Ban on pot ‘swag’ creates unintended problems: sector
Proposed bill amendment sparks fears it would give black market the advantage
With days to go until the Senate votes on the federal Cannabis Act, members of the legal marijuana industry are warning that a recent move to limit promotional “swag” could have unintended consequences for cannabis growers and retailers.
On Friday, the Senate voted 34 to 28 to remove a section of Bill C45 that allowed companies to promote products and services using “brand elements” on noncannabis merchandise, such as hats or T-shirts, so long as the items weren’t appealing to young people or associated with certain attractive lifestyles.
“We are all too familiar with the marketing techniques used by alcohol and tobacco companies,” said Conservative Sen. Judith Seidman, who forwarded the amendment, during Friday’s debate. Eliminating the use of branded merchandise, regardless of age appropriateness or whether or not it promoted a “glamorous” or “daring” lifestyle, “would close this loophole and reduce the possibility that cannabis companies will market to our kids by stealth,” she said.
The amendment was quickly and widely condemned by the members of the emerging legal cannabis industry, who fear the change could reduce their ability to compete with the black market. “We’re trying to compete with a market that has extensive branding both in terms of the packaging, and in terms of their swag and their online digital presence,” said Greg Engel, chief executive of cannabis company OrganiGram Holdings Inc.
The legal industry is already starting at a disadvantage, he said, and needs all the latitude for brand development it can reasonably get.
Only dried cannabis and cannabis oil will be available at first in the legal recreational market, while a wide range of edibles, concentrates and dried bud can be easily purchased in the illegal market, he said. The legal products themselves will be sold in plain white packages with large health warnings and only limited branding, according to draft regulation released by Health Canada this spring.
By leaving the act silent on public-facing promotion, the Senate’s amendment also creates confusion for retailers, said Trina Fraser, who leads the cannabis group for Ottawa law firm Brazeau Seller Law.
“The definition of promotion in the bill is quite broad, and I would think that even my logo and store name on the exterior of my cannabis store, if I’m a retailer, would be a promotion,” said Fraser. This creates uncertainty for would-be retailers, who are trying to design stores in provinces that will allow private retail. It could even impact government retailers like the Ontario Cannabis Store, a subsidiary of the Liquor Control Board of Ontario, said Fraser. “I think that (OCS) sign and that logo that they spent hundreds of thousands of dollars to create is a promotion, as a promotion is defined in the bill. And that’s a promotion that’s not captured by any of the exceptions,” said Fraser. The “swag ” amendment is one of 40 that the Senate adopted last week ahead of its final vote on the bill this Thursday. Other amendments include a proposal to give regulators the ability to cap the level of THC, the psychoactive component of cannabis, in legal products, and an amendment that explicitly spells out provinces’ right to ban cannabis growing at home.
Most of the other amendments are highly technical and of less concern to industry members watching the Senate for hints about their business prospects. The promotion amendment could, however, prove to be a sticking point.
Allan Rewak, executive director of trade group Cannabis Canada, said the industry is pushing hard for the House of Commons to reexamine the amendment. “Because of the widespread impact beyond the stated intentions of this amendment, and the impact it will have on retail environments, we believe the House of Commons should reject it and deal with this matter in regulation,” said Rewak.