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Report on Business Cannabis Professional ‘Health Canada has larger concerns’: Experts dismiss threat of crackdown on cannabis ads

HIGHLIGHTS
  1. Snapchat, Twitter and other social media platforms are running ads from recreational cannabis companies
  2. Health Canada is looking into whether those social media ads are violating restrictions on marijuana product promotions that could companies
  3. Experts say a “sternly-worded letter” is the most likely penalty as the guidelines for what is allowed and what is not are unclear

Health Canada is more likely to issue the regulatory equivalent of a slap on the wrist for violating restrictions on cannabis advertising, experts say, with very little chance of any licence being put at risk.

Quebec-based cultivator Hexo, which does run ads on Snapchat, was targeted by a short report last week claiming the company was running afoul of federal rules prohibiting cannabis promotions that can be seen by minors. Health Canada did confirm the agency is investigating the matter, but Brenna Boonstra says the worst possible penalty would not be overly severe.

“Do I think we could see a licence revocation over non-compliant advertising? Probably not,” said Ms. Boonstra, director of regulatory and quality for consulting form Cannabis Compliance Inc. (CCI). “In my mind, Health Canada has larger concerns with compliance then this issue now.”

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The short report claimed Hexo could be “the next CannTrust” over the potential violations, referring to the Toronto-based licenced producer currently under investigation by Health Canada, the Ontario Securities Commission and the Royal Canadian Mounted Police. The allegations against CannTrust focus on growing unlicenced cannabis and, as Cannabis Professional exclusively reported last month, allegedly concealed the illicit production from federal inspectors.

Most analysts and experts believe CannTrust could potentially have its licence revoked by Health Canada over those violations. The agency has only revoked the licence of one cannabis producer under the Cannabis Act thus far - Agrima Botanicals of British Columbia - after the company was discovered to be selling some of its products into the illegal market.

“Both of those transgressions are in my mind very different than promoting cannabis on a channel that is accessible by youth and Health Canada is likely to see it the same way,” Ms. Boonstra said. “Across other regulated product categories like pharmaceuticals or natural health products, it is typically a sternly-worded letter from Health Canada requiring you to remove your advertisement.”

David Wood, a partner based in the Calgary office of Borden Ladner Gervais LLP and co-chair of the firm’s cannabis industry focus group, said the lack of clear rules governing what can be considered acceptable cannabis promotional activity has forced companies to make educated guesses. Some, he agreed with Ms. Boonstra, look at rules for similar industries as a guide.

“The consequences are not specified in the [Cannabis] Act and the current regulations are essentially silent on promotional activity,” Mr. Wood said. “Until we have either action by Health Canada or the publication of what they see as appropriate in terms of penalties for certain types of contraventions, we either have to see some history of enforcement or a statement from Health Canada of their position on what is appropriate.”

Health Canada spokesperson Eric Morrissette said the agency is “aware of the situation” with Hexo and “is looking into the matter.” The cannabis regulator “considers each situation on a case-by-case basis”, he said, adding “in cases where limited promotion takes place by social media, it is up to the person responsible for the content of the promotion to take reasonable steps to ensure that the promotion cannot be accessed by a young person.”

The guidelines “are still in flux,” Ms. Boonstra of CCI said, “the big phrase in regulation here is ‘reasonable steps’, but ‘reasonable steps’ has never been defined by Health Canada, that is the phrase that they have used but there is no definition and they have not published any public guidance on what are and what are not reasonable steps.”

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If whatever steps taken are not deemed reasonable, Mr. Morrissette said Health Canada is authorized to impose a range of punishments, from the “issuance of a warning letter, suspension or cancellation of a federal licence...or monetary penalties up to $1-million.”

However, Mr. Morrissette said, when a contravention is identified, “Health Canada works with the implicated individual(s) or corporation(s) to promote compliance by... providing them with an opportunity to comply with their legal obligations.”

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