Canada: B.C. Provides Update Relating To Retail And Wholesale Distribution Of Non-Medical Cannabis

On February 5, 2018, the British Columbia government supplied additional insight into its proposed retail and wholesale distribution framework for non-medical cannabis through the release of its Private Retail Licensing Guide (Guide) and Liquor Distribution Branch Information Sheet. The B.C. government has noted that, while these publications set out its intentions for B.C.'s retail framework, this framework is subject to upcoming federal and provincial legislation.

WHOLESALE DISTRIBUTION FRAMEWORK

B.C. will use a government-run, wholesale distribution model to sell non-medical cannabis, with B.C.'s Liquor Distribution Branch (LDB) serving as the wholesale distributor. The LDB's stated focus is to ensure safe, responsible sales of non-medical cannabis and to help ensure the product stays out of the hands of minors.

The LDB will also operate public retail stores and the Liquor Control and Licensing Branch (LCLB) will be responsible for licensing private stores and monitoring the retail sector. The LDB is aiming to open the first government-operated, non-medical cannabis retail store by late summer. The LCLB also expects to conduct sales of non-medical cannabis online. Conversely, at the outset, private cannabis retailers will not be able to deliver their products or sell online. LCLB is considering an e-commerce platform for cannabis sales and commented that, after the adoption of the platform, it intends to adapt it for liquor sales in a later phase.

RETAIL FRAMEWORK

Public and private non-medical cannabis retail stores will be permitted to sell pre-packaged dried cannabis, cannabis oils that comply with federal requirements and seeds. These stores may also sell cannabis accessories, as defined in the proposed federal Cannabis Act. Pricing has not yet been determined, as taxation and markups are still being considered. Cannabis edibles will not initially be available, but are expected to be available within 12 months of legalization, as determined by the federal government.

The operating rules governing public and private retail stores will be similar to those currently in place for liquor. However, to promote responsible use, licensed retailers will not be able to sell cannabis in the same stores as liquor or tobacco. In urban areas, licensed retailers will only be allowed to sell cannabis and cannabis accessories, and will be prohibited from selling other products such as food, gas, clothing and lottery. Exceptions will be made for rural non-medical cannabis retail stores, though the criteria for determining these rural areas are currently under development. At this time, the B.C. government will not be licensing consumption lounges, with consideration to be given to other types of licenses at a later date.

LICENSING

This spring, the B.C. government will launch an online early registration process for individuals and businesses who are interested in applying for a cannabis retail license. The intention of this process is to allow the assessment of applications as soon as the applicable legislation is passed. B.C. will not cap the number of retail licenses available, but licenses will not be issued without the support of local governments, which will have the authority to make local decisions based on community needs. Prospective applicants will need to provide business documentation and information on their store's proposed location, as well as undergo a background check. The Guide suggests that having operated an illegal dispensary prior to legalization will not, on its own, exclude the applicant from being considered for a license.

The Guide also notes that a person or company may have an interest in both a producer and a retailer of cannabis, but that the LCLB will place restrictions on the business relationship between the producer and the retailer. Where a close association, financial or otherwise, exists between a licensed producer and a non-medical cannabis retail business, the retail business will be prohibited from selling any products from the licensed producer (subject to exceptions to be considered in the future to support micro-producers). At this time, retailers of cannabis cannot accept or request any inducement from a producer.

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