Canada’s Competition Bureau wants THC limits for edibles changed

Canada’s competition watchdog is throwing its weight behind some long-standing demands from the cannabis industry, including easing restrictions on cannabis packaging and adjusting limits on the amount of psychoactive component in pot which can be found in edible products.

In a submission to Health Canada and an expert panel reviewing cannabis legislation released on Friday, the Competition Bureau proposed changing tetrahydrocannabinol (THC) limits and giving pot companies more freedom when it comes to packaging and marketing as a way to stimulate competition.

“The bureau believes that stronger competition in the cannabis industry would help foster innovation and benefit consumers by providing them with increased choice and quality,” he wrote in his brief.

“Importantly, these benefits would serve to further displace illicit market activity and strengthen the legal cannabis industry.”

A 2022 Health Canada survey found that nearly half of the 10,048 respondents who used cannabis in the past year purchased the substance exclusively from legal sources, up from 43% in 2021.

Some believe that the true share of the illicit market is higher due to the stigma attached to disclosing cannabis use.

Pot growers and stores have long believed that THC and packaging changes would reduce the market share of illicit sellers and help them reduce the high number of layoffs, facility closures and writedowns they have suffered in recent years to keep their business afloat.

Their calls for change have grown in recent months after Ottawa launched a review of the Cannabis Act last year, which set purchase and possession limits and established safety requirements for growing, sale and transportation of the substance.

When the legalization legislation came into effect in 2018, it prevented cannabis products from being packaged in a way appealing to young people and limited THC in edibles to 10mg per package. Illegal products often exceed the limit.

Stakeholders told the bureau that raising the limit to 100 mg “could make cannabis edibles more appealing to consumers, especially those currently purchasing them on the illicit market.”

The bureau suggested that easing restrictions on cannabis promotion, packaging and labeling would also give producers more leeway to innovate and help consumers make more informed purchasing decisions.

To comply with regulations, most pot companies package their products in black or white containers, devoid of eye-catching branding, which could help differentiate one product from another.

The bureau also tackled the cannabis licensing process and compliance costs, suggesting they be made “minimally intrusive to competition, where possible”.

The process currently requires cannabis producers to have facilities nearly complete – a process that often costs millions – before they can receive licenses. Then there are the “time-consuming and costly” security requirements and annual regulatory fees.

“By minimizing the regulatory burden of the licensing process and lowering compliance costs where possible, policymakers can reduce barriers to entry and expansion, as well as stimulate even greater competition. effective,” the Bureau said.

Rounding out its recommendations was a suggestion regarding excise duties, an area outside of the committee tasked with reviewing the scope of the law.

Duties are imposed on products when they are delivered to buyers. For dried and fresh cannabis, plants and seeds, the higher of $1 per gram or 10% per gram.

For edibles, extracts, and topicals, this is a flat rate based on the number of milligrams of total THC in the product. There are additional rights in Alberta, Nunavut, Ontario and Saskatchewan.

The total amount of unpaid excise duties on cannabis has increased since legalization, the office said. As of September 2022, 66% of licensees required to remit excise duty had an outstanding debt with the Canada Revenue Agency, the bureau said.

“Many stakeholders interviewed by the bureau raised Canada’s excise duty framework – and excise duty rates in particular – as a major impediment to competition in the cannabis industry,” the brief states.

“These stakeholders told the bureau that the current excise duty regime makes it very difficult for the industry to be profitable and viable.”

This report from The Canadian Press was first published on May 26, 2023.