustrate the underlying policy objectives, as opposed to a blanket approach seen in the cannabis and tobacco regimes.  It also allows for proactive solutions like pre-screening.  Overall, the framework for alcohol regulation strikes a much more reasonable balance between the protection of the public health and the facilitation of a sustainable market. 

Much of this has to do with the fact that alcohol is a more widely accepted substance, despite the fact that alcohol has been labelled as the “deadliest” drug.[49]  Of course, the level of restrictiveness in a legal framework does not need to be commensurate with the level of harm associated with a substance – Parliament is permitted to implement restrictions based on factors outside of harm.[50], [51]  In the case of cannabis, the newness of the substance to the licit market, coupled with the ongoing stigma associated with cannabis, help justify Parliament’s conservative approach to legislation from a policy perspective.  Yet, because the level of conservatism has more to do with caution as opposed to direct harm associated with cannabis, Parliament may gradually move towards a looser framework that does a better job of balancing market efficiency, as seen in alcohol regulations.  However, until cannabis becomes somewhat de-stigmatized, the legal framework will likely remain on the restrictive end alongside tobacco. 

c) Tobacco, Alcohol and Cannabis – How Do the Harms Compare?

Despite having a legal framework that closely mirrors the tobacco regulatory framework, cannabis has been shown to be generally less harmful than tobacco.[52]  Although smoking marijuana has been shown to linger in human arteries longer than tobacco, it has not been linked to lung cancer the way tobacco has.[53]  In a study conducted by Doctor Donald Tashkin, Emeritus Professor of Medicine at the David Geffen School of Medicine at the University of California, Los Angeles, it was discovered that marijuana contains a certain chemical that kills dangerous cells before they become cancerous, which is why cannabis has not been linked to increases in certain types of cancer thus far.[54]  The caveat, however, is that far more research exists on tobacco than cannabis, and so the association between cannabis and negative health effects remain somewhat unknown.[55]  Moreover, tobacco has a death toll that is 56 times higher than cannabis and an economic cost four times as high,[56], [57] yet the consumption of tobacco is only 0.4% higher than cannabis.[58]  Additionally, cannabis, unlike tobacco, has many beneficial aspects that should also be accounted for including the ability to help control pain and chronic symptoms.[59]

Interestingly, alcohol has also been hypothesized to be more harmful than cannabis from a health perspective.[60]  It is linked to various types of cancers, cirrhosis, liver failure, changes in brain structure, and is a major cause of motor-vehicle accidents.[61]  Cannabis, in comparison, has been linked to changes in brain structure amongst teens,[62] and increases in the risk of schizophrenia if used habitually by young adults.[63]  Overall, from a health perspective, alcohol has been linked to a wider scope of diseases (once again with the caveat that more research and data exists with respect to alcohol).[64]  However, when it comes to motor-vehicle accidents, cannabis is just as harmful as alcohol – of the 42% of fatal accidents that occurred in 2014, 44% were crashes that involved the use of cannabis.[65]  The rise in motor-vehicle accidents due to the influence of cannabis and alcohol ought to be an important factor when determining where on the spectrum of regulation cannabis should lie.

In fact, many Canadians have criticised that the harms associated with alcohol justify more stringent laws on alcohol advertising.  At the moment, alcohol advertising is permitted on the side of transportation vehicles, which young persons are easily exposed to.[66]  In addition, alcohol advertisements frequently feature attractive women, which has been condemned for influencing more underage girls to drink in comparison to young boys.[67]  The enforcement of marketing regulations in digital advertising, which young people are exposed to most often, has also been criticised for being too lenient.  These concerns suggest that perhaps even alcohol regulation is too lenient, and that while the regulatory framework for cannabis should be modelled after alcohol as opposed to tobacco, perhaps a medium in between is more appropriate.  

***

From a health and safety standpoint, the position of cannabis on the spectrum of regulation appears to be incorrectly skewed more towards the stricter end.  The Cannabis Act closely mirrors tobacco regulations despite being less harmful than both tobacco and alcohol, and bearing more similarities to alcohol as a recreational substance.  Although this was done intentionally by Parliament as a measure of precaution, placing undue emphasis on the protection of health and safety, and not enough weight on the facilitation of a sustainable new industry leads to consequences that indirectly frustrate the Act’s policy objectives.  It leads to the furtherance of the illicit market and a potentially poorly educated society with respect to a newly legalized substance – both of which circle back to negatively impact public health and safety.  For this reason, the success of the licit market is critical.  Yet, under the current regulatory framework, the licit cannabis industry is unlikely to be sustainable in the long-run.  

Part III: The Current Restrictions on Marketing Lead to a Cannabis Market that is Unlikely to Thrive and Meet Policy Objectives

Combatting the illicit market and reducing illicit activities is highly dependent on the ability of the licit cannabis industry to flourish.  The key success factors of the cannabis industry include: (1) the development of effective marijuana strains and derivative products;[68] (2) effective marketing of differentiated products;[69] (3) reducing the stigmatization of cannabis;[70] (4) simplification of regulation;[71] and (5) production efficiency.[72]  Almost every key success factor is unnecessarily hindered by regulatory restrictions related to marketing, which include advertising, pricing, packaging and distribution.  The marketing restrictions have the effect of: (1) creating a synthetic mature market; (2) preventing the licit market from effectively competing against the black market, and (3) inhibiting consumer education and awareness with respect to cannabis products.  The ultimate outcome is a market that may not thrive or meet the policy objectives mandated by the legal framework.

a) The Current Regulatory Framework Creates a Synthetic Mature Market

The cannabis market in Canada is in a unique position given that licensed producers must compete with both licit and illicit competitors.  Essentially, licensed producers must compete against experienced and aggressive illicit competitors, all the while being unduly constrained and prohibited from adopting marketing strategies that are essential to the growth of an infant industry.  The restrictions enforced by the Act with respect to marketing have the effect of creating market dynamics that are prone to mature industries including commoditization, price wars, and the need for cost efficiency and scale.[73]  More importantly, the unnatural interference with the free market gives rise to significant challenges with respect to differentiation amongst competitors, and eventually results in the transformation of an infant industry into a synthetic mature market that ultimately does not benefit anyone.

