B.C. Bud Rules

by Pierre-Yves Galléty

Other Canadian provinces have already announced how they intend to regulate the sale of non-medical cannabis, but the industry has been holding out for British Columbia – the home of B.C. Bud – with high hopes that the province would adopt a progressive model that would galvanise the sector and cement its cultural dominance of this nascent industry.   

This week, John Horgan’s NDP government finally ended months of speculation and set out how cannabis will be bought and sold in BC.  Under the plans outlined by Solicitor-General Mike Farnsworth, cannabis will be sold through both privately-owned and government stores.  All retailers will all have to be licensed, and must source their supply from the single government-run wholesaler, with existing (illegal) dispensaries required to fall in line with the same regime.

We already knew that distribution from Licensed Producers (LPs) will be a provincial monopoly, similar to the existing practice with alcohol, but it was now made clear that LPs will not be able to sell directly to customers through their own retail outlets, or online. Home grow provisions, allowed for by the federal legislation, but likely to be banned in Quebec, will be permitted in B.C., albeit with landlords and strata councils given discretion to restrict home grow in their properties if they choose. 

There were several aspects of the plans that proved unexpected, and arguably unnecessary from a public health point of view. Fortunately, the NDP government resisted the lobbying of their own union supporters who campaigned for two years against private retail, and instead have settled for a hybrid model. As with all such approaches, there are a few major compromises, and it will be some time before we know if the model will prove adequate to satisfy the sizeable consumer market that British Columbia represents. But the positive and negative of the new B.C. Bud rules are now finally becoming clear.

One licence to rule them all

So what are the positives? Firstly, the licensing regime for private retail will apply to all businesses, both government-operated and private – including existing dispensaries, which will now have a path to becoming truly legal enterprises. A single province-wide licensing regime makes sense, replacing the city permits in places like Vancouver that were brought in a few years ago.  It doesn’t reward the dispensaries that have refused to get a city business permit, or allow the best ones already operating to leapfrog everyone else who has waited. But it does make it easier to quickly authorise the most responsible ones, and sanction and shutter those dispensaries that continue to flout all the rules, which is probably what the government needs the police to be ready to do after July. 

The Wealth Shop in Point Grey, Vancouver: the best dispensaries can get licensed by the province this summer.

Unlike Ontario, where such a crackdown seems doomed to failure, BC has recognised that creating a legal channel to accommodate dispensaries removes any excuse for illicit businesses to go on selling. Targeted enforcement of those cowboy cannabis pop-ups just in it for a quick buck now seems both more likely and more justified.

Enabling the best dispensaries to become legitimate is the right approach to ensure the staff, with their expertise and product knowledge, can transition into the mainstream market (even if some of the owners might struggle to pass vetting). These measures mean the private retail experience for cannabis in BC will be diverse, and professionalised, with mandatory staff training and inspections, and there will be a place for the best dispensaries in that system, just not all of those operating today. That will ultimately be good for consumers.

Separate shopping baskets

Secondly, it is also positive that co-location with alcohol sales is off the table, at least at the start. Until now, public health advocates were not winning many arguments. They had not been able to convince any province to set a higher minimum age than 19 (aligned with liquor in most parts of Canada), and they failed to win support for that approach in BC too. This at least means no opening for the black market to prey on the youngest users. However, the health lobby did win the key argument over access, persuading Ministers here to propose a ban on co-location of cannabis with alcohol in government stores, winning out over the liquor industry lobby, who opposed standalone cannabis stores (and who had been running radio ads for months on the issue). 

On this question, the activists and public health establishment were united – better in the long run to wean consumers off the more socially harmful drug, even if that means some users migrate to pot. And we know that it is better for other road users and the consumer themselves if retail restrictions make the separate buying process a little more inconvenient, and so reduce the number of people who might consume pot and booze together.

Retail opportunities, but not without local consent

Private pot shops will be a very visible feature of the cannabis market in BC, with no cap on the number of outlets.  However the municipalities will ultimately decide where retail stores will be allowed to open. This will give local politicians and energetic activists a big say over whether individual communities have some cannabis retailers as part of their local economy, or none. This will inevitably mean a lot of political horse-trading among councillors, business applicants, and city officials, but that is not unusual.

By letting municipalities decide on retail locations, it might seem like Victoria is simply buck-passing on the thorniest part of this whole reform. But zoning is what municipalities do in Canada, and devolving this responsibility to the lowest tier of government is consistent and probably for the best to accommodate areas with divided constituents.  Some communities are wary about legalisation and many people are sceptical or actively opposed, and this gives more conservative parts of the province a say in how it will affect them. 

Many places to buy cannabis, except online

And what about the negatives? The province has decided – for reasons that haven’t been spelled out – that no private online sales will be permitted.  The Liquor Distribution Branch will eventually operate online sales of cannabis in addition to its own standalone stores, but few details were given on how such a platform would work, or when it would go live. This will be in addition to the federal platform that Ottawa has pledged to set up. 

Age verification and secure, signed-for delivery practices are commonplace for many online retailers, and would be more than adequate for cannabis, which the province could monitor and account for via a light-touch inspection regime, especially when combined with the seed-to-sale tracking that federal authorities will impose.  Why should retail outlets – and more crucially, the Licensed Producers creating jobs and paying taxes in B.C. – not be allowed to sell online if these standard and well-tested safeguards are followed? 

