Canada’s federal Competition Bureau has released a set of recommendations that it said, if implemented, could help to further displace the illicit market and bolster the regulated cannabis industry.
The report has been presented as a formal submission to Health Canada and the Expert Panel currently reviewing the country’s federal cannabis law.
To promote a more competitive legal industry, the Competition Bureau made three suggestions:
- Ensure federal policies and regulations are minimally intrusive to competition.
- Consider increasing THC limits on cannabis edibles to allow legal producers to meet consumer demand and better compete with the illicit market.
- Consider easing restrictions on cannabis promotion, packaging and labeling to provide producers with more flexibility to compete and innovate.
The Competition Bureau said it recognizes that the recommendations must be carefully balanced with public-policy goals, including health and safety – the two main reasons cited by Canada’s federal government for legalizing cannabis sales in the first place.
Citing data from Seattle-based cannabis analytics company Headset, the report also said the largest cannabis producer in Canada has an overall industry market share of a little more than 10%, suggesting a high level of fragmentation.
The report also outlined several barriers to competition.
The report, however, ignored research MJBizDaily research that found that First Nations were largely excluded from the regulated cannabis industry.
The first barrier identified by the report is licensing requirements and regulatory compliance costs.
“Lower regulatory barriers can also stimulate innovation, leading to more variety and choice for consumers,” the report noted.
“Reducing the regulatory burden can also help decision-makers meet other important public policy goals, such as displacing the illicit market and protecting the diversity and vitality of Canada’s legal cannabis industry.”
The second barrier outlined in the report is THC limits for cannabis edibles.
The Competition Bureau noted that Health Canada maintains no limit on the THC content for dried cannabis products to facilitate the legal industry’s ability to compete with the illicit market.
“However, this is inconsistent with the approach taken toward other cannabis product categories, including edibles,” the report noted.
According to the report, adjusting the THC limit for edibles – currently 10 milligrams per package – could also improve the productivity and efficiency of the cannabis supply chain.
However, the report also fails to note that the industry is still swimming in oversupply of most product formats, including edibles.
The third barrier in the report touches on packaging, labeling and prohibitions on cannabis promotion.
“Since legalization, some cannabis producers have developed new and unique products and processes,” the report said.
“However, current restrictions make it difficult for cannabis producers to promote their innovations, which in turn can have a chilling effect on competition.”
The fourth barrier cited by the Competition Bureau is the excise duty framework.
The report cited MJBizDaily reporting on skyrocketing unpaid cannabis tax in Canada, which was 192.7 million Canadian dollars ($145 million) as of March 31, 2023, a more than threefold increase over the 2021-22 fiscal year’s CA$52.4 million.
The report is available here.
