The Alcohol and Gaming Commission of Ontario (AGCO) fined CANNABIS XPRESS $200,000 for allegedly violating the province’s anti-inducement law imposed on cannabis stores.
CANNABIS XPRESS has 14 locations in Ontario and two in New Brunswick. The company opened the first private cannabis store in New Brunswick. Chris Jones, founder and CEO told Cannabis Retailer that he targets small communities where there are no other stores.
The AGCO’s rules “prohibit Ontario cannabis retailers from asking for or accepting inducements from cannabis producers as a condition of selling or giving preferential treatment to products in their stores.”
This is the first time that this particular penalty has been enforced. Back on June 30, 2022, the inducement rules in Ontario were revised. 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,” AGCO noted.
There was also a revision at that time to allow the selling of data. The updated guidelines stipulated that retailers are allowed to enter into agreements with licensed cannabis producers for the sale of data for business intelligence purposes. The fee charged by the store and paid for by the LP should be at “fair market value.”
CANNABIS XPRESS allegedly disguised payments received from licensed producers (LPs) as payment for data. AGCO claims the retail chain worked with a dozen LPs over at least 30 months.
Chris Jones, CEO of CANNABIS XPRESS, advised Cannabis Retailer that he has “no comment on that right now.”
Most enforcement actions are taken after someone complains to the regulator. AGCO said it began its investigation of CANNABIS XPRESS “after receiving information regarding inducement activity.” The regulator reviewed tens of thousands of documents and concluded that the payment for a data services program, “which it entered into with licensed cannabis producers are, in fact, an inducement program.”
The AGCO added, “These agreements were actually an indirect means of requesting and accepting prohibited inducements where, for a fee or a percentage of product sales, CANNABIS XPRESS gave preferential treatment to products from LPs that had executed such unlawful agreements to the disadvantage of those that had not. “For example, (CANNABIS XPRESS) refused to stock an LP’s product unless they agreed to enter into prohibited inducement agreements and promoted the sale of cannabis products from producers who entered such inducement deals.”
CANNABIS XPRESS will have the opportunity to appeal the fine.
Image courtesy of CANNABIS XPRESS