Thursday, August 30, 2018

Ontario should junk cannabis wholesale monopoly too

Doug Ford almost got it right on cannabis - The Globe and Mail - Ian Irvine:

August 22, 2018 - "Ontario Premier Doug Ford should be congratulated for improving Ontario’s marijuana market structure last week. He decided to privatize the retailing of marijuana in the province. That decision represents a reversal of the previous government’s choice to place retailing in the hands of a high-cost government monopoly. This is good news.

"However, he also decided to leave a government agency front and centre in the wholesaling of cannabis. Having gone some way to free up entrepreneurial energies and create an expansive marketplace, he balked at the idea that this market could function well without a monopsony, or a single buyer, at its core.

"For the benefit of Ontarians, the government should ... look at successful and safe cannabis market models that have been developed south of the border.... In Colorado for instance, the present combination of moderate taxes, multiple retail outlets and extraordinarily active laboratory testing has led to the virtual elimination of the illegal market....

"A wholesale monopoly ... suffers from an excess of power.... It is also less complex for a single buyer to deal with a small number of suppliers than a large number. Consequently, small producers and product variety will be the losers.... 'Big Cannabis” will gain from this structure, and small artisanal marijuana will live a hazardous existence. If the latter were to have direct access to retail, we could be sure that a vibrant industry composed of hundreds of small producers would survive....

"Second, the positioning of an additional agency will add to the cost of distribution and ultimately to the price paid by the end user. It is a universal 'given' that if the price charged to the user is much above the street price then the illegal market will continue to thrive....

"Third, there is little to justify the existence of a monopoly wholesaler from a safety standpoint. A report from the Colorado Department of Revenue (Marijuana Enforcement Division) indicates that, in 2017, about 150,000 tests on content and potential contaminants were carried out. Unsurprisingly, this system has resulted in a high-quality, low-variance product....

"The craft brewing industry in Canada has been an enormous success. Imagine the outcome if, at some point in the 1990s, the Ontario government had decided that 'in the interests of a safe supply' all sales would have to transit through a government wholesale monopoly, and that monopoly, staffed by bureaucrats, would decide which products would reach the consumer and which would not.

"Mr. Ford, for the benefit of all Ontarians ... should take a second giant step in producing a vital and successful market: by eliminating the Ontario Cannabis Store monopsony and replacing it with a system of rigorous quality testing."

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