____ Posted Tuesday September 12, 2017 ____


New Ontario Cannabis Regime Won't Kill Illegal Market

Instead of reaching out to existing illegal market, the province of Ontario goes it alone. by Peter Thurley

Last Friday the Ontario provincial government released its plan for administrating cannabis after its federal legalization in July of 2018. Details of the plan include an initial lot of 80 stores opening July 1, 2019, with a further 70 stores to be opened by 2020. The plan also calls for provincially administered online sales, with the same age verification systems currently in place for selling alcohol online. Most notably, the plan does not include an amnesty for current dispensary or compassion club owners, but is instead very clear that the only legal avenue for buying cannabis in Ontario will be through a single provincial retailer.

This approach intended to tightly control how cannabis is distributed, highlights the public health goal of keeping cannabis out of the hands of minors. The Attorney General was very clear that it would be devoting significant resources to closing current dispensary operations. The goal, then, is to ensure that the illegal compassion club model is killed off in favour of behind-the-counter government sales locations and a government-run online sales presence.

Unfortunately, this approach, which freezes out all existing illegal operations in favour of a few store locations across the province is counterproductive.

With demand already under strain in the federal medical Accessing Cannabis for Medical Purposes Regulations (ACMPR), it is almost certain that there will be more people looking to purchase cannabis on July 1, 2018 than there will be legal product, let alone enough access points. Consider that Ontario, a province with more than 11 million people spread out across more than a million km2, currently has over 650 LCBO locations, in addition to grocery store outlets. While not everyone who drinks a glass of wine will want to smoke a joint, the number of folks looking to enjoy cannabis legally come this time next year will be far greater than the few stores they can bring online in that time. With most locations likely to be found in the GTA, whole areas of the province will be drastically underserviced, leaving significant opening for the illegal market to continue.

On top of demand issues, the proposed model is almost certain to keep the price of cannabis high. It is currently possible in Canada to buy an ounce of medical grade cannabis from an online retailer for about $180. That same ounce, purchased legally online through a Licenced Producer, costs a patient $280. Add to that internal challenges involved in creating a new provincial distribution system, the necessary basic and advanced training that will be required for all provincial cannabis employees, the costs of pursuing and prosecuting existing dispensary owners, and it is highly unlikely that the price of the cannabis will remain low enough to make a dent in the existing market.

Indeed, Ontario has failed to seize a significant opportunity to eliminate the illegal market from operation, in so far as one jurisdiction can. If you’re in any one of thousands of rural municipalities or suburban communities in the province, your access point for your cannabis won’t change. It will still be the high school weed dealer whose product you can’t and don’t trust, simply because the hour ride to the city won’t be worth it. And why would that same person spend $100 more than necessary to obtain legal cannabis, when the delivery method of Canada Post is the same?

Where there was an opportunity to create a system that can respond adequately to demand, while providing a price point that chokes out the illegal market, it is now lost. With Ontario being the first province to release its plan, it is likely to become a rubric for other provinces. If this occurs, Canada will have an unhealthy legal cannabis regime and a very healthy illegal cannabis market, indeed the very opposite result that public policy experts want to see.

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