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Increase THC, Competition Bureau Says

Canada’s federal Competition Bureau has released recommendations to improve competition in the cannabis industry, further displace the illicit market, and bolster the legal cannabis industry.

The recommendations were presented in a formal submission to Health Canada and the Expert Panel currently conducting the legislative review of the Cannabis Act.

Three Recommendations for a More Competitive Industry

The Bureau made three recommendations to Health Canada to promote a more competitive legal industry:

  1. Review the cannabis licensing process and related regulatory compliance costs to ensure policies are minimally intrusive to competition.
  2. Review and consider adjusting THC limits on edible cannabis products to allow legal cannabis producers to meet consumer demand and better compete with the illicit market.
  3. Review and consider easing restrictions on cannabis promotion, packaging, and labelling to help consumers make informed purchasing decisions and to provide cannabis producers with more flexibility to compete and innovate.

The Bureau says its recognizes that these recommendations must be carefully balanced with other important public policy goals, including public health and safety.

Need for Competition in the Industry

The report outlines the state of competition in Canada’s legal cannabis industry and the need for more competition.

The Bureau says that competition fosters business efficiency and innovation and encourages producers to deliver new and innovative products and services to the marketplace. This in turn provides consumers with competitive prices and product choices.

Competition can ensure consumers have access to a variety of products and the information they need to make informed purchasing decisions. Competition can also help displace illicit market activity and bolster the strength of the legal industry. The Bureau says, “Without the ability to compete vigorously and effectively against an entrenched illicit market, businesses operating in Canada’s nascent legal industry cannot, and will not, succeed.”

The Bureau also points out that overall, the recreational cannabis industry in Canada is characterized by a small number of large cannabis producers and a large number of smaller cannabis producers. While the industry is emerging and evolving, some degree of consolidation has already occurred.

At present, according to data derived from Headset.io, the largest cannabis producer has an overall industry market share of just over 10%, suggesting a high level of fragmentation.

Barriers to Competition

Based on feedback from stakeholders, the Bureau identifies five barriers affecting competition in Canada’s cannabis industry:

  1. Licensing requirements and regulatory compliance costs
  2. THC limits for edible cannabis products
  3. Prohibitions on cannabis promotion, packaging, and labelling
  4. Excise duty framework
  5. Lack of industry standardization

The Bureau says that “Together, these barriers create a significant cost burden on cannabis producers and stifle innovation. Reducing these barriers will enhance the ability of businesses to compete and could create better outcomes for small and medium cannabis producers, as well as for consumers.”

For more information, please read the full report.

Cannabis Act Review and Regulations Feedback

In April, Health Canada announced it was seeking feedback on potential amendments to the Cannabis Regulations in an attempt to reduce regulatory burdens while addressing public health and safety risks. Stakeholders also had the opportunity to identify and comment on additional regulatory issues.

Health Canada was targeting five priority areas, including licensing and packaging and labelling requirements.

In September 2022, the federal government announced a legislative review of the Cannabis Act and an Expert Panel has been assembled. The review will shape the next stage of the fledgling industry’s evolution and growth.

Tags: Canadian cannabis industry (60), Cannabis Act (40), Competition Bureau (2), Health Canada (64), illicit market (21), regulatory changes (1), THC limits in products (2)