Canada: Ontario Announces Proposed Legislation For Private Cannabis Retail

This afternoon, Ontario Finance Minister Vic Fedeli and Attorney General Caroline Mulroney made an announcement to the public regarding the Ontario government’s plans to introduce legislation that will set out a new private cannabis retail store model, following an announcement to this effect made in August of this year.

The proposed legislation will be introduced tomorrow, September 27, 2018, and will outline the provinces “two-phase regulatory approach” which will, in the opinion of government, ensure public trusts are protected and demonstrate a “non-negotiable commitment to social responsibility”.

The two-phase approach outlined by the proposed legislation will see Ontario move to an online only cannabis retail model run on October 17th, 2018, followed by a licensed private retail system to be implemented by April 1st, 2019.

The regulatory approach will, says Mulroney, require amendments to other pieces of legislation as well, and will see the introduction of amended regulations down the line. One such amendment will be modifications to the legislation with respect to public consumption in an effort to align with the Smoke Free Ontario Act, 2017 – the idea being that cannabis consumption would be prohibited in all the same areas as tobacco is (enclosed public spaces and work places). Throughout the announcement, the future regulations were continually cited as providing the government with “flexibility” to adapt to ongoing concerns.

The proposed legislation will, as expected, designate the “Ontario Cannabis Store” as the exclusive online retailer of recreational cannabis as well as the exclusive wholesaler and distributor to private retail stores. The proposed legislation will change the governance structure of the Ontario Cannabis Retail Corporation, which will no longer be a subsidiary of the LCBO. Under the new structure, the OCRC will report directly to the Minister of Finance.

The proposed legislation will introduce a “robust licensing framework” overseen by the Alcohol and Gaming Commission of Ontario (the “AGCO”). The AGCO will be the exclusive provincial regulator and will be the only body authorized to grant store licenses. The licensing process will require cannabis retailers to apply for both retail operator licenses and retail store authorizations for each retail location they wish to operate. Licensing will be done through a formal application process administered by the AGCO. The AGCO is in the Government’s opinion “perfectly suited” to be Ontario’s cannabis regulatory authority because of its deep understanding of compliance and enforcement in sectors that involve a similar risk to recreational cannabis.

The AGCO will take a “zero tolerance approach” to those operating illegal cannabis retail stores after October 17th, 2018 in the application process. In the question period, Attorney General Mulroney advised that prior criminal convictions or operating illegal dispensaries prior to October 17th, 2018, will not necessarily bar applicants.

The proposed legislation will include regulation making authority for concentration limits for how many licenses that one operator can hold. The Province will similarly be entitled to set a business buffer between cannabis retail locations and schools.

Of note, the proposed legislation will limit the ability of licensed producers (“LPs”) to own and operate retail locations. Any LP will be permitted to hold a single retail license at a single production site located in Ontario. It is unclear as to what ability out-of-province LPs will have to operate in Ontario.

As has been discussed at length in recent weeks, municipalities will have a one-time window to opt out of permitting cannabis retail, with a deadline of January 22nd, 2019, three months after municipal elections. The Province has met with many stakeholders up to this point and is confident that this will allow enough time for counsels to meet and make appropriate decisions. At this time, there will be no set cap of how many cannabis stores per capita or per municipality.

However, the AGCO, once it receives applications, will be required to issue a public notice, open for a 15 day period, for public and municipal input about a proposed store location. This will probably look like the list that Alberta has been using. At this point, objections to locations may be received. The Province has a stated intention to ensure that First Nations communities who wish to prohibit cannabis retail within their communities, are able to. Fedeli advised there would be more to say in the days and weeks ahead in this regard.

The Province has remained committed to providing $40 million in funding over 2 years to all municipalities to assist in the cost of legalization, with each municipality receiving at least $10,000. There will be considerations as to how the funding will be allocated, and those discussions will take place at some point down the line.

Stay tuned for a more detailed post tomorrow after the proposed legislation is released.

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.

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