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AGCO clarifies inducements to cannabis retailers from production and processing licence holders

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Updates to Cannabis Standards Clarify Inducement Rules

Please note: this blog is a reprint from an AGCO announcement. For the original, please visit www.agco.ca.

Alcohol and Gaming
Commission of Ontario

90 Sheppard Avenue East
Suite 200

Toronto ON M2N 0A4

February 7, 2022

 

Updates to Cannabis Standards Clarify Inducement Rules

Following the completion of industry-wide consultations, the Alcohol and Gaming Commission of Ontario (AGCO) has finalized updates to the inducement rules in the Registrar’s Standards for Cannabis Retail Stores (the 'Standards'). The new rules will take effect on June 30, 2022.

 

The Standards have always prohibited licensed cannabis retailers from accepting or requesting material inducements from licensed producers. The updated Standards set out additional detail related to inducement activity between federally licensed producers and retailers to support consumer choice and a level playing field in the legal cannabis industry.

 

The AGCO has built a strong regulatory framework to support a well-regulated and competitive cannabis market for the benefit of Ontarians. These inducements standards are an integral step in continuing the success of the regulated cannabis market.

 

With the evolving growth of Ontario’s retail cannabis market, the AGCO heard from licensees that they needed additional clarity in the Standards related to inducement activity. To this end, the AGCO updated the Standards to provide clarity, and the companion Guidance Document to include clear examples of acceptable and prohibited agreements between licensed producers and retailers.

 

The AGCO would like to thank all retailers for their commitment to following the Standards, and to operating with honesty and integrity in Ontario’s cannabis market.

 

If you have questions or need guidance on complying with the updated Standards by June 30, 2022, your local Compliance Officials are here to help and support you with additional information and education.

 

For more information, including examples of what is permissible and what is not, please see this Guidance Document.

 

Updated Standards

The updates to the Standards are consistent with and further clarify the prohibition on inducements in the Cannabis Licence Act, 2018. Please refer to the table below for the updated inducement-related Standards:

 

6.4 (Amended)

Standard 6.4 - Licensees may not accept or request material inducements from licensed producers, their representatives, or suppliers of cannabis accessories.

 

Guidance: inducements are items, benefits, payments, or services that are offered or given with the purpose to promote or increase the sale of a particular brand or product by the licensee or their employees.

 

6.5 (New)

Standard 6.5 - Licensees and their representatives may not, either directly or indirectly, accept or enter into any agreements for any item, benefit or service with a licensed producer or their representatives. The following exemptions apply:

 

  1. a licensee and its representatives may accept items of nominal value,
  2. a licensee and its representatives may accept items, benefits or services exclusively for the provision of training or education related to cannabis,
  3. a licensee may enter into an agreement to sell its data for business intelligence purposes,
  4. where a licensed producer has an ownership interest in the licensee, the licensee may enter into financing and lease agreements,
  5. a licensee may enter into a franchise agreement with a licensed producer or its affiliate.

 

6.6 (New)

Standard 6.6 - Licensees and their representatives may not enter into any agreement pursuant to Standard 6.5 that:

  1. Defines the amount of product from the licensed producer or its affiliates that must be offered for sale at the retail store;
  2. Requires a defined amount of display space in the retail store to be dedicated to product from the licensed producer or its affiliates;
  3. Provides merchandising, marketing or promotional activities to the licensed producer or its affiliates;
  4. Restricts the ability of the licensed producer or its affiliates to sell its product at other retail stores, or the ability of the licensee to sell products from other licensed producers or their affiliates.

 

8.1.10 (New)

Standard 8.1.10 - When entering into any agreement or accepting any item, benefit or service pursuant to Standard 6.5, a licensee shall maintain the following records:

 

  1. Copy of the complete agreement
  2. Description of the item, benefit or service
  3. Date of receipt of item, benefit or service
  4. Name of licensed producer and representative and
  5. Fair market value of the item, benefit or service

 

 

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