Law Times

Law Times • OcTOber 2, 2017 Page 5 www.lawtimesnews.com Ontario's pot plans may keep black-market incentive BY DALE SMITH For Law Times A s Ontario looks to im- plement a government monopoly model for recreational marijuana distribution, some lawyers are concerned that there will be problems for legitimate individ- uals and companies looking to find a legal entry into the market. The concerns are being raised as the federal bill that would le- galize marijuana makes its way through committee study in the House of Commons. "Under the [Liquor Control Board of Ontario] model that Ontario's proposing, [the prov- ince] said that they're going to buy from federally licenced pro- ducers. That begs the question . . . who are those licenced pro- ducers going to be?" says Trina Fraser, partner with Brazeau Seller LLP in Ottawa, who has advised the medical cannabis industry since it was privatized in 2014. Currently, medicinal mari- juana users can order pot from licensed online distributors, while the courts have upheld the rights of low-income users to grow their own. In her recent submission before the Commons health committee's study on Bill C-45, short-titled the Cannabis Act, Fraser noted that there are an estimated 13,000 individuals in British Columbia alone working in the illicit cannabis industry, representing $600 million in wages, which also exposes them to risks for health and safety and criminal prosecution. She says that the government should look at ways to involve prior illicit-market producers in order to create a more robust cannabis market if they want to combat the black market. Fra- ser said that on the retail side, a monopoly model run by the provincial government favours large-scale production because the province will have the ability to dictate the purchase require- ments that will be difficult for small-scale producers to meet, much like the LCBO currently does with smaller wineries. "Even if you could convince the federal government to be le- nient with who they're granting production licences to, if we see most or all of the provinces fol- low an Ontario-like model on distribution and sales, would those producers even have any- one to sell their product to?" asks Fraser. Section 62(7) of the federal bill provides that the minister may refuse to issue a production licence if the applicant has con- travened the Controlled Drugs and Substances Act in the past 10 years, which could have an impact on those looking to enter the market legally. In addition, s. 26 of the current Access to Cannabis for Medical Purposes Regulations requires the minis- ter to refuse a production licence where the CDSA has been con- travened in the past 10 years. Some lawyers point to the fact that provisions such as s. 62(7) work to act to level the playing field for entrants. "I think the federal govern- ment is being very careful not to reward people who were know- ingly engaged in grey market or black market activity because allowing them to enter the mar- ket would provide an incentive for them to engage in that kind of activity pre-legalization," says Alexis Levine, partner with Blake Cassels & Graydon LLP in Toronto. "People who have followed the rules would be disadvan- taged for having done so." Levine adds that the advan- tage of a system such as that which Ontario is proposing is that it takes away the complexity of distribution, but at the same time, the single buyer has all of the negotiating leverage that it entails. Levine says the current un- certainty with the "skeletal" form of the bill without being able to see any coming regula- tions is making it difficult for lawyers trying to advise their clients. Fraser hopes that more clar- ity will be coming as to what is going to be legal and what isn't, given what she says are confus- ing messages. "It's important for lawyers be- cause it really is going to touch their practice in some way, no matter what you do," says Fraser. "If you're a leasing lawyer, sooner or later, you're going to have a landlord client who's going to be approached to lease space to someone operating a cannabis- related business. You need to be able to advise them on if what's being proposed is legal or not." Fraser lists employment law and trademark law as other ar- eas that will likely see a lot of new activity. But even in a monopoly retail environment, lawyers say it may not be enough to deter the black market for sophisticated consumers who are used to what they are able to currently obtain, which in many cases is access to craft growers whose products are relatively easy to find on the black market. "For those consumers, the monopoly provider has better products that are of interest to that sophisticated consumer," says Aaron Harnett, a solo prac- titioner in Toronto who repre- sents Canna Clinic dispensaries. "There are a lot of people al- ready consuming marijuana in Ontario, and they are going to represent the overwhelming ma- jority of the customers, at least in the first phase of introduction to legalization." Harnett says that those con- sumers won't be satisfied with an inferior product. "Forget about dispensaries; illegal online retailers represent a very significant market share already," says Harnett. Bill Blair, parliamentary sec- retary to the federal ministers of Justice and Health and the gov- ernment's point person on the marijuana file, says the advan- tage of the well-regulated retail environment will give consum- ers the confidence that what they are purchasing is of known providence, potency and purity. "I think this significantly limits any activity outside of the regulated retail environment, and we've created an opportu- nity for the provinces to define that environment. Ontario has already stepped up to do so. Others, I'm anticipating, will do so shortly," said Blair. Federal NDP justice critic Alistair MacGregor says that, at first glance, he doesn't think the Ontario model will have enough stores to keep up with demand, which may provide an incentive to keep the current dispensaries going. "If governments don't make any effort to include them, then the black market is going to con- tinue to thrive," says MacGregor. Federal Conservative justice critic Rob Nicholson says he has other concerns around the provisions in the bill that allow home-growth production of four plants, which are inconsis- tent with the goals of protecting children. "You're not protecting chil- dren if you're growing these plants in the house," says Nichol- son. "Even keeping them below three feet — what happens if you go away for a couple of weeks and they grow to three-and- a-half feet? There are so many problems with that, but there's no greater accessibility for chil- dren if their parents are growing it in the house." LT NEWS Trina Fraser says she hopes that more clar- ity will be coming from the federal gov- ernment around who is allowed produce marijuana once it is legalized. 561-391-3344 f 561-948-4713 d 561-910-7861 Florida Probate and Tax Planning Services STEVEN Z. 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