Ontario Government Announces Cannabis Retail Rules

Article by Alexis Levine, Chris Nyberg and Kerri Marks, Mondaq

Ontario Government Announces Cannabis Retail Rules Alexis Levine, Chris Nyberg and Kerri Marks

Ontario has now passed Bill 36: Cannabis Statute Law Amendment Act, 2018 (Bill 36), which sets out the government’s updated approach to the regulation of recreational cannabis. Bill 36 introduces the Cannabis Licence Act, 2018 (Licence Act), which governs the regulation and licensure of private cannabis retailers and amends the legislation making up the previous regime, including the Cannabis Control Act, 2017, the Ontario Cannabis Retail Corporation Act, 2017, and the Smoke-Free Ontario Act, 2017. The new framework opens the door for private operators to capitalize on cannabis retail opportunities in Ontario, which are expected to be up and running by April 2019.

LICENSING

The Licence Act sets out the licensing scheme for private cannabis retail stores in Ontario and will be administered by the Alcohol and Gaming Commission of Ontario (Commission). The Commission is expected to begin accepting licensing applications in December 2018.

Retailers will be required to hold a general retail operator licence, as well as a retail store authorization for each premises. There will also be requirements for certain individuals to hold cannabis retail manager licences. Similar to other provinces, these licences and authorizations require significant investigation and will therefore not be transferable. While there will be no arbitrary cap placed on the number of licences and authorizations available, the province may impose a limit in the future.

Licensees under the Cannabis Act (Canada) who are authorized to produce cannabis for commercial purposes may only hold one retail store authorization that must be at the site set out on their federal licence. It is unclear whether this will only apply to holders of cultivation licences or whether it will also apply to holders of other federal licence classes as well. Furthermore, the Licence Act prohibits the licensee and its “affiliates” from collectively holding more than one retail store authorization.

The defining regulations have not yet been issued; however, it is possible that the province may adopt a more restrictive interpretation than that set out in corporate statutes. Current licensees, and especially those that have sought to vertically integrate, should be aware of this issue when looking to structure their proposed retail opportunities or restructure their current arrangements.

DISTRIBUTION

The amendments to the Ontario Cannabis Retail Corporation Act, 2017 confirm that the province has the exclusive right to sell cannabis in Ontario online and by any other means other than by retail storefront. The Ontario Cannabis Retail Corporation (Corporation) also has the exclusive right to sell cannabis inventory to private retailers for the purpose of distribution to consumers. The Corporation is prohibited from operating retail stores, leaving brick and mortar retail opportunities for private operators.

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