There is no good record of government monopolies thriving on the internet, and whatever shopping platform is created will be guaranteed to underwhelm. What it will do is cut off the potential for dynamic LPs and smaller craft producers to grow their own customer base, and inflate product costs by requiring every cultivator to transact via the middle man of a government web portal.  Add on top uncompetitive delivery charges and many pot consumers are going to shop elsewhere.

Consumers come second…

For that, users might have plenty of purchase options, but some sensible consumer avenues have been ruled out, for now at least. We still do not know if lounges will eventually be permitted – hotels might be keen on this exemption – or whether consumers can look ahead to sampling cannabis at grow sites, and even shopping for it at the end of the tour like any successful whisky distillery or vineyard. Both options would be a boon for the craft cannabis industry that BC likes to celebrate, especially because such smaller producers will otherwise struggle to survive in the face of the big players and the volume demands set by the government wholesaler.

The ban on an LP having a financial relationship with a retailer has been proposed as a way of helping smaller producers and avoiding a vertically-integrated industry that quickly consolidates and gets dominated by the cannabis corporations, but blocking a producer from owning a store while also preventing them from selling from their own online channel will just limit the growth of B.C. companies that want to educate, build brands, and shape consumer experiences, and not simply grow cannabis.

Government first…

Most politicians understand that you cannot please everyone, and with a policy as complex as this, the reaction was never going to be fulsome praise. For those expecting a more liberal, pro-market policy, the proposals will disappoint.  Consumers in B.C. won’t be able to buy cannabis directly from their favoured LP, and retailers face other odd restraints – like prohibiting any home delivery service – that seem designed to bolster the government’s revenue but will just help the black market to continue to thrive, rather than undermining it.

In effect, the plan positions the government – or their subsidiaries – quite well, whether it really wants to be in the legal pot business or not. They will either be controlling distribution and benefitting financially from the new legal market (with a monopoly on legal online sales, plus all revenue from sale taxes, and their own product mark-ups), or controlling the private retail presence in local communities, by using powers to block retail stores entirely where local politicians aren’t onboard.  As such, the model will serve government better than it serves cannabis consumers (at least initially) and in the long term it will only benefit the public at large if it can meet consumer demand, without harming health. 

Nevertheless, the plans were not as statist as some feared.  Dispensaries already operating with a city license will be able to keep trading, so long as they take the same path to becoming a registered, legal retailer of cannabis, and those that are prospering today will be welcoming the chance to be successful, legal and legitimate in the new cannabis market. And allowing private retail, despite sustained lobbying, is a sign that the New Democrats knew that government control alone could never deliver the coverage needed, nor crucially, what the consumer was likely to want.

Doors left open

The general impression is that the government in Victoria has decided not to throw open the sector too quickly to private interests – a very sound public policy position – but not to rely entirely on government channels either. The B.C. rules still require legislation to take effect, and though they are not as pro-enterprise as Alberta, they are better than many places. They should at least allow the province to attract retail investment and challenge its larger competitor, Ontario, with its much more restrictive monopoly model

Many in the industry believe the plans overall are not as ambitious as they could have been, with some obvious opportunities missed.  But none of the rules will prevent British Columbia becoming the hub of this new industry and changes to the legislation as it is debated might still result in positive amendments – permitting private online retail would be the most obvious first target but others seem likely too. Fortunately, Horgan’s current minority government (staying in office, day by day…), is not closing the door indefinitely on a more liberalised regime (“not at this time” is repeated at different places in the licensing guide), which means the framework is likely to evolve over time, whichever party is in office, and that is a reality that the sector needs to learn to live with. 

Beating the black market

As is the case with every provincial regime, the biggest policy tension between protecting health and displacing the black market still remains. The many anti-competitive measures in B.C.’s plan are guided by a concern for public health, and they are not misguided, but they will make access harder and inflate prices and the black market is not going to be beaten by such an approach.

The gangs and traffickers will already be plotting how they can continue to undermine legitimate businesses and go on thriving in B.C., selling products to youth, delivering to your door, and supplying the high strength edibles that will continue to be prohibited for at least another year.  We cannot predict if legalisation will seriously undermine the black market in any province and it remains to be seen if the limits on the private sector now being proposed in B.C. will turn out to be too strict if the Government is truly committed to promoting a competitive industry with the scale, diversity and dynamism to undercut criminal gangs, satisfy a diverse group of consumers and create lasting economic benefit.

Think about Ontario

People often argue that it is the fundamentals that make the cannabis produced here world famous, and this new framework will still allow for a thriving industry to develop.  But with the B.C. Bud reputation comes an experienced domestic consumer that will be expecting, and then demanding, convenient access to a range of high-quality, competitively priced local products.  Come July, that typical B.C. consumer might feel just a little disappointed.  But at least they won’t be queuing for hours in the summer heat to buy a small ration of expensive government-issued pot, like their compatriots in Ontario.

Blair Gibbs is Policy Advisor at Volteface, based in Canada. Tweets @BlairG1bbs 

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