Proposed pot bill raises regulatory questions
Proposed bill’s vague wording on ads leaves questions open on regulation
A new era of “big marijuana” could create a multibillion-dollar Canadian market, but with details of legalization legislation still hazy, pot producers are stepping up lobbying efforts to push for advertising they say will not only deliver pot profits to shareholders but take them out of criminal hands.
The federal government introduced legislation Thursday that will see it continue to regulate and license producers of legal marijuana the way it does for medical cannabis firms. Public Safety Minister Ralph Goodale said the government will not tolerate a “free-forall” approach as Canada becomes the second country in the world to legalize pot at the federal level.
That means Canada’s some 40 licensed medical marijuana producers stand to gain from first-mover advantage, said Vahan Ajamian, a research analyst at Beacon Securities. He believes the legislation could spark a wave of mergers and acquisitions among marijuana companies, as has happened in the mature tobacco and alcohol industries. “In the way we don’t have 40 independent producers of beer or cigarettes eventually we won’t in this industry either.”
He was one of many industry watchers to draw comparisons to tobacco and alcohol in reaction to the government’s overhaul of nearly a century of marijuana laws, opening up a new legal recreational market to an extent that hasn’t been seen since the end of alcohol prohibition in the 1920s.
The main question for licensed producers is the extent to which they can advertise and market their products. The bill’s vague wording surrounding advertising leaves significant room for interpretation as to whether it becomes a tightly controlled market like tobacco or more loosely regulated alcohol advertising.
Advertising requirements in the bill are not as strict as expected, said Eileen McMahon, chair of intellectual property and food and drug regulatory practices at Torys law firm. “The regulations are not yet published so there’s an opportunity to push back or comment on them too ...,” she said.
The proposed Cannabis law “pro- hibits any promotion, packaging and labelling of cannabis that could be appealing to young persons or encourages its consumption, while allowing consumers to have access to information with which they can make informed decisions ...”
The legislation bans displays of marijuana products that can be seen by young people, which means products might either have to be hidden like cigarettes at corner stores or sold in a separate adults-only store, or section of a store. That ban also prohibits companies from conventional and social media outreach.
The act also prohibits association with certain glamorous or relaxed lifestyles, nor can marketing depict a person, character or animal. However, details of packaging and advertising rules will be determined in regulations yet to be written, giving the licensed producers time to lobby the government to consider more overt advertising.
The industry will continue to push government to allow advertising, said Sebastian St. Louis, CEO of Quebec-based licensed producer Hydropothecary.
“If they don’t allow any kind of advertising, the problem is the black market will continue to advertise and continue to put Canadians at risk,” he said.
“We need to be able to make Canadians aware that licensed producers exist and that there is a legal high-quality, low-cost supply available.”
And licensed producers are encouraged that the legislation did not call for the strictest “plain white packaging” they feared.
Several licensed producers sent a letter last month to Prime Minister Justin Trudeau and cabinet asking them to rethink the task force’s position on advertising and packaging, arguing a lack of brand awareness and advertising will undercut their efforts to differentiate themselves from the black market.
The legislation seemed to leave the door open to alcohol rather than tobacco-level advertising restrictions, said Brendan Kennedy, president of Tilray, one of the licensed producers behind that letter. “It seems like a positive step and it seems like it’s not going the way of plain packaging, which I think would be a huge disservice to consumers.
“Brand prohibition would create a race to the bottom where essentially companies would compete on price and potency, which is the exact opposite of what the government wants.”
We need to be able to make Canadians aware ... that there is a legal high-quality, low-cost supply available.