Pubdate: Fri, 20 May 2016
Source: National Post (Canada)
Page: FP4
Copyright: 2016 Canwest Publishing Inc.
Author: Peter Koven


Licensed Producers Take on Black Market

TORONTO - This week's crackdown on illegal marijuana dispensaries in 
Toronto comes after an intense lobbying campaign by licensed pot 
producers, who became alarmed by the brazen growth of the black 
market and the threat it poses to the industry.

Dispensaries began receiving hand-delivered notices from police on 
Wednesday, reminding them that their businesses are unlawful and they 
could face significant fines. These actions came less than a week 
after Mayor John Tory issued a letter calling dispensaries to be reined in.

"This is a long time coming," said Cam Battley, chair of the advocacy 
committee for Cannabis Canada, an industry association for licensed 
pot companies.

"We warned the municipal government last fall that things were 
getting out of hand."

The dispensaries have become a headache for licensed medical 
producers like Canopy Growth Corp. and Aphria Inc. They are selling 
far more product than the legal market, and are doing it with no 
regulation or oversight. That raises product safety concerns, and 
threatens to undermine a legal, regulated industry that is still in 
its infancy.

The licensed producers have to worry about losing business to 
dispensaries, where both legitimate and dubious medical prescriptions 
are getting filled. There is also a risk of lasting reputational 
damage to the industry from the black market.

When the licensed producers started lobbying the city about the 
dispensaries last year, Battley said there were perhaps two dozen of 
them in Toronto. Today, there are reportedly more than 100.

Prime Minister Justin Trudeau has vowed to legalize recreational 
marijuana, and new dispensaries began popping up at a rapid rate 
around the time he was elected last October. The federal government 
does not plan to propose legalization rules until next year, but the 
dispensaries decided the current transition period allows them to 
operate openly.

There are no reliable numbers around how much pot they are selling. 
But Aaron Salz, an analyst at Interward Asset Management, estimated 
dispensaries are doing more than $500 million of sales a year. By 
comparison, he said the legal medical market is worth perhaps $130 to 
$140 million. He said dispensaries are currently the biggest threat 
to the legal industry.

"If the city fines dispensaries and shuts them down, the approach is 
obviously strong-armed, but I think it stems the growth and impact on 
(licensed producers) more than just letting them proliferate," he said.

Illegal dispensaries have popped up across the country, but Battley 
said Toronto is currently the most problematic region. The industry 
has become a free-for-all in Toronto, with many customers apparently 
unaware that they are breaking the law.

The legal pot industry got its start in 2014, when Ottawa introduced 
legislation requiring medical marijuana patients had to buy their 
product from licensed producers. There are currently 31 companies 
with licences, 18 of which are in Ontario.
- ---
MAP posted-by: Jay Bergstrom