In a report published by the Competition Bureau in 2016, the Bureau analyzed the result of advertising restrictions on the health care sector.[74]  Studies pointed to the conclusion that restrictions on advertising can be “to the detriment of consumers and the Canadian economy.”[75]  In the health care sector, practitioners and pharmacists are far more knowledgeable about products and treatments than patients.[76]  This creates a level of “information asymmetry,” where patients are not as well-educated on the products available or the quality associated with each option.[77]  In such cases, two things can happen: (1) consumers will only purchase brands they are familiar with, which discredits new entrants and generally keeps prices high; or (2) profitability becomes the key source of survival and competitors continue to cut costs, and with it, quality in an industry-wide “race to the bottom.”[78]  Both scenarios can be similarly applied to the current cannabis industry.

The first scenario can be applied to competition amongst the licit market, where licensed producers are far more knowledgeable about their product strains than both consumers and even retail staff, which creates a similar level of information asymmetry.  Due to the restrictions in marketing, licensed producers are only able to engage in informational or brand marketing in limited circumstances.  Their ability to drive mass awareness about their brand or new products, or differentiate their products from existing competitors is generally limited to direct or in-store advertising.  As a result, current marketing strategies consists of vague marketing materials that convey little about the brand[79] or factual videos that show a tour of a cannabis factory.[80]  On the first day of legalization, more than 95% of cannabis purchasers were unaware of the brands they had purchased.[81]  Even for a new industry, that statistic is alarming given that cannabis companies had pushed the envelope by ramping up marketing efforts prior to legalization through the use of tactics that would soon to be prohibited.[82]  Without the ability to form opinions about a brand based on differentiating factors, consumers may simply turn to larger, more familiar brands similar to the way health care products are sold.

The asymmetrical information also makes it harder for new players in the industry.  Establishing a position in the market becomes extremely difficult and costly.  The lack of information disseminated creates a situation that favours top performing brands and gives them the ability to maintain higher prices in the industry.  In the Advertising Restrictions Report, the Bureau highlighted two instances where this occurred: (1) in the children’s breakfast cereal market, where a ban on advertising aimed at children under the age of 13 in Quebec led to higher purchases of “established” brands;[83] and (2) in the US malt beverages industry, where the concentration of the industry’s largest players is higher in states where alcohol advertising is prohibited.[84]  The inability for smaller or new players to establish a presence in the marketplace leads to a concentrated market with higher prices.[85]  In addition, new products are not fully valued by consumers due to a lack of awareness, reducing the need for innovation.

In the second scenario, a lack of marketing leads to a race to the bottom, where cost-cutting becomes the most viable alternative to increasing profitability.[86] A cost-based strategy across the majority of incumbents often leads to a market full of “lemons”, or in other words, low quality products.[87]  Like the first scenario, innovation becomes less valuable since competitors are unable to leverage traditional marketing strategies to drive awareness or increase the perceived value in new products.  Without the ability to grow topline revenue through the development of new products, volume, or increased perceived value, cost-cutting becomes the most viable option for improving profitability.  Although cost efficiency is a healthy part of any business, it is risky when it becomes a primary strategy – at a certain point, it reaches its peak and is not a viable long-term strategy.[88] 

At the moment, licensed producers are already frantically seeking for cost efficiencies through scale and low input costs.[89], [90]  Although cost-cutting has not yet impacted the quality of cannabis, it is possible in the long-run.  Eventually, only the largest players will remain standing and the myriad of cost cutting may start to impact quality.  Without healthy competition, new entrants, or innovation, the industry may be left with lemons.

In the cannabis industry, price floors established by the government along with marketing restrictions make it extremely challenging to compete.  Topline growth depends on: (1) gaining new cannabis users, which requires consumer education though marketing; (2) getting current cannabis users to switch from the illicit market, which will only occur if consumers see the value in purchasing licit cannabis at its current higher price; and (3) focus on selling premium cannabis strains to help boost profits, which again requires innovation and strategic marketing to communicate value to the consumer.  Moreover, from a public health perspective, the first growth strategy may not be favourable given its potential to increase the use of cannabis amongst underage persons and Canadians more generally. 

The two scenarios are more conducive to a mature market, yet have made their way into the cannabis industry in its infant stage as a result of restraints on the free market.  Marketing, especially at early stages, is a useful tool that drives awareness and educates consumers on the choices available, and helps develop preferences for specific brands or products.[91]  Without it, consumers are left to conduct their own research, and in a highly regulated infant industry like cannabis, research can be complicated, inefficient, incorrect, and sometimes not even available due to regulatory restrictions on marketing communications.  While certain restrictions are valid in order to maintain public health and safety, restraints at the current level are likely to create a synthetic mature market that is unprepared to respond to the demands of the newly created cannabis industry, let alone be sustainable in the long-run.  The consequences of an unsuccessful cannabis industry are detrimental to commerce, public health and safety by way of uninformed consumers, and the elimination of the long-standing black market.

b) The Cannabis Industry is Unlikely to be Successful in Competing with the Illicit Market

One of the key contributing factors to the legalization of cannabis is the policy objective of reducing illicit activities and combating the illicit market.  Moving cannabis sales from the illicit to the licit market is not only beneficial from a criminal law perspective, but it also ensures that the cannabis consumed across Canada is tracked, stays out of the hands of underage persons, and meets public health and safety standards.  Providing access to quality-controlled cannabis is also another policy objective outlined in the Act.[92]  However, it is unlikely that the mere legalization of cannabis will curtail the black market from continuing to thrive.[93]  Current consumers of illicit cannabis have little incentive to flock to the licit market and the government does not have enough enforcement power to deter illicit activities.  Instead, the elimination of the illicit market will depend on the ability of licensed incumbents to successfully compete against the black market.  As it stands, the current restrictions on price, sales and marketing inhibit the ability for the licit market to do so. 

