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Doug Ford Wants Government To Butt Out of the Cannabis Trade

— Benjamin A. Smith

It seems newly-elected Ontario Conservative leader Doug Ford isn’t a fan of government’s involvement in the cannabis trade. Nary a week after winning a razor-thin party election, Ford has already interjected thoughts about how legalization should look in Ontario. This is significant since the former city councillor stands a good chance of beating incumbent Kathleen Wynne in the upcoming June provincial elections. We explore how a Ford government could shape cannabis policy if he proves victorious.

The poignant comments emanate from an interview Ford conducted with CBC Radio’s Ottawa Morning. Among the many topics discussed, Ford was asked about his “plans for regulation and enforcement for marijuana when it becomes legal? Would you privatize pot stores?” Perhaps to nobody’s surprise, Doug Ford espoused a rather free market—dare we say classic conservative—response. Here’s what he said:

We’re going down a path that no one really knows. I have been open to a fair market and letting the markets dictate. I don’t like the government controlling anything no matter what it is…. I’m open to a free market and I’m going to consult with our caucus…. I don’t believe in the government sticking their hands in our lives all the time. I believe in letting the market dictate.

There’s simply no way to misinterpret his feelings on the matter. Doug Ford believes the government should butt out of the cannabis trade, and presumably, will seek government disengagement if he’s elected in June. But what power does Doug Ford really have over federal legislation? Could he really drive changes to provincial government retail and distribution channels to allow free market economics to reign supreme? The answer is maybe.

According to Bill C-45, the proposed Cannabis Act would create a comprehensive national framework that would enable provinces and territories to tailor certain rules in their jurisdictions. The provinces have maneuverability to operate within the Act as long as it aligns with The Task Force advice on Cannabis Legalization and Regulation.

Some of the provincial mandates set up by Bill C-45 include:

  • Licensing the distribution and retail sale in their respective jurisdictions, and carrying out
    associated compliance and enforcement activities;
  • Setting additional regulatory requirements to address issues of local concern. For example,
    provinces and territories could set a higher minimum age or more restrictive limits on
    possession or personal cultivation
  • Establishing provincial zoning rules for cannabis-based businesses;
  • Restricting where cannabis may be consumed; and
  • Amending provincial traffic safety laws to address driving while impaired by cannabis (e.g.,
    providing for 24-hour licence suspensions for adults or zero tolerance for young drivers)


Could A Ford Government Open Up Retail Competition?

As it currently stands, the Liquor Control Board of Ontario (LCBO) will be the province’s sole distributor of legal recreational marijuana once legalization passes. The LCBO recently struck a deal with Shopify to operate its online cannabis sales platform, thus cementing its multi-channel monopoly in the province. It’s a great racket if you can get it.

Presumably, Doug Ford’s free market stance on cannabis is diametrically opposed to the LCBO’s position as monopolistic purveyor. If Ford really wanted the government to ‘get out of the way’, what better way than to open up competition against the only game in town—the Ontario Cannabis Store.

Based on the powers given to the provinces by Bill C-45, Ford might have that opportunity.

We wrote earlier that Bill C-45 gives provinces the power of “licensing the distribution and retail sale in their respective jurisdictions”. If we dig deeper into the Bill’s definition of “retail sales”, there’s nothing in it to preclude free market (retail) involvement as long as it meets certain requirements such as limits on storefront density, proximity to schools, co-selling with alcohol or tobacco.

Going one step further, Clause 69 sets out a framework for provinces and territories to authorize the selling of cannabis such that a person could possess, sell or distribute cannabis if they have been authorized to do so under provincial or territorial.

Furthermore, verbiage on page 34 of the Act states: “The provinces and territories would be
responsible for defining the type of distribution and retail system, number of authorized retailers that
would operate in their jurisdiction.”

I’m not a lawyer, but it seems perfectly clear that Doug Ford would possess the legal authority to open up competition should he become premier of Ontario.


Author’s Take

Initially, the Liberal government plans on opening 40 stores in Ontario with zero free market competition. If Doug Ford is serious about getting government to butt out of the cannabis trade, opening up the free market would be his best option. This would serve to lower prices and enhance consumer choice.

That is by no means Ford’s only option. He could opt to lower the legal limit to 18 (from 19), raise/lower legal possession amount or allow cannabis usage on public property. It hard to say without hearing more commentary.

But one thing is clear: If Ford wins the upcoming provincial election, the cannabis trade in Ontario is about to get a lot more interesting.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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bsmith@midasletter.com |

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