Waterloo Region cannabis store leading campaign to cancel kickbacks

By CityNews Staff

With the cannabis industry relatively new to the province and the country, you only have to look back a few years to when the Alcohol and Gaming Commission of Ontario (AGCO) set regulations to ban inducements.

Inducements or “kickbacks” are payments between producers and retailers with the purpose to promote or increase the sale of a particular product by the licensee or their employees. In the context of the Ontario cannabis market, it could allow the large chains, who can afford these inducements, to gain market share, and use them to fund pricing that independent retailers cannot afford to match.

The AGCO then announced an exception in June, 2022, where payments for the sale of data for intelligence purposes were made legal. This is where the issue started according to Highland Cannabis Owner and CEO, Owen Allerton, who told CityNews 570 in an interview Thursday that chains are disguising inducements as data sales.

“We're all operating stores, we all have to pay staff and pay rent. At first, when we looked at this, we said 'selling at these prices, how are they staying in business?' It didn't make sense. There's no way they could be paying their rent and their staff, even trying to cut costs, and make it work at these levels.”

Allerton added that he has spoken with lawyers, who said that the chains have not found a loophole, they are simply getting away with misrepresenting illegal payments. 

Stores such as Highland Cannabis, who have less than 10 other locations, make up two thirds of the over 1,500 retailers across the province. These are mostly family-owned shops, that would not be able to keep up 25 per cent discounts offered by some of the bigger chains.

Allerton said the AGCO is looking into it, but no enforcement actions have been taken yet.

“It's already a very tough business because there are so many retail stores,” said Allerton. “Having to price-match unfairly low prices that are subsidized by chains that are breaking the rules at scale while the provincial regulator stands by and does nothing is disheartening. If nothing is done, very quickly, you could see 300-500 retailers close their doors in the next 12 months.”

The Cancel Kickbacks Campaign started by Highland Cannabis has nearly 1,000 signatures including over 100 independent retailers.

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