The office says the moves would boost competition.
Canada’s competition watchdog is throwing its weight behind some long-standing requests from the cannabis industry, including relaxing restrictions on cannabis packaging and tightening limits on the amount of psychoactive component of marijuana that may be in edible products.
In a submission to Health Canada and a panel reviewing cannabis law released Friday, the Office of Competition positioned changing limits on tetrahydrocannabinol (THC) and giving marijuana companies more freedom in packaging and marketing as a way to boost competition.
“The office believes that stronger competition in the cannabis industry would help foster innovation and benefit consumers by providing them with more choice and quality,” he wrote in his filing.
“Importantly, these benefits would serve to further displace illicit market activity and bolster the legal cannabis industry.”
A 2022 Health Canada survey found that nearly half of the 10,048 respondents who used cannabis in the past year purchased the substance exclusively from legal sources, an increase from 43 percent in 2021.
Some believe that the true share of the illicit market is higher due to the stigma surrounding disclosing cannabis use.
Marijuana growers and stores have long felt that THC and packaging changes would reduce the market share held by illicit sellers and help them reduce the myriad of layoffs, facility closures, and write-downs they have made. in recent years to keep their businesses afloat.
Their calls for change have grown in recent months after Ottawa launched a revision last year of the Cannabis Law, which sets purchase and possession limits and safety requirements for growing, selling and transporting the substance.
When legalization legislation went into effect in 2018, it prevented cannabis products from being packaged in a way that was attractive to young people and limited THC in edibles to 10mg per package. Illegal products often exceed the limit.
Stakeholders have told the office that raising the limit to 100mg “could make edible cannabis products more attractive to consumers, especially those who currently source them from the illicit market.”
The office suggested that easing restrictions on cannabis promotion, packaging and labeling would also give growers more room to innovate and help consumers make more informed purchasing decisions.
To comply with regulations, most marijuana companies package their products in staid black or white containers without conspicuous branding, which could help differentiate one product from another.
The office also took aim at the cannabis licensing process and compliance costs, suggesting they be made “minimally intrusive to competition, where possible.”
The process currently requires cannabis growers to have facilities near completion, a process that often costs millions, before they can receive licenses. Then there are the “long and expensive” security requirements and annual regulatory fees.
“By minimizing the regulatory burden of the licensing process and reducing compliance costs, where possible, decision makers can lower barriers to entry and expansion, as well as stimulate even more effective competition,” the Office said.
Rounding out his recommendations was a suggestion regarding excise duties, an off-panel area that reviews the scope of the law.
Tariffs are imposed on products when they are delivered to buyers. For cannabis, dry and fresh plants and seeds, they amount to $1 per gram or 10 percent per gram, whichever is higher.
For edibles, extracts, and topicals, it’s a flat fee based on the number of milligrams of total THC in the product. There are additional duties in Alberta, Nunavut, Ontario, and Saskatchewan.
The total amount of unpaid cannabis excise duty has risen since legalization, the office said. As of September 2022, 66 percent of licensees required to remit excise duties had an outstanding debt to the Canada Revenue Agency, the office said.
“Many stakeholders interviewed by the office raised Canada’s excise framework, and excise rates specifically, as a significant barrier to competition in the cannabis industry,” the filing said.
“These stakeholders told the office that the current excise regime makes profitability and viability in the industry very challenging.”
Canopy Growth Corp., a Smiths Falls, Ontario company. cannabis company, welcomed the Bureau’s recommendations, chief executive David Klein said.
He found that the suggestions reflect many of the pleas in the industry.
“Legal producers must be able to offer the range of formats and potency that consumers seek to compete with the illicit market and support a sustainable cannabis industry in Canada,” it said in a statement.
“It is equally critical that restrictions on consumer engagement are reviewed to facilitate informed purchasing decisions and we expect the government to act swiftly on these recommendations as time is of the essence.”
Organigram, a Moncton, NB-based cannabis company, is also aligned with the Bureau, especially as it believes that changes to the THC limit are necessary.
The limit “pushes consumers into the illicit market,” CEO Beena Goldenberg said in an email, while the packaging restrictions “hinder our ability as licensed producers to effectively communicate and differentiate our products.”
This report by The Canadian Press was first published on May 26, 2023.
Tara Deschamps, The Canadian Press