Ontario bows to corporate interests with cannabis regulation change

BY SEAN SEURATTAN

Cannabis in Canada has the ability to change people’s lives for the better in a myriad of ways. In only five years of legalization, we have made leaps and bounds from a place where cannabis could only be mentioned under your breath. While it is definitely progress, the current infrastructure is constantly changing and evolving to meet society’s needs. Sometimes the pendulum swings the right way and sometimes it does not.

The Ontario provincial government has made a change to a regulation that could negatively impact cannabis small business owners in the region. By no means was cannabis legislation perfect in its first iteration, nor is it even close now. Where some of the rules and regulations are ridiculously restrictive and often overly excessive, there are checks and balances incorporated into the system meant to foster a diverse and sustainable environment. This is what the Ford government has chosen to remove.

In an effort to keep the immensely lucrative cannabis market free of any type of monopolistic interests, a cap was placed on how many stores any given entity could operate. This cap would limit the amount of influence and market share large corporations with literally hundreds of millions of dollars in capital funds could have. Small business owners trying to maintain a handful of stores, or less could easily be pushed out of areas and even business altogether by large companies with more locations able to function at lower cost.

Prior to January 1^st, 2024, companies could only have up to 75 locations in operation at any time under one entity and any of its affiliates. This should have been more than enough; however, this amount has now been doubled to 150. To the layperson, this change seems insignificant, but it could impact the market in an undesirable way on multiple levels.

For consumers, this degrades the market space by making it less hospitable for those smaller operators who are able to stay afloat by offering better service and unique offerings. Less choices means less purchasing power and can end in higher prices overall. Companies will be less inclined to innovate and compete with each other to earn your money.

For small business owners, this could be a fatal blow in a market where the odds are already stacked against them. Retail profit margins are slim since the product has its price marked up before it even enters their store. They rely on the relationships they’ve made with their customers to keep their doors open. Yet, in the beginning of an economic recession customers are forced to make hard choices with their dollars and even a small savings can be enough to sway loyalty.

Unknown to most people except for those in the industry is a business practice that almost solely benefits large companies who would be the only ones who could even conceive having 175 locations. The practice is known as “data deals” where large operators are able to sell their volumes of customer sales data to licensed cannabis producers, which in turn greatly assists them in deciding what to create. The profits from these data deals are then leveraged to lower cannabis costs for them without affecting their bottom line. Customers can sometimes see lower end costs but are not guaranteed.

The number of retail operators who will benefit from this can be counted on one hand and consist of the wealthiest in the market space. Cannabis Lawyer and Legal Expert Harrison Jordan from Substance Law touts that we are going in the wrong direction. “This change, which clearly favours large operators, makes little sense. It’s plausible that one or more of these major players lobbied for it, especially since at least one is listed in the Ontario lobbying register. The extent of these lobbying efforts is certainly something that warrants further investigation.”