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AGCO Considering Inducements

The Alcohol and Gaming Commission of Ontario (AGCO) announced that it has begun consulting with stakeholders about the regulation of inducement activity between federally licensed producers and licensed cannabis retailers in the province.

Proposed Changes

In a short notice released Friday morning, the regulator said that it has proposed a new draft of standards that would provide greater clarity and certainty to retail cannabis licensees and that it believes that it is important for the province to foster a cannabis marketplace where big and small retailers and licensed producers all have a fair shot.

According to the announcement, these proposed changes have been submitted to AGCO stakeholders for their feedback and will help shrink the illicit market by providing retailers and licensed producers a more level playing field and give consumers more choice.

Stakeholders have until August 23 to respond to the survey.

Inducement Activity

An inducement is essentially anything that persuades someone to purchase your product over another brand. In other industries, this could include things as simple as swag, free products, or other gifts, but also can include special discounts that the buyer and seller have arranged based on their relationship.

In the cannabis industry, since most provinces act as wholesalers, these special relationships aren’t allowed between licensed producers and retailers, so in more congested areas, these retailers can have trouble differentiating themselves from the competition—particularly the illicit market.

The Ontario Cannabis Policy Council and the Ontario Chamber of Commerce have been advocating for retailers in the province to be allowed to create individual relationships with licensed producers, and this seems like the first step towards a more open industry.

Level Playing Field or Pay-To-Play

Last year, Alberta Gaming, Liquor and Cannabis (AGLC) considered similar changes and asked the industry in Alberta what it thought. In a subsequently released report, it showed that while 35% of respondents (Cannabis Industry Association members, retailers, licensed producers, and liquor and cannabis stakeholders) agreed that the prohibitions against inducements should go, 19% strongly agreed that they needed to stay, and 69% of all respondents agreed that some changes needed to be made.

 

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In the AGLC’s report, those that supported inducement-type activity said that they hoped it might help loosen marketing regulations to allow a better reach to customers with branded merchandise and that promotions and displays can be valuable educational tools. Additionally, supporters wanted to be allowed to receive sample products and for licensed producers to be able to help with defective products.

Detractors, however, said that prohibiting inducements is the only way to actually ensure a level playing field for retailers, as large corporate retailers selling high volumes at a low cost from licensed producers may push out small businesses.

In the end, the AGLC opted not to change regulations.

As rumours fly about Ontario cannabis stores already closing their doors, could inducements help retailers stand out in a crowded market, or will Mom-and-Pop retailers get squished beneath the feet of big corporations with friends in high places and deep pockets?