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Cannabis Government, industry must work together to define cannabis promotions

Part of cannabis laws and regulations

The promotion of cannabis has always been polarizing – should it be as restrictive as possible in order to not attract youth, or be more permissive in recognition of the importance of brand distinction? The federal Cannabis Act adopted the former approach, but cannabis is big business, and big business calls for marketing. As a result, the industry has been wrestling with what activities are allowed under the law and, often, the lines can get blurry.

Recently, it was reported that Health Canada would investigate the sponsorship of a charitable fundraiser by two cannabis companies (Canopy Growth Corp. and Halo Labs), triggering a national discussion as to what is and is not allowed to be sponsored by cannabis companies under the act.

Notably, the act does not actually prohibit sponsorships of events or activities by cannabis companies. Rather, it is the promotion of a sponsorship by a cannabis company that is prohibited (by “cannabis company,” I am broadly referring to any person that produces, sells, distributes or provides a cannabis product, accessory or related service).

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That distinction is not intuitively clear. After all, what is a sponsorship if not a promotional opportunity? Sure, some companies are naturally charitable, but sponsorships promise brand placement and engagement. Promotion is arguably inseparable from every sponsorship.

I suppose a sponsor could request anonymity for its financial support, but if the object of the act was to prohibit sponsorships to the point that that was necessary, why wouldn’t the legislation just outright ban sponsorships by cannabis companies? Donations can remain anonymous. That would have been easier to draft and to understand.

As a result, I have to believe that Canada’s legislators must have intended for some degree of sponsorship by a cannabis company to be allowed. So, where could that daylight possibly exist?

Maybe there are some forms of sponsorships that do not rise to the level of promotion after all. The act contains a fairly broad definition of what constitutes a “promotion,” namely making a representation about a thing or service that is “likely to influence and shape attitudes, beliefs and behaviours” about that thing or service. That’s a useful starting point. If a sponsorship involved nothing more than a cannabis company’s logo placement on event materials, could that logo be considered likely to shape or influence anything?

Take away the conventional benefits that are used to attract large sponsors – no opportunity to make remarks or introductions about a brand, no commercials, no giveaways, no activations. If a cannabis company does not express its brand in that way, I have a hard time seeing where the influencing and shaping might occur.

The stakes are high. If found liable for non-compliance, the cannabis company could face penalties ranging from warning letters to licence suspensions or revocations to massive fines. Compounding the challenges for cannabis brands and the events seeking their sponsorship dollars, the act also prohibits the publication or dissemination by any person of a prohibited promotion on behalf of a cannabis company. So the charities, event organizers and advertisers all need to ensure they are clear on whether the proposed sponsorship is offside the act.

Within days of the sponsorship investigation being announced, Health Canada released a notice to all licensed cannabis producers reminding them of the restrictions on promotional activities, including sponsorships. The letter stated that promotion prohibitions are included in the act “in support of its objectives, including … protecting young persons and others from inducements to use cannabis. Promotion can have a significant impact on the appeal, social acceptance and ‘normalization’ of a particular product, and in turn its level of use.”

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There is a lot to unpack in that excerpt.

It is beyond the scope of this column to explore the benefits and ills associated with normalizing cannabis. But, as an adviser to companies trying to navigate the legalities of sponsorship, there are some important takeaways here. Compare the words above with the definition of “promote” from the act – “influence,” “shape,” “appeal,” “acceptance.” There is consistency.

Sponsorship, in and of itself, is not the issue. Impact is. The old playbook for sponsorships does not apply to cannabis companies. Sponsorship benefits, brand placement and the advertisement of those sponsorships must all be scrutinized. Be bland. Be distant. If brands are trying to engage with their customers, cannabis brands must actively disengage. Don’t tell a story. At least not in the usual way.

The restrictions are understandable. Cannabis is a unique product, with health and societal risks and attributes that are not completely analogous to any one of tobacco, alcohol or pharmaceuticals.

But a prohibition in absolute terms presupposes that the aims of the act cannot be balanced with the realities of traditional corporate sponsorship. Sponsorship raises money for worthy causes, and there is now a risk of a deprivation of those funds from certain potential supporters. Young persons can be restricted entry to an event, eliminating the risk that they would access the sponsorship placements. Pharmaceutical companies engage in sponsorship, but it appears that equating pharmaceuticals with medical cannabis would be tantamount to normalization, and normalization is apparently to be avoided.

I feel as though we are all stakeholders in this cannabis experiment together. There is a coast-to-coast conversation under way about what these laws mean and why, and I believe good corporate citizenry among cannabis companies exists to help the government realize its policy objectives. But it will take time to get it right, so I hope the dialogue between government and industry remains open and that undue sanction can be avoided in the meantime.

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Chad Finkelstein is a partner at the law firm of Dale & Lessmann LLP (www.dalelessmann.com) in Toronto. He can be reached at cfinkelstein@dalelessmann.com or followed on Twitter at @ChadFinkelstein.

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