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AGCO issues $200,000 in penalties to Cannabis Xpress for alleged illegal agreements with cannabis producers

(Globe Newswire) Toronto — The Alcohol and Gaming Commission of Ontario (AGCO) has issued an Order of Monetary Penalty totaling $200,000 to 2776112 Ontario Inc., the licensed operator of the Cannabis Xpress chain of cannabis retail stores, for alleged violations of Ontario’s regulatory standards related to provincial anti-inducement laws.

The provincial Cannabis Licence Act, 2018 and the AGCO’s Registrar’s Standards for Cannabis Retail Stores prohibit Ontario cannabis retailers from asking for or accepting inducements from cannabis producers as a condition of selling or giving preferential treatment to products in their stores.

After receiving information regarding inducement activity, the AGCO undertook compliance inspections of Cannabis Xpress, including a review of over 82,000 relevant documents, and found that Cannabis Xpress’s so-called “Data Services Program” and/or other agreements, which it entered into with licensed cannabis producers (LPs) are, in fact, an inducement program.

Notably, over a period of at least 30 months, the licensee repeatedly sought the participation of over a dozen LPs in so-called “data service” or other such agreements. These agreements were actually an indirect means of requesting and accepting prohibited inducements where, for a fee or a percentage of product sales, Cannabis Xpress gave preferential treatment to products from LPs that had executed such unlawful agreements to the disadvantage of those that had not.

For example, the licensee refused to stock an LPs product unless they agreed to enter into prohibited inducement agreements and promoted the sale of cannabis products from producers who entered such inducement deals. It was found that the licensee attempted to disguise these illegal payments as agreements for the sale of data for business intelligence purposes, which are permissible under the Standards.

The AGCO is committed to ensuring that the cannabis retail sector operates with honesty, integrity and in the public interest.

A licensed retailer served with an Order of Monetary Penalty by the AGCO has the right to appeal the Registrar’s action to the Licence Appeal Tribunal (LAT), an adjudicative tribunal independent of the AGCO and part of Tribunals Ontario.

“Provincial law and AGCO standards include anti-inducement regulations to protect consumer choice and maintain a level playing field for small businesses in the cannabis retail industry. The AGCO monitors the sector’s compliance with these requirements and will take strong action against any licensee found to be engaging in illegal behaviour.” — Dr. Karin Schnarr, Registrar and CEO, AGCO