Kitchener, Ontario – February 1, 2023 (Newsfile Corp.) (Investorideas.com Newswire) Highland Cannabis and independent cannabis retailers in Ontario are banding together in an effort to level the playing field in the kickback-fraught cannabis industry, starting a ‘Cancel Kickbacks’ Campaign that highlights the rampant improper circumvention of anti-inducement regulations in the Ontario cannabis market.
From the outset of cannabis legalization, the Alcohol and Gaming Commission of Ontario (AGCO) has expressly prohibited inducements between licensed cannabis producers and licensed cannabis retailers. The AGCO defines inducements as payments that are “given with the purpose to promote or increase the sale of a particular brand or product by the licensee or their employees.”
The Cancel Kickbacks campaign is demanding that the Ontario government properly enforce its own anti-inducement regulations being circumvented by retailers and producers that are falsely and illegally characterizing inducement transactions as payments for the sale of “data for business intelligence purposes.”
These payments favour larger, well-funded, licensed cannabis producers who have the funds to pay kickbacks as a sales incentive to gain market share, and larger retail chains which have the leverage to demand the kickbacks and then use them to fund predatory pricing that small independent retailers cannot possibly match.
Highland Cannabis Inc., an independent retailer based in Kitchener, Ont., is leading the Cancel Kickbacks Campaign. “The AGCO, by failing to enforce the inducement prohibition is tacitly permitting the cannabis producers to pay prohibited kickbacks to the retail cannabis chains. Several of the large retail chains are using the prohibited inducement money to fund predatory pricing, controlling the market and thereby driving the small independent retailers out of business,” says Owen Allerton, owner of Highland Cannabis Inc. “People talk about the price wars in the cannabis retail market. There are no price wars. There are just big chains and their ultra-discount models that are subsidized by prohibited kickbacks. Producers are paying these prohibited kickbacks for shelf space in big chains, meanwhile they are undermining the 1,000+ independent retailers – driving them out of business. In the end, only the chains will be left.”
Kickbacks also threaten hundreds of licensed cannabis producers. “Kickbacks – or ‘pay to play’ is hurting small producers as well,” says Dr. Shane Morris, consultant and industry expert. “Small, craft-type growers of cannabis trying to legally survive in an already highly competitive marketplace simply cannot afford to pay these kickbacks to retailers. They are often blocked from large retailers who demand payment in return for a product listing, ultimately limiting consumer choice and stifling innovation.”
In addition to the broad prohibition against inducements, the Registrar’s Standards also explicitly prohibit any agreement between a retail licensee and a licensed producer that defines which – or how many – products the retailer sells, or how much display, merchandising, marketing or promotion the licensed producer’s products receive.
However, on June 30, 2022, the AGCO revised the Registrar’s Standards for Cannabis Retail Stores to allow retailers to sell their “sales data” to producers “for business intelligence purposes.” That change opened the door for larger industry players to circumvent the express prohibition against inducements simply by characterizing such inducements as payment for “sales data.” This prohibited practice amounts to a “kickback” scheme that threatens to undermine Ontario’s Cannabis industry.
Of Ontario’s 1,573 licensed retailers, approximately 300 are part of large retail store chains and over 1,000 are smaller, independent shops (fewer than 10 stores). Independent cannabis retailers are predominantly run by individuals or families who have invested personal finances and savings into their retail startups. These independent shops make up the majority of the industry and are at the greatest risk from predatory pricing funded by prohibited inducements.
To date no compliance or enforcement actions have been taken by the AGCO regarding the use of data sales as cover for inducements in the cannabis industry in Ontario.
Retailers and producers can sign the petition at www.cancelkickbacks.com
About Highland Cannabis
Founded in 2020, Highland Cannabis is Kitchener’s one-stop shop for local, independently sourced quality products while delivering efficient and personalized services. Through providing their patrons of all experience levels with the knowledge to shop confidently and comfortably, Highland Cannabis caters to the local community and emphasizes the importance of local initiatives to help Kitchener grow.
For media inquiries, please contact:
Melissa Durrell – Durrell Communications
Scott Hamilton – Durrell Communications
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