BC’s Cannabis Distribution Model

On February 5, 2018 the Government of BC announced additional details of the regulations and policies that will govern the sale of non-medical cannabis in the province. The Liquor Distribution Branch will retain a monopoly over distribution of cannabis, but there will be public and private options for retail, including online sales.

Cannabis retail sales will take place in stores that are physically separate from those that retail liquor and tobacco. Cannabis retailers will not be permitted to sell any other products. The government anticipates that the first public and private stores will open in the summer of this year.

The Liquor Control and Licensing Branch (LCLB) will regulate and enforce the sale of cannabis. While there will be no restriction on the number of licences issued by the province, local municipalities will effectively have a veto over whether licences will be granted. Applications will be open to all businesses, including pre-existing liquor store licensees and cannabis dispensaries. Pre-registration for private licences will begin in the spring, prior to the federal legislation coming into force. After the federal legislation has been passed, completed applications for a licence can be submitted to the LCLB, which will assess each application based on criteria that have yet to be disclosed. However, the government has confirmed that the rules will be similar to those currently in place for liquor.

Given the unique context and untrammeled territory, licensing applications will not be straightforward. For example, under the current liquor laws the LCLB must assess whether an applicant is “fit and proper” to hold a licence. In the liquor context, this rule generally creates an uphill battle for those who have operated businesses in contravention of the law or who have criminal records. The meaning of this phrase in the context of cannabis is unclear, but pre-existing dispensaries may face an uphill battle for licences. There will also be other important criteria, including the requirement for local government approval.

The government will also likely impose distance restrictions on a licence’s proximity to other licensed establishments. With the government set to open its own stores, it is likely that disputes will arise between private operators and the government-run retailer over the location of their respective stores. Additionally, rural retail store licensees will be subject to different regulations than urban licensees.

The principles of administrative law will govern all licence applications and any appeal of a decision denying a licence application. These principles are complex, but generally require a fair process and that decisions be “reasonable”. As the legal parameters for granting and denying retail cannabis licences will be untested in court, applications should be structured in consideration of possible appeals. This includes reviewing the legislative grants of authority, regulatory parameters, and policy guidelines that will govern the application process.

The government will be making additional policy announcements over the next few months, and will table its cannabis legislation and associated regulations in the spring.

Shea Coulson is a lawyer specializing in liquor and cannabis law. He has represented members of the hospitality industry and acted in these areas for 10 years. Shea is the founder and principal of Coulson Litigation and is based in Vancouver.