In July 2021, the Alcohol and Gaming Commission of Ontario (AGCO) announced it had begun consulting with stakeholders about the regulation of inducement activity between federally licensed producers and licensed cannabis retailers in the province. A year later, changes are coming into effect.
Changes Effective June 30, 2022
On June 30, 2022, new inducement rules will be coming into effect in Ontario, governing how retailers and licensed producers can interact.
The updated standards “generally prohibit licensees from entering into agreements for items, benefits, payments, or services with licensed producers and their representatives with the purpose to promote or increase the sale of a particular product by the licensee or their employees. In other words, licensees are not allowed to ask for or accept material inducements.” The new rules will be added to existing rules.
More Clarity and a ‘Level Playing Field’
The existing standards already banned inducements. The AGCO says: “The updated standards set out additional details related to inducement activity between federally licensed producers and retailers to support consumer choice and a level playing field in the legal cannabis industry.”
No House Brands
The new rules ban in-house brands, white-label products affiliated with the store they’re being sold at. “Retailers may continue to sell white label products that have already been produced; however, the AGCO expects retailers to exit any current agreements and not enter any new agreements with LPs once the updated standards come into effect,” the document stipulates.
In-Store Advertising Banned
The updated guidelines specifically prohibit the “sale of in-store or online advertising space.” Licensed Producers are not allowed to pay for advertising space, preferred shelf placement, or promotional activities in-store or online.
Licensed retailers are not allowed to receive cannabis for sensory-display purposes from LPs, implying stores are supposed to pay for those products. Stores are also banned from receiving assets from LPs that could be deemed essential to the operation of the business, like branded fridges.
‘Nominal Value’ Products Allowed
The updated guidelines clarify the situations in which licensed retailers may enter into agreements with LPs, saying that any benefits or services received must be of nominal value. “Nominal value items, benefits or services, unlike financial or material inducements, are those that are of inconsequential value.” The AGCO does not apply a dollar figure to nominal value, but provides examples like t-shirts, hats, or inexpensive cannabis accessories.
Education and Training
The new rules specifically allow licensed retailers to accept items, benefits or services that are related to education or training. However, LPs may not directly or indirectly pay for licensed retailers’ travel or accommodation related to education and training.
LPs can provide cannabis product samples to stores, so long as they’re directly related to education or training. The expectation is that sample sizes would be a small quantity of a cultivar or product available in Ontario. Any samples should be received infrequently.
The updated guidelines stipulate that retailers are allowed to enter into agreements with licensed cannabis producers for the sale of data for business intelligence purposes. However, the fee charged by the store and paid for by the LP should be at “fair market value.”
For more information, please refer to the AGCO guidance document, available here.