B.C. government paints a bleak picture of the legal cannabis retail landscape

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The B.C. government's newly renamed Liquor and Cannabis Regulation Branch (LCRB) released the eligibility requirements and a step-by-step application guide for private cannabis retail store licences yesterday (July 5).

The documents are intended to help hopeful applicants navigate an obstacle course littered with legal hurdles. What the government produced, however, is a silver platter summary of why cannabis retailers and activists say there's still a lot left to fight for. 

The licence will allow retailers to sell “non-medical” weed and accessories in physical storefronts once federal legalization comes into full effect. B.C. opted for a split retail system, permitting both private and government-owned brick-and-mortars.

Online sales will be entirely provincially owned and operated.

Most of the 25-page application guide contains no surprises, as details of B.C.’s plan trickled out during Bill C-45’s legislative process. It does, however, paint a tidy picture of the stark landscape for pot shops come fall—if left unchallenged, that is.

The result of the regulations is a hybrid between food and liquor laws and seems like it could come straight out of George Orwell's 1984.  

At least $10,000 in start-up costs

The newest revelation outlines the startup fees associated with the application and licensing process.

The province has set the initial cost of the application at $7,500, which covers a mandatory security-screening and financial-integrity check. Once granted, additional costs include a first year fee of $1,500, an annual renewal fee of $1,500, and a two-year reoccurring screening fee of an undecided amount.

The document also states that all employees, including those who don’t come in direct contact with cannabis like cleaning and maintenance staff, must be registered and trained with the provincial government. It is up to the employees or owners to cover any of the costs incurred during this process.

False hope for illegal dispensaries

A number of the city’s grey market dispensaries can breathe a sigh of relief…sort of. The province says it will allow any stores currently operating “illegally” to apply for a retail licence, but under several conditions.

Current illegal dispensaries will not get preferential treatment, nor will they receive approval for if either the financial-integrity check or security screening reveals any links to organized crime.

The document does not go into detail regarding the extent or definition of organized crime, which leaves plenty of room for a big red “denied” stamp for activities dispensaries could argue are standard operating procedures.

For example, under the current Criminal Code, any group comprised of three or more individuals participating in illicit activities constitutes “a criminal organization”. Considering the fact that a dispensary needs, at minimum, several budtenders, managers, and product specialists—the likelihood of clearing this hurdle is bleak.

It does note, however, that all applicants will be assessed using the same criteria, and criminal record checks will be reviewed on a “case-by-case basis and will consider a number of factors”.

Illegal dispensaries—may the Force be with you.

Navigating landmines

Several of the application’s checkpoints have an embedded kill switch, including the first step.

Where any proposed store is located, the local government must “provide a positive recommendation” to the LCRB before an application can proceed. Failure to obtain the proper go-ahead will halt the process. While the local government has to collect and consider the views of its residents, it can ultimately make the decision on granting a recommendation.

Municipalities and regional districts also have the power to charge prospective licensees a fee to assess their application, create zoning bylaws regarding the location of the store, and impose limits on things like signage and operational hours.

A positive endorsement does not, however, equate to approval to continue with the process. The LCRB still maintains “discretion whether or not to issue the licence, but must consider the local government’s recommendation".

One thing the LCRB did do right: these powers extend to Indigenous nations, giving them final say on what is developed on reserve or treaty settlement land. 

Government weed only

This fact hasn’t seemed to hit home yet: the only legal weed available will be government weed. Period.

In both documents, the LCRB makes it very clear all products must be approved by the B.C. Liquor Distribution Branch (LDB)—the authority assigned to oversee legalization across the province.

It reads: “All of the cannabis sold in the store must be purchased from the Liquor Distribution Branch. Licensees must not sell cannabis that is not obtained from the Liquor Distribution Branch.”

If that wasn’t loud enough for the back row, these documents go on to clarify that retailers may not sell liquor, tobacco, snacks, cannabis-infused edibles, or non-cannabis related items of any kind. Stores will only be able to sell a maximum of 30 grams of federally approved dried cannabis bud, oil, and seeds to a customer. 

The LDB will purchase all cannabis products directly from federally licensed producers (LP) and store it in a warehouse. Private retailers will place orders with the LDB, if their application is approved, and have to report their inventory to the LCRB every month.

This means: if a dispensary wants to take the leap to the legal space, it will have to put all operations on hold, effectively closing the doors. Retailers will then have to clear their shelves of any illegal product (read: everything), shoulder any lost revenue, and clear the final inspection process. Once they place their first order, along with a "significant number" of competing dispensaries starting operations around the same time, they will have to wait to reopen until their shelves are stocked with government-approved weed.

