TORONTO — This week’s crackdown on illegal marijuana dispensaries in Toronto comes after an intense lobbying campaign by licensed pot producers, who became alarmed by the brazen growth of the black market and the threat it poses to the industry.
The owners of property in which dispensaries have set up shop began receiving hand-delivered notices from police on Wednesday, reminding them that the businesses are unlawful and they could face serious consequences if they remain open. These actions came less than a week after Mayor John Tory issued a letter calling dispensaries to be reined in.
“This is a long time coming,” said Cam Battley, chair of the advocacy committee for Cannabis Canada, an industry association for licensed pot companies.
“We warned the municipal government last fall that things were getting out of hand.”
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The dispensaries have become a headache for licensed medical producers like Canopy Growth Corp. and Aphria Inc. They are selling far more product than the legal market, and are doing it with no regulation or oversight. That raises product safety concerns, and threatens to undermine a legal, regulated industry that is still in its infancy.
The licensed producers have to worry about losing business to dispensaries, where both legitimate and dubious medical prescriptions are getting filled. There is also a risk of lasting reputational damage to the industry from the black market.
When the licensed producers started lobbying the city about the dispensaries last year, Battley said there were perhaps two dozen of them in Toronto. Today, there are reportedly more than 100.
Justin Trudeau has vowed to legalize recreational marijuana, and new dispensaries began popping up at a rapid rate around the time he was elected last October. The federal government does not plan to propose legalization rules until next year, but the dispensaries decided the current transition period allows them to operate openly.
There are no reliable numbers around how much pot they are selling. But Aaron Salz, an analyst at Interward Asset Management, estimated dispensaries are doing more than $500 million of sales a year. By comparison, he said the legal medical market is worth perhaps $130 to $140 million. He said dispensaries are currently the biggest threat to the legal medical industry.
“If the city fines dispensaries and shuts them down, the approach is obviously strong-armed, but I think it stems the growth and impact on (licensed producers) more than just letting them proliferate,” he said.
Illegal dispensaries have popped up across the country, but Battley said Toronto is currently the most problematic region. The industry has become a free-for-all in Toronto, with many customers apparently unaware that they are breaking the law.
In Vancouver, on the other hand, steps have been taken to rein in dispensaries. Dozens of shops that were operating close to schools and community centres have been shut down, and this week, a Vancouver dispensary received a business license for the first time.
The legal pot industry got its start in 2014, when Ottawa introduced legislation requiring medical marijuana patients had to buy their product from licensed producers. There are currently 31 companies with licenses, 18 of which are in Ontario. The patient base is growing about 10 per cent a month, but it remains tiny with 65,000 to 70,000 people enrolled in the program.
Currently, legitimate medical customers can only buy their product through mail order. However, pharmacies are lobbying for control of distribution. And assuming Ottawa legalizes recreational marijuana, it is expected to become widely available in retail stores.
CORRECTION: A previous version of this story said the police hand-delivered notices to dispensaries on Wednesday. They were delivered to the owners of property in which dispensaries are located.