Rules more restrictive for cannabis than for tobacco

Marketing and branding cannabis and its derivatives in Canada presents significant challenges. The federal government built the marketing restrictions in the federal Cannabis Act on the restrictions developed for the tobacco industry.

These restrictions are among the most severe in Canada on marketing and branding in a legal industry. The success of the cannabis industry requires a reasonable loosening of this approach to permit effective competition with the illegal market.

The government’s approach to tobacco identified three types of promotional activity:

• Informational promotion.

• Brand-preference promotion.

• Lifestyle promotion. Government outright banned lifestyle promotion and permitted the other two types in limited circumstances. The Supreme Court of Canada considered these tobacco marketing restrictions in two free-speech-related Charter of Rights cases: in 1995 and in 2007.

The court approved legislative restrictions on advertising to youth that still permitted advertising in places where youths would be present. The court held it was constitutional to restrict advertising tobacco to youth on the basis that advertising would be permitted if it targeted adults and was not designed to be particularly appealing to young persons, as distinguished from the general population.

Unfortunately, the Cannabis Act has not adopted this constitutionally approved structure and instead has prohibited all three types of promotion in places where young persons are permitted by law. Of course, that is virtually every location in our society.

The other big marketing issue in the Cannabis Act is the prohibition on any meaningful labelling – permitting only the use of plain packaging, and a single, very small, brand element, with the majority of label space being occupied by government warnings.

Given that labels are affixed to products that can be displayed only in locations where youths are not permitted by law, it is difficult to understand why virtually all

branding activities on a label are prohibited.

How will these severe restrictions on marketing and branding play out in the future?

First, one of the stated purposes of the Cannabis Act is to “provide for the licit production of cannabis to reduce illicit activities in relation to cannabis.”

This alone distinguishes cannabis from tobacco.

Second, cannabis has known, court-recognized medical benefits. This also distinguishes it from tobacco. Third, illicit cannabis sells for less, and it is not governed by the same marketing restrictions.

Given this context, arguably, it is not sustainable for the federal government to maintain such severe restrictions if it wants to effect its stated purpose of reducing illicit activities in relation to cannabis.

There are two ways to solve this problem.

First, businesses can use industry associations (ideally one, rather than many) to lobby the government to change the laws based on evidence collected during the early days of legalization. For instance, the failure of cannabis to raise anywhere near its projected revenue demonstrates that the existing structures are not working.

The second approach is for a cannabis business or industry association to bring a Charter of Rights challenge to the Cannabis Act advertising and marketing restrictions, on the basis that they infringe the Section 2(b) right to freedom of expression.

No matter what happens in the future, what is clear is that successfully navigating the regulation of cannabis advertising and marketing activities is both challenging and essential for the success of any business focused on consumer-facing products.

Shea Coulson is a partner at Dentons Canada LLP in Vancouver. His law practice focuses on the commercial and regulatory environment of the Canadian

cannabis industry.