by: CJeremy Burke and Gaurav Gopinath
Now that the federal Cannabis Act has received Royal Assent, the path to legalization (on October 17, 2018) is clear. Unfortunately, as in other heavily-regulated industries, there will be significant differences across the provinces and territories in how cannabis may be distributed and sold.
The Cannabis Act imposes a common framework across Canada (including strict rules about the retail advertising, labelling and packaging of cannabis products), but the provinces will retain authority over whether to permit private retail sales, online sales and a number of other matters.
Unfortunately for business owners interested in selling cannabis or cannabis derivatives, certain provinces are pursuing a public retail model that permits the sale of controlled substances only by government-owned retailers. These include Ontario, Quebec, New Brunswick, Nova Scotia, PEI and possibly in Nunavut as well. The other provinces and territories are pursuing either hybrid public/private retail models or, in the case of Manitoba and Saskatchewan, private-only retail models.
For retail storeowners wishing to sell cannabis paraphernalia, none of the provincial statutes currently prohibit the sale of cannabis paraphernalia (except, in certain provinces, to minors) in, for example, convenience stores – though it bears noting that some provinces have not finalized their legislation. Further details on each jurisdiction’s retail model follow.
Alberta will pursue a mixed public/private model. The Alberta Gaming and Liquor Commission (AGLC) will purchase from licensed producers and distribute to both licensed private retail outlets, as well as its own stores. The AGLC expects to issue 250 licenses province-wide within the first year of legalization. Licensed retailers will sell cannabis and related paraphernalia, but will not be allowed to sell alcohol, tobacco or pharmaceutical products. Online sales will occur through a single AGLC-operated website.
British Columbia has announced a mixed public/private retail model. The Liquor Distribution Branch (LDB) will control wholesale distribution to private stores, government-owned retail outlets, and online sales. The Liquor Control and Licensing Branch (LCLB) will handle licensing of private stores. There will be no cap on the number of stores, but private retailers will need to have municipal government approval. The government has indicated that though licensed retailers will likely have the right to sell cannabis paraphernalia they will likely not be permitted to sell other general convenience store products.
Saskatchewan has announced a fully private retail (and distribution) model, with retail licensing to be overseen by the Saskatchewan Liquor and Gaming Authority (SLGA). The SLGA has issued 51 retail licenses so far. There will be no government retail or distribution operations. Cannabis retailers will be required to establish a standalone storefront operation, with the option to also operate an online store. Licensed retailers will be allowed to sell paraphernalia.
Manitoba has announced that it will have a private retail model. Licensing will be overseen by the Liquor, Gaming and Cannabis Authority of Manitoba (LGCA). There is no announced cap on the number of retail licenses that may be issued, but only four retailers have been named at this time. The Government of Manitoba will enact legislation allowing municipalities to hold a plebiscite (direct vote) on whether to allow cannabis sales, effectively giving communities a veto on recreational cannabis sales. It is unclear at this time whether licensed retailers will be permitted to sell paraphernalia.
Retail sales will be handled solely by the government’s Ontario Cannabis Retail Corporation (OCRC), a subsidiary of the Liquor Control Board of Ontario (LCBO). The OCRC expects to have an initial 40 retail outlets at legalization, and 150 outlets by 2020. There will no private retailers. The OCRC has also signed an agreement with Shopify to build its online store. OCRC’s stores will sell cannabis paraphernalia and accessories.
Quebec will have a public retail model. The Société Québécoise du Cannabis (SQC) is expected to have 20 retail locations operating by legalization and will operate an online store. Private retail will not be permitted. The SQC has signed an agreement with licensed producer Hydropothecary, under which Hydropothecary is expected to supply the SQC with 20,000 kilograms in the first year of legalization. SQC outlets will sell cannabis paraphernalia and accessories.
New Brunswick will have a public retail model. The Cannabis Management Corporation (CMC) will control and oversee the retail sale of recreational cannabis products. All stores will be managed by CannabisNB, a new subsidiary of the New Brunswick Liquor Corporation, as will online sales. Private sales will not be permitted. CannabisNB stores will also sell paraphernalia and accessories.
The Nova Scotia Liquor Corporation (NSLC) will control all cannabis sales in the province. Private retailers will be prohibited. At this time, the NSLC has announced that 12 retail outlets are expected to open by fall 2018. The NSLC will also operate an online cannabis store. The government has stated that paraphernalia sales will not occur in NSLC outlets.
Newfoundland and Labrador
Newfoundland and Labrador will pursue a mixed public/private model. The Newfoundland Liquor Corporation (NLC) will control licensing and distribution. At this time, the NLC has announced 24 government retail outlets across the province. The NLC will also establish an online store, which will be the only online retailer permitted in the province unless the government’s Cabinet and the NLC grant special approval to a licensed private retailer. It is unclear whether the NLC outlets will sell paraphernalia, although private retailers will be permitted to do so.
Prince Edward Island
The Prince Edward Island Cannabis Management Corporation (CMC) will oversee the operation of four cannabis retail locations and an online store in the province. Private retail operations will not be permitted. It is unclear whether paraphernalia sales will occur in CMC outlets.
Northwest Territories will pursue a hybrid private/public retail model, with the public liquor retailers commencing cannabis sales operations immediately following legalization. Licences may also be issued to private cannabis retailers, although none have been so far. The government will also operate an online store. It is not clear whether authorized retailers will be permitted to sell cannabis paraphernalia.
Nunavut's proposed cannabis legislation will allow online sales by the government immediately, but brick-and-mortar retail operations will only be implemented following community consultation. The territory’s Liquor Commission will oversee cannabis sales. It’s unclear whether private retailers will be permitted. No information on paraphernalia sales has been released.
Yukon has announced that it will initially pursue a public retail model, with sales occurring through an online store and physical retail outlets operated by Yukon Liquor Corporation (YLC). The YLC will also control importing and distribution of cannabis. However, there is currently draft legislation (the Cannabis Control and Regulation Act) that prescribes a licensing process for private retailers. There is currently no information on whether paraphernalia sales will be permitted.
Jeremy Burke is a business lawyer and partner at Aird & Berlis LLP in Toronto. His corporate and commercial practice spans various areas, including business ownership arrangements, commercial and shareholder agreements, regulatory compliance, corporate structuring and ongoing governance, as well as business mergers, acquisitions and dispositions. As a member of the firm’s Cannabis Group, Jeremy is actively preparing clients for the opening of the recreational market in Canada. firstname.lastname@example.org T 416.865.4644