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Ontario’s Retail Framework

Ontario’s Cannabis Licence Act, 2018 and its associated regulations came into force on November 16, 2018. The regulations provide much-anticipated clarity on Ontario’s framework for the forthcoming sale of recreational cannabis by private retailers.

In this issue, Ranjeev Dhillon, Partner and Co-Lead of the National Cannabis Group at McCarthy Tétrault LLP, answers some of your questions regarding the Ontario retail framework and how it compares to other provinces across Canada.

Q: How will recreational cannabis be sold?

A: Currently, in Ontario, recreational cannabis is exclusively sold online through the government-run Ontario Cannabis Store website. As of April 1, 2019, recreational cannabis may also be sold at authorized brick-and-mortar stores. Licensing and authorization will be overseen by the Alcohol and Gaming Commission of Ontario (AGCO).

The retail frameworks vary from province to province. They range from permitting sales exclusively through the private sector (Manitoba, Saskatchewan) to sales through both the private and public sector (Ontario, Alberta, BC, Newfoundland and Labrador) to sales only through the public sector (Nova Scotia, New Brunswick, Prince Edward Island, Quebec).

Q: Where will recreational cannabis be sold?

A: Retail cannabis stores in Ontario must be “standalone” or separated from other retail stores by physical walls, and cannot share a common space (other than a common area of an enclosed shopping mall). This prohibits the use of a store-within-a-store model. Across all provinces, stores must be a prescribed distance away from schools. In Ontario, that distance is 150 metres.

It is unclear whether the AGCO will consider population density when awarding licences across Ontario municipalities. Notably, before January 22, 2019, municipal governments have the ability to opt-out of having any cannabis retail stores in their jurisdictions at all.

 

Q: Who can become a recreational cannabis retailer?

A: In Ontario, applicants are not eligible to become a retailer if they have been charged or convicted of an offence in contravention of cannabis laws. This prohibits applicants who operated illegal cannabis stores after October 17, 2018 from participating in the new retail licence regime.

An applicant, together with any affiliates, may not operate more than 75 retail stores across Ontario. Unlike some provinces (such as Manitoba and Saskatchewan), Ontario has not placed an upper limit on the total number of retail store authorizations that may be issued. Alberta and BC have adopted similar approaches, where there is no cap on the total number of retail licences in the province, but limits on how many licences an entity may hold.

Q: What involvement can Licensed Producers of cannabis have in the retail market?

A: The Ontario Regulations limit the retail role of Licensed Producers (LPs). Corporate applicants cannot obtain a licence if more than 9.9% of the corporation is owned or controlled by an LP or its affiliates. LPs and their affiliates are restricted to operating only one retail store, which may only be located at the LP’s production facility.

In Alberta, LPs may hold retail licences, subject to a general limit of holding no more than 15% of the retail licences in the province. Similarly to Ontario, BC instituted provisions to mitigate the potential for LPs to dominate the cannabis retail sector in that province.

Q: What products can be sold in the store?

A: In Ontario, retail stores may only sell cannabis, shopping bags, and “cannabis accessories”, as defined in the federal Cannabis Act. Accessories include rolling papers, pipes, bongs and vaporizers, or other things represented to be used for the consumption of cannabis.

These restrictions are similar across Canada, with the exception of Saskatchewan, which permits the sale of ancillary items such as cookbooks, magazines, and branded apparel.

All cannabis products and accessories must be kept behind the counter, prohibiting a self-service model. Retail store operators must take caution to ensure that cannabis or accessories are not displayed in a way that is visible to young persons, even from outside the store. Individuals will need to provide identification before entering the stores.

Despite the regulations and restrictions on the sales of recreational cannabis, we are seeing tremendous innovation in the retail sector across the country. Without any brick-and-mortar stores in Ontario yet, we look forward to seeing what is to come in Ontario’s private sector.

A recognized leader known for his pragmatism, business knowledge, and industry expertise, Ranjeev Dhillon and McCarthy Tétrault LLP assist clients successfully navigate the evolving demands of the high-growth cannabis market in Canada and abroad. Ranjeev is regarded as a market leader and ranked Band 1 Cannabis lawyer in Chambers Canada. The McCarthy Tétrault LLP Cannabis Group has significant experience in assisting cannabis retailers in Canada.

Photo by Allice Hunter – File:Canada Ontario location map.svg, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=73297219