Cannabis is currently sold in the illicit market for approximately $6.83 per gram.[94]  Across Canada, prices vary by province and range from a low of $6.00 per gram in the Yukon to $16.28 in British Columbia for a premium strain.[95]  Interestingly, consumer feedback suggests that the price discrepancy between illicit and licit cannabis is actually higher than the stated average. One consumer claimed that the strain he purchases off the black market for approximately $7.14 per gram sells for $17.14 at licit retailers.[96], [97]  Similarly, the owner of an illegal online dispensary claimed that the price discrepancy between the licit and illicit market is actually double the price, and that their most expensive strain sells for $7.00 per gram.[98]  With licit cannabis reportedly priced up to double that of illicit cannabis in certain cases, it is unlikely that licensed producers can compete and steal substantial market share from the black market if this is the norm.  Purchasers of illicit cannabis are price sensitive, and experts have stressed the importance of pricing licit cannabis near, or slightly higher than illicit cannabis.[99]  If similar regular and premium brands can be found in the illicit market for almost half the price, licit competitors can only win if they compete on non-price factors including differentiation and brand loyalty.  Consumers will only pay more for a product that has higher perceived value as a result of its unique strain, quality or brand value – all of which require effective marketing. 

The sale of dried cannabis is not the only area of concern.  Many speculate that the majority of profit-driving sales will come from the edibles segment, which will naturally have higher prices and margins.[100]  This includes vapes, oils, edibles, topical products and sprays.[101]  Yet, the illicit market is equally as sophisticated when it comes to edibles, offering products that range from candies to cookies.[102]  If the need for differentiation is equally as substantive in the edibles market as it is in the dried cannabis segment, the same issue may arise.  However, it is likely that legal edibles may inherently have an advantage over illicit edibles, since regulated food production is valued by most consumers – no one wants to eat a cannabis chocolate bar that may not have been prepared in a reputable facility.    

Nevertheless, if a product is destined to lose against a competitor when it comes to price, there needs to be another reason to justify a premium price.  The marketing campaigns in the alcohol industry have been incredibly successful at creating premium brands that compete on non-price factors.  For example, one study showed that consumers were willing to pay substantially higher prices for what they perceived to be premium wine, despite the fact that they could not tell the difference between wines in a blind taste test.[103]  Similarly, consumers are willing to pay a premium for branded over-the-counter drugs like Advil, even though private label brands offer the exact same compound of the analgesic drug ibuprofen (i.e. a store labelled brand such as Life).[104]  Getting consumers to pay more requires building brand equity, and although brand marketing is acceptable, the circumstances in which it is permitted may still limit the ability for companies to adopt strategic marketing campaigns.

At the retail level, the sale of cannabis will depend heavily on the retail salesforce since marketing efforts are significantly limited outside of stores.  The issue is that with over 85 identical looking strains in store,[105] the sales staff may not be equally as knowledgeable about each product.  It is also far too expensive for the sales staff to focus on each shopper for an extended time – in a busy store, the salesperson may ask a couple of quick questions about what kind of cannabis the customer is looking for and narrow down the options to a few recommendations before moving on to the next customer.  Certain provinces have also recognized the importance of an effective retail salesforce in developing a successful legal market.[106]  Provinces have the right to implement mandatory training and some have partnered with experts in the field to help bridge the knowledge gap.[107], [108]  In particular, the provinces of Ontario, Nova Scotia and Prince Edward Island agreed to use a cannabis retail training program developed by Lift & Co, an online cannabis community platform, and MADD.[109], [110]  The training focuses on responsible use, choosing the right product and providing valuable customer service.[111]  If the programs are successful, it should help retailers catch up to the level of expertise that the illicit salesforce has.

However, the existing relationship between illicit cannabis consumers and their “dealers” may be difficult to pierce.  Purchasers of illicit cannabis have a specific dispensary that they trust and an existing relationship with a dealer who is essentially an “expert salesperson”.[112]  With years of experience in selling various strains to clients, it is likely that dealers are more knowledgeable than cannabis retail staff, at least in the short-term while training at licit retail stores is still being rolled out.  If current purchasers of illicit cannabis can continue to purchase comparable strains at half the price from “expert salespeople” they trust and have a strong relationship with, then what is the incentive to purchase from the licit market?  Breaking the illicit retailer’s existing relationship with their customers will require a salesforce in the legal market that adds more value to the purchasing experience – otherwise, it will be slow process.

One step in the right direction is to allow previous cannabis dealers to participate in the licit market.  In Ontario, individuals with previous convictions can apply for a retail license, provided they shut down their illegal dispensaries prior to October 17, 2018 when the Act became effective, and are not associated with organized crime.[113] Allowing existing competitors to participate in the licit market incentivizes participants to follow their dealers and exit the illicit market.  It also immediately staffs stores with expert salespeople who can educate both new and current users of cannabis on the products available.  More importantly, it gives illicit dealers the incentive to switch to a legal sales channel, thereby reducing the black market through the elimination of illegal dispensaries that enforcement has been unable to control.  Other provinces that prohibit individuals with former convictions to participate in the licit market will likely see consumers of the illicit market continue to rely on their existing supplier. 

