When the Cannabis Act came into effect last Oct. 17, it included several express objectives: protecting young people from inducements to use cannabis, providing regulated production of cannabis, deterring illicit activities and providing access to a quality-controlled source.
But, six months later, defining an approach to the market that balances these objectives is essentially impossible because policy and guidance from Health Canada around promotional activity is nearly non-existent. This lack of clarity limits the regulated industry (and its role in the success of the Cannabis Act) and maintains opportunities for the illicit market.
The requirements for compliant promotion listed in the federal Cannabis Act were written in typical legislative fashion – definition without explanation. In essence, they are based on subjective judgement calls. The federal Cannabis Regulations do not address promotional activity other than implications through packaging and labelling restrictions (which are notoriously tight, consistent with protecting young people from inducements to use cannabis). With that as a backdrop, Health Canada sent a letter to federal licence holders in early March reminding them of promotional restrictions and consequences of non-compliance – yet providing no prescriptive guidance on compliant promotional activity.
An appropriate level of promotional activity is critical to the success of the Act, and lack of clarity wastes time and bandwidth in an industry where both are at a premium.
One major point of interpretation is that “promotion” as defined in the Cannabis Act must be for the purposes of sale – by inference, it is possible to display brand elements outside the context of promotion. Does this mean for example that every cannabis company in Canada can run an impaired driving awareness campaign to display their logo while remaining outside the definition of “promotion”? Indirect promotion, or the absence thereof, is assessed contextually, but industry is left guessing at how to weigh different aspects of any given context.
Other examples of poorly-defined subjective standards are abundant. Industry has no definition of compliant website age-gating (criticized without guidance in Health Canada’s early March letter). It is unclear whether personal opinions expressed by individual users on an age-gated forum are tantamount to non-compliant testimonials. Cannabis accessories are defined based on use in the consumption of cannabis (is a grinder an accessory?). Promoting “services related to cannabis” is restricted but there is no written definition of “services related to cannabis” in the Act. Assessing association with a positive or negative emotion is almost entirely subjective, and while a familiar concept in the tobacco industry, the differing legislative goals of regulating tobacco compared with cannabis, and the near-total absence of tobacco promotion, leaves the cannabis industry without useful analogy on this point. There are many other examples.
Subjective standards without guidance mean that the only way to ensure compliance is to engage in zero promotional activity. But we are now at a critical stage in the establishment of brands, particularly on the eve of product diversification with the introduction of edibles, topicals and extracts. To satisfy all legislative objectives of the Cannabis Act, Canada should be motivated to allow – even encourage – an appropriate level of promotional activity. Messaging from Health Canada discouraging promotional activity without offering dialogue or guidelines runs counter to reaching this appropriate level.
As in more developed industries, clarity on compliance around promotional activity will follow with time. But that is cold comfort to companies that want to compete now and compete responsibly. The current state of affairs may push industry participants to take risks and overstep into non-compliant activity – at which point non-compliant behaviour may be rewarded with greater market share, particularly if penalties for non-compliance follow a “warning first” approach.
Without clarity on limits, an emphasis on compliance pushes toward nearly zero promotional activity, increasing chances of failure and hampering diligent and careful market players who are most likely to make a responsible, robust and viable regulated cannabis industry a reality. The legislative goals of the Cannabis Act are not served any more by falling below the appropriate level of promotional activity than they are by overshooting.
Without a functional regulated industry, the Cannabis Act fails, and without clear guidance on the limits of promotional activity, the regulated industry is weakened.
The Cannabis Act does not prohibit promotional activity, and Health Canada has a legislative basis to both support a successful industry and protect young people from inducements to use cannabis. Dialogue between industry and Health Canada to better define boundaries around promotion – ideally with written codification of limits and guidelines – would be a welcome step toward clarity.
David Wood, Ph.D., is a partner at Borden Ladner Gervais (BLG), where he co-chairs cannabis industry focus group. David has advised federal cannabis licensees, pre-license entities, technology companies, and other domestic and foreign participants in the Canadian cannabis industry in relation to the Cannabis Act and its regulations, including the Cannabis Regulations and the Industrial Hemp Regulations.