Navigator’s Take on Ontario’s New Cannabis Rules

The Ford Government has unveiled further details about Ontario’s private cannabis retail model in preparation for the initial opening of “bricks and mortar” stores on April 1, 2019. This includes new rules to curb the influence of Licensed Producers in the provincial retail market and to keep cannabis stores a minimum distance away from Ontario schools.

The release of Ontario’s new cannabis regulations will add a much-needed dose of clarity and certainty for the public and industry participants, while at the same time setting the stage for several months of interesting political theatre at the municipal level.  Here are the top three takeaways:

1. Ontario among North America’s most business-friendly cannabis regulatory environments. The Ford Government is clearly committed to establishing one of the most business-friendly, free market regulatory environments in North America for cannabis retailers.  This includes a unique single-tier licensing system that has eliminated the traditional business licensing and zoning authorities held by Ontario municipalities.   Ontario’s new cannabis regulations have created remarkably few additional restrictions on a cannabis retailer’s ability to choose locations at will. The only major change is the creation of a 150-metre mandatory “buffer zone” between cannabis stores and schools. Ontario has decided not to follow the approach of other jurisdictions by mandating minimum distances between two cannabis stores (to prevent the clustering of stores in downtown areas for example) or placing a hard cap on the number of stores that can be opened in the province.

2. Canada’s Licensed Producers cut out of Ontario’s cannabis retail market. Ironically, the Ford Government has taken drastic steps to restrict one particular group’s access to Ontario’s cannabis retail market – Licensed Producers.   Under the province’s new cannabis laws, Licensed Producers will be limited to operating a single store that must be located at the LP’s production facility.  Licensed Producers have been barred from partnering with a licensed retailer in Ontario beyond a 9.9% ownership stake.  With the objective of providing a competitive advantage to small businesses, the Ford Government’s approach is a marked departure from other Canadian provinces that have either allowed producers to directly own and operate their own stores (Manitoba, Saskatchewan, and Newfoundland and Labrador) or to directly partner with retailers (Alberta).

3. All politics is local. Some of the most critical political decisions regarding Ontario’s cannabis retail market are yet to come.  In the coming months, we can expect some heated debates in municipalities across Ontario, which will come in two varieties:

  • Newly-elected municipal councils across Ontario will be required to decide by January 22, 2019 whether to “opt out”. Will they  side with cannabis-legalization opponents and opt out, considering that they will have no legal authority to control the volume and location of stores in their communities? Or, will municipal politicians embrace the spirit of legalization and the free market and open their borders to cannabis stores?
  • It can be anticipated that some municipalities – particularly large urban municipalities like Toronto and Ottawa – will confront pockets of NIMBY-style backlash from parents and community groups who are opposed to stores in their neighbourhood or in close proximity to local schools. These protests will put Ontario’s cannabis regulator in the difficult position of deciding whether to reject store licence applications on the basis of community concerns.

Navigator Ltd. is Canada’s leading high-stakes public strategy firm.  Our national cannabis practice includes a team of experts who can help you navigate the regulatory process with advisory services that include: regulatory affairs, community and stakeholder engagement, government relations, and full-service communications support.