Another factor that gives illicit competitors an advantage are the restrictions placed on in-store marketing at legal retailers.  Although the Act currently allows for a wide scope of informational or brand advertising in-store, most provinces do not allow for sampling (which may be extremely valuable once edibles are legalized).[114], [115], [116]  Seeing the cannabis product itself may also be limited or even restricted depending on the number of smell jars permitted.  The issue is that purchasing cannabis can be largely experiential, and research has shown that consumers like to “see, touch, feel, smell and learn about the product they are buying,” which is widely available in the illicit market.[117]  Regardless of how many in-store signs, pamphlets or interactive tablets may be available in store, many educated (and even some uneducated) consumers will want to see the actual product to determine the quality of the cannabis. Convincing experienced buyers to purchase a mystery product in a plain package from a relatively inexperienced salesperson (in comparison to their existing supplier) may prove to be difficult.  

For Parliament to be successful in achieving its policy objective of reducing illicit cannabis activities, it must first ensure that the legal framework for cannabis is one that can enable market success, not failure.  The reality is that licit cannabis is far more expensive than illicit cannabis, and licensed producers are restricted from engaging in the traditional marketing communications used to either increase their brand value or justify higher prices.  The practical application of the Cannabis Act from a business perspective with respect to marketing and advertising make it difficult to achieve the policy objective of deterring the illicit market.

c) A Lack of Proper Marketing Leads to Poor Consumer Education of Cannabis Products

The policy objectives aimed at protecting young persons from accessing or being induced by cannabis products led to the development of rather harsh restrictions on packaging and marketing communications. More importantly, what has not been thoroughly considered is whether the effects of banning most types of marketing and implementing plain packaging lead to poor consumer education of cannabis products, ultimately contradicting the policy objective of enhancing public awareness of the health effects of cannabis.  Branding, and marketing more generally, are important tools that help consumers make informed purchasing decisions, and perhaps restricting communication is counteractive to the protection of public health and safety.  

The plain packaging for cannabis provides the consumer with three pieces of information – the brand name and logo, level of THC and CBD, and the health effects associated with cannabis consumption.[118]  It does not provide information about the brand itself, how the strain varies from other products on shelf, what the different levels of THC or CBD mean, or the chemicals used in the production process.  By comparison, wine bottles often have a history of the winemaker on the label and a description of the production process along with a stamped seal such as Vintners Quality Alliance (VQA) that attest to quality.[119], [120]  Similarly, until companies in consumer packaged goods started to emphasize that their products were natural, pesticide-free, or of a certain quality with respect to winemaking, consumers were largely unaware of some of the questionable ingredients used in their products.[121] 

What is interesting about cannabis in relation to this, is that the level of THC in natural cannabis has risen from 2% in the 1960s to over 10% in 2018, and new strains of cannabis are continuously being developed through DNA manipulation.[122]  In addition, a surprise inspection conducted by Health Canada in 2017 found that two of the seven leaf samples taken from licit producers contained unapproved pesticides.[123]  At the moment, the processing of cannabis is not visible to consumers and the production process remains in the dark.  If a consumer wanted to purchase a natural, pesticide-free strain of cannabis, or understand what the various levels of THC or CBD mean, that information is not available or permitted on the package.  The consumer would have to conduct their own research online or rely on a retail representative to explain how the products vary.  Retail staff may be more familiar with larger or top-selling brands, and the information provided may also vary by store.  A lack of consistency in the information provided may make it extremely difficult for consumers to determine the quality of products and which products best suit their needs.  The negative impact of limited information is even more detrimental to new cannabis consumers who do not have any experience with the product. 

Moreover, the effectiveness of plain packaging has also been debated.  Five years after the implementation of plain packaging in Australia, consumption of tobacco increased by 24%[124] and the consumption of illicit tobacco increased by 15%.[125]  Analysts have claimed that without brand presence, the Australian market for tobacco experienced commoditization and consumers were unable to differentiate between products, making them more susceptible to manipulation from the illicit market.[126]  Without proper information on the brand and product readily available, consumers may make poor choices that can be harmful to their health and safety, especially if it leads to the consumption of illicit products. 

In an attempt to protect young persons from the negative influences of cannabis and enhance public health and safety, Parliament modelled the marketing regulations for cannabis after the tobacco legislation – essentially opting to include less information, with the intention of maintaining consumer protection.  However, unduly restricting communications for a newly legalized substance may inhibit the ability of consumers to make an informed decision about which cannabis product is most suitable for them.  Ultimately, if consumers do not see the value in licit cannabis, they may simply resort to the black market.

***

Instead of opting for a more thorough approach to marketing restrictions, Parliament chose to implement a blanket restriction on most marketing and advertising strategies.  The effect of undue restrictions limits the ability for businesses to thrive by creating a synthetic mature market and bolstering the ability for illicit competitors to compete.  It also has the effect of diminishing the ability for consumers to make an informed decision.  Ultimately, the consequences of undue restriction may lead to unintended consequences that the legislative framework was designed to prevent.  The practical application of the restrictions could also result in a failure to meet the policy objectives of providing access to quality-controlled cannabis, combatting the illicit market, and protecting public health and safety.  Although the correct foundation has been put in place, it likely requires adjustments to ensure it makes sense in practice.

Part IV: Revising the Cannabis Regime Without Sacrificing Health & Safety Measures

Relative to how restrictive the tobacco and cannabis regulations are, cannabis should be placed somewhere in the middle of the two regimes. However, moving cannabis towards a less stringent regime does not simply mean “loosening” regulations broadly.  Rather, it means carving out specific exceptions in the regime that will help facilitate a healthy free market, in situations that are not likely to substantially impact public health and safety.  As a starting point, there are two key areas that Parliament should consider exploring with respect to the cannabis regime: (1) allowing for more flexible marketing strategies in-store, where marketing is targeted to consumers above the legal age; and (2) establishing a cannabis advertising and marketing review board to proactively guide the industry.  The key areas of interest outline how the regime can be revised so that it is better aligned with both business practice and the policy objectives of the Act.  As a caveat, each key area would require further empirical research to determine its full impact and viability.

a) Flexibility with In-Store Marketing

The experiential nature of purchasing cannabis requires a dynamic multi-sensory environment, especially when plain packaging makes every product look identical.  Although certain provinces have permitted the use of sealed smell jars, it may not be available for every strain, and in some provinces, it must be purchased at the retailer’s expense.[127]  If seeing and smelling dried cannabis is an important part of the purchasing decision, licensed producers should be allowed to provide small sized portions (at their expense) that can be used for sensory purposes at the point of sale.  For safety purposes, smell jars can be kept locked away in the back of the store and only brought out at the customer’s request.

