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Torkin Manes’ reflections on the Cannabis Act review final report

As pretty much everyone in the industry knows, the Cannabis Act came with a baked in review clause that requires the government to review the legislation, its administration and operation within three years of the Cannabis Act coming into force.

Section 151.1(1) if the Cannabis Act sets out this requirement. Notably, it explicitly provides that the review shall include a review of the impact of the legislation on public health, and in particular, on the health and consumption habits of young persons in respect of cannabis use, the impact of cannabis on Indigenous persons and communities, and the impact of the cultivation of cannabis plants in a dwelling-house.

An expert panel, appointed by the government for this purpose, recently published a summary of the results of their initial engagement. The expert panel still has to conduct a “second phase” of its mandate, which will see it re-engage stakeholders in various discussions to “gain a deeper understanding and fill any knowledge gaps from our first phase.”

So while there is still much work to be done before the panel’s final report is prepared and ultimately tabled in parliament by March, 2024, it is fair to say that the initial findings set out the overarching framework under which the report will ultimately be based.

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This article will only discuss the initial findings at a very high level and only those that (arguably) relate directly, or indirectly, to business considerations.

It will likely come as no surprise that there is somewhat of an inherent conflict between public health considerations and economic/business considerations. Indeed, the panel noted that “where as public health stakeholders advocated for the need to maintain a precautionary approach to cannabis in order to protect public health and safety, industry representatives asserted that a viable industry is a necessary precondition to maintain a safe and legal source of supply and to combat the illicit market.”

This is not to say that the legislative regime cannot accomplish supporting both public health and economic/business interests concurrently, but rather that in some instances there is clearly a degree of trade-off that is required. There are a few examples of this throughout the expert panel’s recent report.

Public health stakeholders indicated that there should be a focus on reducing harms associated with consumption, high-potency products, higher-risk product formats, polysubstance use and cannabis poisonings of children, amongst other things. While this group is generally supportive of the 10mg THC cap on products, there were some calls for further restrictions such as stricter age limits, setting minimum pricing for retailers and restrictions on selling flavoured products.

Not surprisingly, these suggestions run counter to those provided by industry representatives, who noted that precautionary elements of the legislative regime already make it exceptionally difficult for them to compete with the illicit market. Indeed, some stakeholders have been calling for an increase to the 10mg THC cap for some time, and would also like to see packaging and advertising restrictions loosened, in large part so that industry participants can better compete with the illicit market.

While some points, such as the THC cap limit on products, resulted in divergent opinions between public health stakeholders and industry stakeholders, other public health considerations, such as the greater need for public education and treatment efforts can clearly be supported by all sides.

Interestingly, the expert panel explicitly noted that although the objectives of the Cannabis Act did not include economic, social and environmental considerations, they heard a great deal about the economic condition of the legal cannabis market, and correspondingly devoted a fair amount of effort outlining what they heard.

Industry stakeholders expressed concern that companies in the legal market continue to struggle to realize profits and maintain financial viability. This concern was, according to feedback, attributable to direct financial considerations (such as the burden of taxes, mark-ups, fees and regulatory compliance costs), a cumbersome regulatory regime (i.e. that licensees have to content with regulatory requirements at the federal, provincial/territorial and municipal levels) and indirect financial considerations (such as THC cap limits, restrictive rules on promotion, packaging and labelling). Respondents noted that it appears that these concerns are driving smaller producers and entities out of the legal market, and either back to the illicit market or out of business altogether, thereby increasing the risks of a future market that is consolidated and dominated by a few large entities what wield significant market power.

What can we therefore expect when the final report is (hopefully) tabled in March, 2024?

On one hand, the expert panel explicitly noted that the objectives of the Cannabis Act do not include economic considerations. On the other hand, it is clear that those considerations were voiced strongly and widely. We can therefore assume that the final report will contain a fairly detailed finding of what the expert panel heard as it relates to economic considerations. The question is whether those concerns will cause the government to act on any of them in any meaningful way?

I suspect that the decision will ultimately come down to whether or not the government believes that the economic considerations are such that they actually pose a significant risk to harming the industry in general and strengthen the illicit market, which the government tis trying to eliminate. If the concerns are viewed in this light, the economic considerations clearly do tie into the other stated objectives of the Cannabis Act. However, if the government fails to appreciate the severity of the economic considerations raised and does nothing, it may find itself down the road having a far more difficult time addressing the stated objectives of the legislation.