Canada is on the verge of making history by becoming the first G7 nation to legalize, regulate and restrict access to cannabis for responsible adult consumption. But achieving Prime Minister Justin Trudeau's stated goals for legalization -- keeping cannabis out of the hands of young people while choking off the illegal market -- won't happen overnight. It will require a sensible, progressive regulatory framework that enables professional companies to eliminate black market producers through competition.
Jars of branded marijuana are on display at a Los Angeles cannabis farmer's market. (Photo: Frederic J. Brown/AFP/Getty Images)
The challenge is considerable. Deloitte estimates the illicit cannabis trade in Canada totals $8 billion. That's a lot of money flowing to gangs and organized crime who've never had a problem breaking the law. Simply changing the law won't automatically take money and power away from these criminals.
Undercutting the black market will be difficult. Unlike their illegal counterparts, legal producers will have to pay taxes and incur expensive regulatory costs.
Reasonable taxation, responsible branding and in-store marketing are the most powerful tools the federal government has to eliminate the black market. Professional companies must be allowed to explain to consumers why their products are superior to those offered by their illegal competitors. Legal producers must also be able to compete with the black market on price.
Consumers need to know - and deserve to know - what they're buying.
Imagine walking into a grocery store where every product is displayed in unbranded white parcels with black lettering. How would you pick out what you want, or know which products are best for your needs? You'd likely leave with things you didn't intend to buy, and items of a lower quality than you intended to purchase.
Consumers need to know -- and deserve to know -- what they're buying. With thousands of cannabis strains offering different effects, numerous ways to consume cannabis and myriad agricultural processes used to grow the plant, packaging information is crucial to give consumers an informed choice.
Plain packaging, as proposed by some groups -- especially in a nascent market -- would give an unfair advantage to black market operators and other, less scrupulous producers able to offer low-quality products at low prices. With responsible producers unable to explain the advantages of their products through branded packaging and in-store marketing, the net result would incentivize consumers to purchase larger quantities of low-quality product, the exact opposite of what public health advocates hope to achieve by recommending plain packaging.
Plain packaging would also have the unintended effect of wiping out the small farmer. Without branding, small growers will not be able to differentiate their products from larger, well-financed competitors who can undercut smaller growers on price.
During alcohol prohibition in the 1920s and early 1930s United States, people brought bootlegged, unbranded alcohol in mason jars on a corner alley. A plain-packaging approach would be tantamount to ending prohibition by creating a legal market where people now buy unbranded alcohol in mason jars from a legal store, yet continue to have a black market option. Such an approach would not solve for all the problems of that prohibition created, including under-educated consumers and subsequent overconsumption of alcohol.
The federal government would be wise to look at Colorado and Washington, where cannabis advertising is restricted but branding and in-store promotion are still allowed. These jurisdictions understand that because cannabis is a complicated product, brands play an important role in helping adults make informed purchasing decisions.
This is a critical moment for Canada as the world watches how we approach cannabis legalization and regulation.
Limiting THC, prohibiting high-potency products and restricting product formats will simply give the black market a monopoly on products that consumers want to seek out. Legislation should provide reasonable product restrictions aimed to prevent overconsumption, such as requiring producers to sell defined quantities of cannabis in tamper-proof packaging. Overly strict prohibitions on already-popular products, however, will embolden the black market and prevent the federal government from protecting Canadians.
A successful legal market will have the following four pillars: responsible branding and in-store promotion; a minimum age of use; a competitive tax regime; and moderate flexibility in terms of the types of cannabis products that can be produced and sold. Without these elements, Canada will fail in eliminating its thriving $8-billion black market.
This is a critical moment for Canada as the world watches how we approach cannabis legalization and regulation. If we truly want to keep cannabis out of the hands of young people, we must allow producers and distributors to brand their products in a responsible way.
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