In additional to sensory aids, in-store advertising and packaging will likely play an important role in facilitating information that helps consumers make purchasing decisions.  Although information and brand advertising in-store is permitted, either in traditional or electronic form using tablets, the plain packaging used for every brand still makes it difficult for consumers to differentiate between products, especially as the number of products available rises.  Packaging helps create brand recognition, signals quality and differentiates the product from competitors.  At the very least, licensed producers should be able to differentiate their products at the point of sale.

One option that could be considered is to allow for a different packaging design for in-store purposes only.  The product displayed in-store would be in branded packaging that includes mandatory warning signs.  However, should the customer choose to purchase a specific product, the product itself would be sold in the plain, government mandated packaging.  Having two separate types of packaging can still meet the underlying policy objectives that support the use of plain packaging.  The purpose of plain packaging is to reduce the appeal of cannabis amongst the youth, prevent accidental consumption and provide warnings for health risks.[128]  By ensuring that consumers leave the store with plainly packaged cannabis, the influence of branded packaging is limited solely to the purchasing experience in-store.  This does not mean, however, that companies are free to use any design they wish – it would still be regulated, just more leniently than plain packaging. 

b) Creating a Cannabis Advertising and Marketing Review Board

If one thing is certain, it is that cannabis producers will push the envelope in order to market their brand.  Strategic branding is one of the key success factors of the industry in addition to being an identified driver of growth in any infant industry.  Cannabis producers are already coming up with creative marketing tactics – generating content and conversations about cannabis use in general, sharing consumer commentary on certain cannabis strains, online advertisements for cannabis investments, and mysterious posts on social media about topics seemingly unrelated to cannabis.[129]  However, it is too early to tell whether these current non-traditional marketing strategies have been effective and whether it actually drives incremental sales.  One would think that vague marketing communications may not be as successful as traditional, more direct messaging. 

As competition heightens, cannabis brands will experiment with more aggressive marketing strategies, at which point a marketing review board would be tremendously helpful.  At the moment, there is great uncertainty as to whether substantiated therapeutic claims or comparative claims are permitted, or what exactly constitutes a brand characteristic.  Having a marketing review board would provide proactive guidance to cannabis brands, reduce the risk of unsavory advertisements from being exposed to the public, and eliminate the risk of having certain campaigns pulled or having digital platforms shut down.  In addition, if the Act is later revised to allow for more leeway with respect to marketing and advertising, more questions will arise, and having a proactive versus reactive approach to approving marketing materials will not only save companies the time and expense incurred, but may deter inappropriate content from being released to the public.  While a marketing review board may be costly to establish, it may also aid cannabis brands in developing more effective marketing materials to drive sales, thereby increasing tax revenue that could be used to fund such programs, all the while keeping in line with restrictions.

Conclusion

A legal framework for a unique industry like cannabis requires balancing the protection of public health and safety with an efficient market that can grow sustainably.  Finding the right balance is difficult and the right balance may change with time or vary based on the issue at hand.  As it stands, the marketing regulations in the Cannabis Act are perhaps too restrictive to allow for the infant industry to succeed in the long-run.  Not only is the Act misaligned relative to the restrictiveness of the tobacco and alcohol regimes, but the current framework unintentionally creates significant issues in practice that will likely frustrate the policy objectives of the framework.  Although legislation tends to evolve as critical issues are brought to the public or to the court, taking a reactive as opposed to a proactive approach to modifying this legislation could mean several failed licit cannabis businesses, a stronger illicit market, and ultimately, harm to public health and safety.  In order to be successful, the cannabis legal framework must make practical business sense, enable healthy competition and be forward-looking.

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Endnotes

[1] Victor Liu, “Legalisation of Cannabis in Canada – A Brief History”, Financier Worldwide (April 2018), online: <https://www.financierworldwide.com/legalisation-of-cannabis-in-canada-a-brief-history/#.XAHgFK2ZNAY>.

[2] Charlie Malone, Danny Kharazmi, Jeffrey Hergott and Davia Wang, “Task Force on Cannabis Legalization and Regulation Delivers Report to Federal Government”, Legislative Comment on Task Force for Cannabis Legislation, online: <https://www.wildlaw.ca/resource-centre/legal-updates/2016/task-force-on-cannabis-legalization-and-regulation-delivers-report-to-federal- government/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original>.

[3] Parliament of Canada, “House of Government Bill C-45 Status of Bill”, Note, online: <https://www.parl.ca/LegisInfo/BillDetails.aspx?billId=8886269&Language=E>.

[4] Martin Patriquin, “Canada's Rushed Rollout of Legal Cannabis Has Been a Gift to the Illegal Market”, Editorial, CBC News (17 November 2018) online: <https://www.cbc.ca/news/opinion/legal-cannabis-rollout-1.4910020>.

[5] Bill C-45, An Act respecting cannabis and to amend the Controlled Drugs and Substances Act, the Criminal Code and other Acts, 1st Sess, 42nd Parl, 2018.  

[6] Cannabis Act, SC 2018, c 1, s 7 [CA].

[7] See CA, ibid, s 17(1)(a).

[8] See CA, ibid, s 17(4).

[9] See CA, ibid, s 17(1)(b).

[10] See CA, ibid, s 17(1)(c).

[11] See CA, ibid, s 17(1)(d).

[12] See CA, ibid, s 17(1)(e).

[13] See CA, ibid, s 2(1).

