Canada: Ontario Cannabis Retail Opportunities (And Limitations)

Last Updated: October 3 2018
Article by Jeremy Burke and Meredith McCann

On September 27, the Ford government published the first draft of Ontario's new recreational cannabis legislation. Introduced just three weeks before recreational cannabis will be legalized across the country, Bill 36 – the Cannabis Statute Amendment Act, 2018, would create a new statute, the Cannabis Licence Act, 2018 (the "Licence Act"), to provide a framework for the licensing of privately-owned recreational cannabis retail stores in Ontario. To accommodate Ontario's new retail framework, the bill also proposes to amend existing laws, including, among others, the Wynne government's Cannabis Act, 2017 (to be renamed the Cannabis Control Act, 2017), and the Ontario Cannabis Retail Corporation Act, 2017  ("OCRC Act").

The draft legislation confirms the government's announced intention to have Ontario recreational cannabis sales be conducted by private businesses (on the ground) and by government (online). Authorized retailers will purchase cannabis directly from the Ontario Cannabis Retail Corporation ("OCRC"), operating as the Ontario Cannabis Store. From October 17 to April 2019, when the government hopes to have private authorized retailers licensed and ready to sell, recreational cannabis will be legally available to Ontarians only through online purchases from the OCRC.

Following are some key characteristics of the proposed new Ontario cannabis licensing regime:

  1. AGCO to Regulate. The Alcohol and Gaming Commission of Ontario ("AGCO") will leverage its experience as the province's alcohol, gaming and horse-racing regulator to hit the ground running on the licensing and oversight of private cannabis retail stores and their operators. The AGCO reports that it will "move quickly" to provide specifics on the licensing process for private retailers once Bill 36 becomes law, and will work closely with the government to support the goal of having private stores licensed and open for business by April 1, 2019.

  2. Licence Categories. Cannabis licensing will bear many similarities to liquor licensing in Ontario. Unlike in liquor licensing, however, the new cannabis licensing regime administratively separates the licensing of retail operators (and their managers) from the authorization of a particular retail store location. The AGCO will issue Retail Operator Licenses to successful applicant individuals or corporations, Cannabis Retail Manager Licenses to store managers and a separate Retail Store Authorization for each approved retail location. This structure should create efficiencies for the AGCO and applicants intending to seek multiple store authorizations.

  3. Licensing Considerations. Identifying all considerations and eligibility requirements is beyond the scope of this article, but some of the basics follow here. As with liquor licensing, AGCO's cannabis licensing process will require comprehensive personal disclosure requirements for directors, officers and shareholders of applicant corporations and satisfaction of numerous location-specific conditions. The AGCO will refuse to issue a licence if there is a negative assessment of the applicant's likely financial responsibility, ability to comply with licensing rules, honesty or integrity. The AGCO will also be required to consider the public interest, including the views of local residents, who will be given an opportunity to comment on each Retail Store Authorization application. In determining whether to issue a store authorization, the AGCO may consider the character, financial history and competence of the applicant, its directors, officers and shareholders, employees and persons "interested in" the applicant or the proposed retail location. Persons "interested" could include anyone with an indirect economic interest in the applicant or otherwise having direct or indirect control over the applicant's business or its financing. If the applicant is leasing the proposed premises, the landlord is an "interested" person that may be subject to AGCO scrutiny. This broad discretion is intended to give AGCO tools to mitigate the risk that organized crime or other unlawful actors are pulling strings in the lawful cannabis retail industry.

  4. Municipal Opt-Out. Ontario municipalities that do not want to host cannabis retail stores can pass a council resolution to that effect at any time until January 22, 2019. (Council can change its mind at a later date to permit retail stores, but that reversal would be final.) Though municipalities are not permitted to create their own parallel cannabis business licensing regime, prospective applicants should appreciate that there will be additional municipal hurdles to overcome before any application for a Retail Store Authorization is approved. These will include, for example, zoning and fire safety compliance, and local geographic considerations. Bill 36 does not prescribe a limit on the number of locations in the province that can receive a Retail Store Authorization, but it's conceivable that pending regulations may provide municipalities an indirect opportunity to prevent what they believe would be an over-concentration of cannabis retail stores.

  5. Restrictions on Federal Licensed Producers.  It has come as a painful surprise to federal licensed producers, and a pleasant surprise to the many prospective new retail market entrants, that the Ford government is seeking to limit the number of Retail Store Authorizations that will be issued to federal licence holders that are licensed to produce cannabis. Specifically, federal licensed producers (together with their affiliates) will be limited to a single Retail Store Authorization, and such store must be located in or adjacent to the federally-licensed site – similar to retail licensing applicable to craft breweries. There is a potential saving grace for licensed producers given that the meaning of "affiliate" is not included in the Licence Act, but remains to be defined in the pending regulations. The other key nuance here is that federal licensees that hold only a medicinal cannabis sale licence, and not a cultivation or processing licence, would not be precluded from seeking multiple Retail Store Authorizations. This restriction on licensed producers is likely to be the subject of earnest lobbying efforts as the legislation makes its way through the legislature toward Royal Assent (and the regulations are drafted) in the coming weeks. If lobbying efforts fail, licensed producers will have to consider workarounds to get their brands on storefronts, such as through franchising. 

  6. First Nations Retail on Reserve. The Licence Act and OCRC Act give First Nation band councils municipality-like powers to exercise a control over retail operations on reserve. In particular, a band council can refuse to allow any retail stores on reserve or, if not banned outright, council must approve the proposed location of any retail store. Under the OCRC Act, the OCRC must also make an effort to avoid processing online cannabis orders destined for residents of a reserve where the applicable band council has passed a resolution prohibiting such deliveries. The Licence Act and the OCRC Act also each include an important provision that would permit First Nations and the Ontario government to agree to vary the licensing, distribution, sale and enforcement regime that would otherwise apply on the reserve – in effect creating the potential for First Nations and the Ontario government to structure a parallel cannabis retail licensing and sale regime applicable only on First Nation lands.

  7. Illicit Cannabis Market Participants. While the AGCO will refuse an application where the applicant has been convicted of an offence under the new federal or provincial cannabis legislation, it is notable than an applicant's past conviction for, or a charge with, certain cannabis-related offences under the Controlled Drugs and Substances Act would not, by itself, preclude granting of a Retail Operator Licence or a Cannabis Retail Manager Licence. However, a licence or store authorization application will be refused if the AGCO believes that the applicant may still be participating in the illicit cannabis market. If current dispensary operators (that are hoping to participate in Ontario's legal cannabis industry) needed any further incentive to cease illicit operations (beyond the strict enforcement wave that's surely just around the corner) ... this is it.

  8. Minimum Pricing. The Licence Act and OCRC Act give the Ontario government the ability to set a minimum price for cannabis sold in authorized retail locations and online by the OCRC. It will be interesting to hear the government's rationale for including this heavy-handed power in a licensing regime structured purposefully to provide free market opportunities for private business.

The proposed new Ontario cannabis retail legislation is a welcome arrival after the long wait and recent change of policy direction. Prospective retail market participants should keep in mind, however, that the legislation may undergo changes prior to legislative approval. And further, that certain rules won't be known until the regulations are published and, in particular with respect to the conduct of store operations, until the AGCO exercises the rule-making authority delegated to it under the Licence Act. Stay tuned!  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Jeremy Burke
Meredith McCann
Similar Articles
Relevancy Powered by MondaqAI
Gardiner Roberts LLP
Norton Rose Fulbright Canada LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Gardiner Roberts LLP
Norton Rose Fulbright Canada LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions