With all provinces except for Alberta, Saskatchewan and Manitoba, and perhaps Newfoundland and Ontario, intending to have government-run cannabis stores after recreational cannabis use becomes legal on October 17, many eyes are on which suppliers the government-run stores will buy from and whether there will be a bias toward local producers.
Dentons partner Shea Coulson told Business in Vancouver that governments will be able to discriminate against growers from other provinces if they want to fill stores with as many local products as possible.
When the B.C. government announced on July 5 that its government-run cannabis stores will source products from 31 suppliers, it made a point of noting that 12 of the suppliers are based in B.C.
Other provinces have gone further.
Speaking on a panel at a July 12 BIV-sponsored event, Emerald Health Therapeutics CEO Chris Wagner said he expects many provinces to have protectionist mindsets.
“The most vocal province in this regard, as you would expect, is Quebec, and they have said that ‘we will preferentially and exclusively, if we can, buy from Quebec-based licensed producers,’” said Wagner, whose licensed cannabis producer is based in B.C., and announced in May that it had bought Quebec-based Agro-Biotech for $90 million in cash and shares.
Coulson, who represented B.C. wineries in a challenge to interprovincial trade barriers at the Supreme Court of Canada earlier this year, said that the landmark R. vs. Gerard Comeau decision won’t help licensed cannabis producers.
The decision ruled that provinces could not discriminate against products from another province unless there was a bona fide reason, such as the health and safety of residents.
Coulson believes the judgment will help remove some protectionist barriers that are in legislation or are official government policies.
In the case of a government-run retail operation, however, the Comeau case decision will have no effect.
“A reviewable decision of the government is when the government is acting in a regulatory capacity or a legislative capacity,” Coulson said.
“You can challenge legislation. You can challenge regulations. You can challenge decisions made pursuant to legislation and regulations. But the government also has powers as a legal person. They can operate commercially as a legal person. That’s distinct. That is like a business operating.”
Therefore, if a province sets up a retail operation similar to the way an entrepreneur does, it is as free as that entrepreneur to stock the store with whatever products it wants.
In contrast, Coulson told BIV that the Comeau case contained a precedent that provincial governments are not able to protect domestic alcohol producers in legislation or regulations unless it is for health and safety reasons. BIV elaborated on this yesterday.