[14] See CA, ibid, s 20.

[15] See CA, ibid, s 22.

[16] See CA, ibid, s 16.

[17] See CA, ibid, s 17(2).

[18] See CA, ibid, s 17(2).

[19] See CA, ibid, s 17(6).

[20] Health Canada, “Proposed Approach to the Regulation of Cannabis: Summary of Comments Received During the Public Consultation”, Legislative Comment s 6.3.

[21] Ibid.  

[22] Alberta, Alberta Gaming, Liquor and Cannabis, Retail Cannabis Store Handbook, (Alberta: 2018), s 3.3.5 [AGLC Handbook]; Saskatchewan , Saskatchewan Liquor and Gaming Authority, Guide to Saskatchewan's Cannabis Retail Framework, p 8 [SLGA Guide].

[23] Man Reg 120/2018 s 8(1) [ManReg].

[24] British Columbia, Liquor & Cannabis Regulation Branch, Cannabis Retail Store Terms and Conditions (British Columbia: 2018), at 11 [BC LCRB Terms & Conditions]; See ManReg, ibid, s 8(2); SLGA Guide, supra note 22 at p 9.

 

[25] Halsbury's Laws of Canada, Public Health at HBC-105 “Tobacco and Disease” (2014 Reissue).

[26] Ibid.

[27] Ibid.

[28] Tobacco and Vaping Products Act, SC 1997, c 13, s 18(1) [TVPA].

[29] See TVPA, ibid, s 21.

[30] Ibid.

[31] See TVPA, ibid, s 22.

[32] Ibid.

[33] See TVPA, ibid, ss 26-28.

[34] See TVPA, ibid, ss 24-25.

[35] See TVPA, ibid, s 29.

[36] See TVPA, ibid, s 19

[37] See TVPA, ibid, s 22(2).

[38] See TVPA, ibid, s 30.

[39] Tobacco Control Act, RSBC 1996, c 451, s 2(1)(c).

[40] Tobacco and Smoking Reduction Act, SA 2005, c T-3.8, s 7.1; Halsbury's Laws of Canada, Public Health at HBC-118 “Provincial and Territorial Restrictions on Tobacco Marketing” (2014 Reissue).

[41] John Paul Tasker, “Parliament passes plain tobacco packaging law, regulates vaping”, CBC News (16 May 2018), online: <https://www.cbc.ca/news/politics/ottawa-plain-packaging-vaping-law-1.4662112>.        

[42] Ibid.

[43] Tobacco Products Regulations (Plain and Standardized Appearance) 152/25, (2018) C Gaz I.

[44] Ontario, Public Health Ontario, Focus On: Alcohol Marketing (Ontario: October 2016), at 16 [PHO Alcohol Marketing].

[45] Canada, Advertising Standards Canada, ASC Alcoholic Beverage Advertising Clearance Guide (2017) at 4.

[46] Ontario, Alcohol and Gaming Commission of Ontario, Liquor Advertising Guidelines (Ontario: December 2017), at 6-7 [AGCO Liquor Advertising Guidelines].

[47] See AGCO Liquor Advertising Guidelines, ibid at p 9.

[48] PHO Alcohol Marketing, supra note 44.

[49] Kelly Fitzgerald, “Why Alcohol Is the Deadliest Drug” AddictionCenter (13 December 2017), online: <https://www.addictioncenter.com/community/why-alcohol-is-the-deadliest-drug/>.

[50] R v Malmo-Levine, 2003 SCC 74, 3 SCR 571.

[51] Note: This case may be distinguished on the basis that it pertains to the question of harm with respect to criminal legislation.

[52] Leland Kim, “Marijuana Shown to Be Less Damaging to Lungs Than Tobacco” University of California San Francisco News Center (10 January 2012), online: <https://www.ucsf.edu/news/2012/01/11282/marijuana-shown-be-less-damaging-lungs-tobacco>.

[53] Ibid.

[54] Charis Grey, “Differences Between Smoking Cigarettes & Marijuana” LiveStrong (14 August 2017), online: <https://www.livestrong.com/article/125021-differences-between-smoking-cigarettes-/>.

[55] “Respiratory Effects of Marijuana” Alcohol & Drug Abuse Institute, University of Washington, online: <http://adai.uw.edu/marijuana/factsheets/respiratoryeffects.htm>.

[56] “Canadian Substance Use Costs and Harms” Canadian Centre on Substance Use and Addiction (2018) online: <http://www.ccsa.ca/Resource%20Library/CSUCH-Canadian-Substance-Use-Costs-Harms-Report-2018-en.pdf>.

[57] Death toll comparison calculated by dividing the death toll of tobacco by the death toll of cannabis (47,563 / 851). Economic cost comparison calculated by dividing the economic cost of tobacco by the economic cost of cannabis ($12 billion / $2.8 billion).

[58] Canada, Statistics Canada, “Canadian Tobacco, Alcohol and Drugs Survey, 2017” (30 October 2018).

[59] Supra, note 52.

[60] Ben Waldman, “Is Cannabis More Harmful Than Alcohol?” Maclean’s (1 October 2018), online: <https://www.macleans.ca/news/canada/weed-vs-alcohol/>.

[61] Ibid.

[62] Sharon Kirkey, “Cannabis Will Soon Be as Readily Available as Alcohol, But How Does Pot Affect You Compared to Booze?” National Post (20 June 2018), online: <https://nationalpost.com/news/alcohol-vs-cannabis-everything-you-need-to-know-before-you-choose-a-vice>.

[63] Marc Davis, “Pot vs. Tobacco: Which Is The True Cancer Risk?” Editorial, Huffington Post (18 January 2016), online: <https://www.huffingtonpost.ca/marc-davis-/pot-tobacco-cancer-risk_b_9010830.html>.

[64] Supra, note 55.

[65] Ibid.