Along with standard yearly inspections from the LCRB and follow-up inspections if complaints are registered, the police are being given carte blanche to enter a dispensary to ensure a retailer is “operating in compliance with legal requirements”. The brevity with which the government addresses this question in the documents implies these visits can take place at any time, for any reason.

If a dispensary is found operating out of compliance with any of the regulations, the officer or cannabis inspector will issue a “Contravention Notice” and the licensee will likely have to attend an enforcement hearing to plead their case. Penalties are still being decided, but violations can result in the suspension or cancellation of a licence.

Employee training

Much like FOODSAFE certifications for the food services industry or Serving It Right for the liquor industry, there will be some sort of provincial standard of training and registration.

Just as there are food and liquor inspectors, there will be cannabis inspectors. They, and police officers, can come into a retail location at any time and check on an employee's credentials.

Keeping youth safe

In most cases, the provincial government will not allow anyone under the age of 19 inside pot shops, whereas minors are permitted inside stores that sell tobacco and alcohol. 

The application guide reads: “Unlike liquor stores, minors are not allowed to enter cannabis retail stores for any reason, with the exception of rural retail licences once this category of licence becomes available.”

If a customer is with with their children, they have two choices: leave them outside or don’t purchase cannabis—unless you’re in a rural town where the province still has yet to decide how to retail private recreational cannabis.

When it comes to alcohol, parents are trusted to manage their children in liquor stores where the consumption of an intoxicating substance is entirely normalized. Considering all cannabis product packaging will be intentionally unappealing to minors and there will be no consumption or sampling permitted in the store, it would inherently seem to be a safer place for Canada's youth than the sidewalk or liquor stores.

Hard line between LPs and retailers

The provinces makes it clear that any federally licensed cannabis producers (LPs) are currently not eligible to apply for a retail licence, meaning they will have to sell their product directly to the LDB for distribution if they want to distribute in B.C.

Similarly, a retailer may not grow recreational cannabis for resale—barring the four personal plants everyone is allowed to grow in the dungeons of their privately owned residences.

Furthermore, if a cannabis retailer has “close financial, business or family connections” to an LP—also known as a “tied house”—they may not be allowed to sell their product.

While tied house connections are not completely banned, if the general manager of the LCRB expects the retailer may promote or purchase one LP’s cannabis over others, the licence can be denied.

While this regulation is arguably in place to avoid preferential treatment or market monopolization, this will be difficult, considering the industry’s size and roots. Many of the existing LPs, dispensaries, and retailers have had decades to build close relationships and vested financial interests to sustain the web of a thriving grey industry. 

In summary: if you grow, you can’t sell. If you sell, you can’t grow. If you know someone who sells or grows, well, you can still be friends.

Things the province will get around to

There are a handful of cliffhangers in these documents.

If a rural region has no plans to introduce a private or government recreational dispensary but needs one, it will get around to that when the regional distribution is known.

If a cannabis business wants to hold more than eight retail licences, they're out of luck but the goverment will revisit that number in 2021. Much like the law stating no more than four personal plants, nothing indicates the justification behind the chosen number of the licence cap.

When “the federal government issues ‘micro-cultivation’ producer licences in the future”, it may get around to considering issuing a class of retail licence for them. This leaves the door open for potential farm gate cannabis in B.C., but only when the federal government makes several decisions regarding craft cultivation.

The employee registration process mentioned previously is not yet open, nor has the training program been developed.

A standard for the pricing of cannabis product still has to be decided, but they’ll get around to that when they can figure out how to keep B.C. LPs from exporting their cannabis to provinces offering premium wholesale prices.

Festivals and outdoor events, like 4/20 and Cannabis Day, are still not allowed to promote consumption, but they’ll get around to that in the “future”, as well.

Other house rules

Unless a local government sets a bylaw stating otherwise, store hours will range from 9 a.m. to 11 p.m.

There will be no consumption of cannabis inside any store and certainly no sampling of any product, effectively tying the hands of cannabis lounges, coffee shops, or event spaces.

Oh, and cannabis cannot be visible from outside the store.

When the province opted for a hybrid system, allowing both public and private storefronts, it was read as a compromise. Instead, British Columbians can expect to get the exact same product at all retail outlets—regardless of who owns them. They will be heavily policed. They will be highly regulated. And if a consumer needs cannabinoid-infused topicals, edibles, or cannabis extracts, the black market will still be a viable hotbed of unmet consumer needs.

This is what legal weed will look like in fall—again, if left unchallenged.

Read the summary of eligibility requirements here and the full guide here.

The provincial government announced yesterday the application process is expected to open sometime in August, although no date has been officially decided (another thing they’ll get around to). Adult-use cannabis will be legal to purchase and consume October 17.

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