This week, The Alcohol and Gaming Commission of Ontario (AGCO) issued an Order of Monetary Penalty totaling $200,000 to the licensed cannabis retailer Cannabis Xpress for alleged violations of Ontario’s regulatory standards related to provincial anti-inducement laws. In this case, the licensee refused to stock an LPs product unless they agreed to enter into prohibited inducement agreements and promoted the sale of cannabis products from producers who entered such inducement deals.

For other cannabis retailers worried about violating the AGCO’s inducement standards, we’ve broken down the new inducement standards that have been in place since June 30th, 2022.

Disclaimer: we are not lawyers and this article should not be considered legal advice.

Inducements between Licensed Producers and Retailers

The AGCO Inducement standards assert that cannabis retail stores can’t make deals with cannabis producers or their representatives to promote or sell specific products and are not allowed to accept anything valuable in exchange for this.

Items, Benefits or Services of Nominal Value

This section says that licensed retailers can accept or make agreements with cannabis producers for things that are of little value, like small gifts or services. These small-value items shouldn’t influence the retailer’s behavior or cover their costs significantly. The decision on what’s considered “small value” depends on factors like whether it affects behavior or covers operational costs. Some examples of small-value items are T-shirts, hats, lanyards, cheap cannabis accessories, and gift bags with inexpensive items related to cannabis. However, these examples might still be seen as influencing behavior or covering costs depending on the situation.

The Merch Doctor Tilray

Items, Benefits and Services Related to Education or Training

This section says that licensed cannabis retailers can accept things related to education or training. Examples include educational sessions or materials, training sessions outside the store (like visiting a cannabis producer’s facility), simple meals during training, and cannabis product samples for educational purposes. These samples should be small and not given too often.

Sale of Business Data

The sale or sharing of personal customer information continues to be prohibited by Canadian law unless expressly consented to. Licensed retailers may enter into agreements with LPs for the sale of data for business intelligence purposes. The AGCO expects that the fee charged by the licensee and paid for by the LP should be at fair market value. Licensed retailers are expected to follow applicable privacy laws and regulations.

Nature of Permissible Activities

Standard 6.6 sets out constraints on agreements that are permissible under Standard 6.5, to ensure that they are not used as a method for material inducements.

Agreement between retail licensees and LPs must not:

  1. Define the amount of product from the licensed producer or its affiliates that must be offered for sale at the retail store;
  2. Require a defined amount of display space in the retail store to be dedicated to product from the licensed producer or its affiliates;
  3. Provide merchandising, marketing or promotional activities to the licensed producer or its affiliates; or
  4. Restrict 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.

Prohibited Activities

This part outlines the general ban on agreements for items, benefits, or services between cannabis retailers and producers, apart from the exceptions listed in Standard 6.5. Some examples of prohibited activities include:

  1. Selling advertising space in-store or online.
  2. Retailers receiving payments from producers for advertising.
  3. Co-branding advertisements with producers.
  4. Featuring products in-store or online.
  5. Retailers receiving payments from producers for advertising space or preferred shelf placement.
  6. Receiving cannabis for display purposes.
  7. Receiving physical assets like refrigerators or computers from producers.
  8. Getting essential items for business operation from producers.
  9. Retailers or employees receiving incentives tied to sales performance.
  10. Receiving cash, rebates, or discounts from producers for listing products at below-market prices.
  11. Receiving travel or accommodation related to education or training from producers.
  12. Receiving monetary compensation for education or training from producers.

Last Updated on April 16, 2024 by ADCANN

Michael McGregor

Michael McGregor

Michael is the seasoned Key Accounts Manager at a leading Cannabis Sales Agency. With a knack for building enduring client relationships and a dedication to personalized service, Michael is driving success in the industry through unparalleled expertise and insight.