[66] Jenna Valleriani, “When Did Alcohol Advertising Get So Out Of Control?” Editorial, Huffington Post (12 July 2017), online: <https://www.huffingtonpost.ca/jenna-valleriani/ontario-alcohol-advertising_a_23026710/>.

[67] Susan Krashinsky, “Alcohol Ads Push Underage Girls to Drink More, Research Finds” The Globe and Mail (13 June 2013), online:  <https://www.theglobeandmail.com/report-on-business/industry-news/marketing/alcohol-ads-push-underage-girls-to-drink-more-research-finds/article12536741/>.

[68] Brian Sayler, “Cannabis Production in Canada” (2018) 11141CA: IBISWorld p 19.

[69] Ibid.

[70] Ibid.

[71] “How Do You Define Your Future in an Undefined Market?” Ernst & Young (2017), online: <https://www.ey.com/Publication/vwLUAssets/EY-Canadian-licensed-producers-report-en/$FILE/EY-Canadian-licensed-producers-report-en.pdf>.

[72] Ibid.

[73] Robrty M. Grant, “Contemporary Strategy Analysis, 7th ed (West Sussex: Blackwell Publishing Ltd, 2010) at 227.

[74] Canada, Competition Bureau Canada, Advertising Restrictions (Ottawa: 4 October 2016).

[75] Ibid.

[76] Ibid.

[77] Ibid.

[78] Ibid.

[79] Leyland Cecco, “How Do You Market Weed When You Can't Market Weed?” The Guardian (6 June 2018), online: <https://www.theguardian.com/world/2018/jun/06/canada-weed-legalisation-cannabis-marijuana-vendors-marketing-tactics>.

[80] Tweed, “Behind the Scenes” online: <https://www.tweed.com/en/vault/behind-the-scenes>.

[81] Kristine Owram, “Canadian Pot Will Lose Out to US Brand Behemoths, Firms Say” Financial Post (18 October 2018), online  <https://business.financialpost.com/cannabis/canadian-pot-will-lose-out-to-u-s-brand-behemoths-firms-say>.

[82] Jacquie Miller, “Cannabis Companies Ramp Up Marketing as Health Canada Warns Them Not to Advertise Pot” Ottawa Citizen (11 October 2018), online <https://ottawacitizen.com/news/local-news/warning-on-ads>.

[83] Supra, note 74.

[84] Tim R. Sass and David S. Saurman, “Advertising Restrictions and Concentration: The Case of Malt Beverages” (1995) 77:1 The Review of Economics and Statistics 80.

[85] Supra, note 74.

[86] Ibid.

[87] Ibid.

[88] Rodger Howell, “How To Turn Your Cost-Cutting Strategy Into A Growth Strategy” Editorial, Forbes (11 August 2016), online: <https://www.forbes.com/sites/strategyand/2016/08/11/how-to-turn-your-cost-cutting-strategy-into-a-growth-strategy/#40c81d47fc61>.

[89] Nick Kovacevich, “With A Wave Of Consolidation, The Cannabis Industry Rises To The Next Level, Editorial, Forbes (29 August 2018), online: <https://www.forbes.com/sites/nickkovacevich/2018/08/29/with-a-wave-of-consolidation-the-cannabis-industry-rises-to-the-next-level/#5d3edfa7f368>.

[90] In July 2018, Aurora purchased MedReleaf, making the transaction the largest cannabis acquisition to date.  The capabilities combined allow Aurora to produce 570,000 kilograms of high-quality cannabis annually for less than $1 per kilogram.

[91] Supra, note 74.

[92] See CA, supra, s 7(f).

[93] Maura Forrest, “Legalizing Marijuana Won't Shut Down Black Market: RCMP Official” National Post (11 September 2017), online: <https://nationalpost.com/news/politics/legalizing-marijuana-wont-shut-down-black-market-rcmp-official>.

[94] Rebecca Joseph, “Here’s How Much Cannabis Costs Across Canada” Global News (17 October 2018), online:  <https://globalnews.ca/news/4563144/heres-how-much-cannabis-costs-across-canada/>.

[95] Ibid.

[96] Cameron Poitras, “Pot Prices a Problem in Stamping Out the Black Market: Advocate” Global News (18 October 2018), online: <https://globalnews.ca/news/4566616/pot-prices-a-problem-in-stamping-out-the-black-market-advocate/>.

[97] Calculated based on the price of $50 for seven grams of illicit cannabis and $120 for seven grams of licit cannabis.

[98] Vanmala Subramaniam, “On Day One of Legalization the Cheapest Bud is Being Sold in Newfoundland and Labrador” Financial Post (17 October 2018), online: <https://business.financialpost.com/cannabis/on-day-one-of-legalization-the-cheapest-bud-is-being-sold-in-newfoundland-and-labrador>.

[99] Rebecca Joseph, “4 in 10 Canadians Say Price of Cannabis Will Determine if They Buy Legally: Ipsos Poll” Global News (15 October 2018), online: <https://globalnews.ca/news/4549506/price-of-pot-black-market-poll/>.

[100] Chloe Aiello, “Marijuana's Margin, Like Alcohol, is Going to be Captured in the End Product, investor says” CNCB (20 April 2018), online: <https://www.cnbc.com/2018/04/20/marijuanas-margin-like-alcohol-is-going-to-be-captured-in-the-end-product-investor-says.html>.

[101] Ibid.

[102] CBC News, “Illegal Pot Edibles Market Flourishing” (10 October 2018), online: <https://www.youtube.com/watch?v=bHC2q73l5kI>.

[103] David Mcraney, “'You Are Not So Smart': Why We Can't Tell Good Wine from Bad” The Atlantic (28 October 2011), online: <https://www.theatlantic.com/health/archive/2011/10/you-are-not-so-smart-why-we-cant-tell-good-wine-from-bad/247240/>.

