Ontario announces private sales for next April

While the future of the distribution system in the Canadian province of Ontario was still unclear a few weeks ago After the abrupt policy reversal brought about by the Conservative Party's accession to power, the new government has just announced that private sales will be authorized, but only from April 1 next year, giving the new government time to get organized and set up an effective system.

Step by step

The province's finance minister, Victor Fedeli, announced Monday that cannabis would first be available for sale online via the government website Ontario Cannabis Store, from October 17 when cannabis will be officially legal at federal level. The six-month delay will allow the government to put in place the regulations needed to establish a private market. It will also be an opportunity to observe the implementation of private distribution models in other provinces such as Alberta, Manitoba and Saskatchewan.

This period will also be used to communicate with public health organizations, law enforcement agencies and indigenous communities to design the best possible distribution model. The government also wants to establish a dialogue with municipalities, giving them the choice of accepting or rejecting the private distribution model. It will make a $40 million fund available to them to prepare for their eventual transition to the new system.

Positive reactions to the choice of the private model

Following the Minister's statements, many entrepreneurs in the cannabis industry expressed their satisfaction and confidence that the government had made the right choice in paving the way for a private cannabis market.

Michael Gorenstain, CEO of Cronos, an Ontario-based licensed producer, said: «We applaud Ontario's decision to implement a private sale system. We believe this is a major step towards establishing a responsible distribution system that allows broad participation by entrepreneurs and enables consumers to choose the brands and products of the future».

Afzal Hasan, President and General Counsel of CannaRoyalty shares this opinion: “In our experience as investors and participants in established cannabis markets, cannabis legalization must be accompanied by a regulatory framework that encourages open and competitive markets, without which consumer adaptation is slow and black market activity persists. Authorizing private sales of cannabis is a step in the right direction for Ontario».

Peter Horvath, CEO of Green Growth Brands, added: “Consumers will be the ultimate beneficiaries of this decision. This would have a positive effect on product availability, quality and price, as only the best sellers who master these elements to a high level will win consumer confidence».

Concerns about the transition period

Two academics who endorse the private distribution model, however, have expressed serious concerns about the transition period to be provided by online cannabis sales by the government. Anindya Sen, Professor of Economics at the University of Waterloo, and Brian Vendramin, Professor of Business at Cambridge University Southbury, described the choice of this transitional model as «bad policy» and «a mistake», mainly because, in many respects, the black market will always be more competitive.

In particular, it will be more competitive in terms of efficiency. Indeed, the chances are that such a system will quickly be overwhelmed by demand, and that the government won't be able to deliver all orders in a satisfactory time: «There will be thousands of orders a day, and people will expect fast delivery. If it isn't, what will happen is that people will turn back to the black market,» points out Anindya Sen. Brian Vendramin agrees, adding: “We need to make sure we're not just ordering pizzas. He is also concerned about the protection of minors: how can such a system ensure that the order does not come from a minor?

The online sales system will also pose logistical problems: «the province will have to hire an army of drivers to come to your house and deliver the product in exchange for a signature. It's really inefficient and I think it goes against what the government wants,» explains Anindya Sen. He expresses his incomprehension at the government's decision not to regulate existing dispensaries and have them take over distribution. Especially since, in terms of quality of service, the stores, which offer contact with staff and the possibility of asking questions or receiving advice, have a clear commercial advantage over online sales. Given that such stores already exist, why trade one quality system for another less efficient one? As the professor says: «If people have access to this kind of high-quality service on the black market, why would they buy their products legally?»

Lisa Campbell, President Cannabis Consumer and Retail Alliance of Ontario, had also expressed reservations about the «zero-tolerance policy towards existing private sellers», which consists in rejecting them as illegal rather than integrating them into the transition. She advocates a model similar to that used in British Columbia, where dispensaries already in operation take charge of the transition.