[104] “Generic and Store Brands vs. Brand Names” CBS News (18 June 2010), online: <https://www.cbsnews.com/news/generic-and-store-brands-vs-brand-names/>.

[105] “Canadians Welcome Legal Pot Sales, Put Up With Supply Issues on Opening Day” CBC News (17 October 2018), online: <https://www.cbc.ca/news/canada/canada-marijuana-sales-summary-1.4866191>.

[106] Julia Wright, “New Details on Training or Cannabis NB Employees” CBC News (23 January 2017), online: <https://www.cbc.ca/news/canada/new-brunswick/budtender-jobs-new-brunswick-cannabis-nb-1.4499959>.

[107] Cannabis Licence Act, SO 2018, c 12, s 2(1); Bill 11, The Safe and Responsible Retailing of Cannabis Act (Liquor and Gaming Control Act and Manitoba Liquor and Lotteries Corporation Act Amended, 3rd Sess, 41st Leg, Manitoba, 2018, 101.21; Bill 30, Cannabis Control and Licensing Act, 3rd Sess, 41st Parl, British Columbia, 2018, s 113.

[108] Alberta, Government of Alberta, “Alberta Cannabis Framework and Legislation”, online: <https://www.alberta.ca/cannabis-framework.aspx>.

[109] Armina Ligaya, “Prior Dispensary Experience Both an Asset and a Risk for Pot Retail Workers” The Canadian Press (12 October 2018), online: <https://www.ctvnews.ca/canada/prior-dispensary-experience-both-an-asset-and-a-risk-for-pot-retail-workers-1.4131479>.

[110] Jeff Lagerquist, “Cannabis retail training monopoly a ‘monumental’ win for Lift & Co., says CEO” Yahoo Finance Canada (7 February 2019), online: < https://ca.finance.yahoo.com/news/cannabis-retail-training-monopoly-monumental-win-lift-co-says-ceo-215840089.html>.

[111] Canopy Growth Corporation, Press Release, “Canopy Growth & ANBL Partner to Create Comprehensive Cannabis Training Program” 19 January 2018), online: <https://www.newswire.ca/news-releases/canopy-growth--anbl-partner-to-create-comprehensive-cannabis-training-program-670152943.html>.

[112] Douglas Quan and Jake Edmiston, “Disrupting the Supply Chain: What Happens to the Black Market When Cannabis Becomes Legal?” National Post (25 September 2018), online: <https://nationalpost.com/news/canada/disrupting-the-supply-chain-what-happens-to-the-black-market-when-cannabis-becomes-legal>.

[113] Shawn Jeffords and Paola Loriggio, “Ontario Government Says Recreational Cannabis Can Be Smoked Wherever Tobacco Smoking Allowed” Global News (26 September 2018), online: <https://globalnews.ca/news/4489445/cannabis-ontario-government-announcement/>.

[114] BC LCRB Terms & Conditions, supra, note 24 at p 13; SLGA Guide, supra note 22 at p 9.

[115] Government of Newfoundland and Labrador, News Release, Provincial Government Releases Regulations for Legalized Recreational Cannabis” (16 October 2018), online: <https://www.releases.gov.nl.ca/releases/2018/fin/1016n07.aspx>.

[116] Andy Riga, “FAQ: Everything You Need to Know About Legalized Cannabis in Quebec” Montreal Gazette (17 October 2018), online: <https://montrealgazette.com/cannabis/faq-everything-you-need-to-know-about-legalized-cannabis-in-quebec>; “Commonly Asked Questions” ALGC, online: <https://aglc.ca/cannabis/commonly-asked-questions>; Julia Wright, “What You Need to Know About Legal Weed in the Maritimes, CBC News (3 October 2018), online: <https://www.cbc.ca/news/canada/new-brunswick/marijuana-stores-cannabis-nb-nslc-pei-legalisation-1.4847856>; Lara Schroeder, “Don't Touch (or Toke) the Merchandise: Manitoba Cannabis Stores Can't Offer Samples” CBC News (13 September 2018), online: <https://www.cbc.ca/news/canada/manitoba/manitoba-cannabis-marijuana-legal-stores-samples-1.4822529>.

[117] Supra, note 71.

[118] Supra, note 20.

[119] Canada, Canada Food Inspection Agency, “Labelling Requirements for Alcoholic Beverages”, (18 May 2018).

[120] Vintners Quality Alliance Act, SO 1999, c 3, s 4.

[121] TED, “What Commercialization is Doing to Cannabis, Ben Cort” (25 September 2018), online: <https://www.youtube.com/watch?v=KyVSuI6JyOs>.

[122] Ibid.

[123] David Brown, “Health Canada Updates Pesticide Testing Requirements in Wake of New Results” Lift & Co (5 May 2017), online:  <https://lift.co/magazine/health-canada-updates-pesticide-testing-requirements-in-wake-of-new-results/>.

[124] “'Plain Packaging' of Tobacco Fails in Australia; Convenience Retailers Urge Canada to Avoid Similar, Costly Mistake Here” Globe News Wire (1 December 2018), online: <https://globenewswire.com/news-release/2017/12/01/1216299/0/en/Plain-packaging-of-tobacco-fails-in-Australia-convenience-retailers-urge-Canada-to-avoid-similar-costly-mistake-here.html>.

[125] Lorenzo Montanari, “Up in Smoke: 5 Years of Plain Packaging Failure” Forbes (1 December 2017), online: <https://www.forbes.com/sites/lorenzomontanari/2017/12/01/up-in-smoke-5-years-of-plain-packaging-failure/#f3ef3726b9ce>.

[126] Ibid.

[127] AGLC Handbook, supra note 22, s 4.8.6.

[128] Geordan Omand, “Plain Packaging Proposed for Legal Marijuana” The Toronto Star (19 March 2018), online: <https://www.thestar.com/business/2018/03/19/plain-packaging-proposed-for-legal-marijuana.html>.

[129] Supra, note 79.