It's time to Cancel Kickbacks
Have you ever wondered how some Cannabis Chain Stores are able to offer prices that are 25% lower than independent shops?
It’s because they’re taking illegal kickbacks
and disguising the transactions as “selling data.”
When Canada decided to create a legal Cannabis industry, all levels of government agreed they wanted to create opportunities for businesses of all sizes.
In other industries, big corporate brands pay large chain retailers kickbacks for carrying their products. When this is allowed it creates an advantage for large chains (who can use their size to demand the kickbacks) and big brands (who can afford the kickbacks.)
So… when the Ontario government created the rules, they banned kickbacks (also known as inducements) from Cannabis producers to licensed Cannabis retailers.
Over 1000 independent Cannabis retail stores have since opened in Ontario – many of them are “mom and pop” shops – people and families who always dreamed of operating their own dispensary – who took out mortgages and even second mortgages and/or cashed in their life savings and opened a shop. All of the independent small businesses trusted that the rules put in place by the government meant that they had a fair shot at success.
So what happened?
Somewhere along the way, lobbyists from the big chains and big corporate growers convinced the provincial government that the retailers needed to be able to “sell their sales data” to licensed producers for “business intelligence reasons.” On June 30, 2022 the Ontario government changed the rules to permit the sale of sales data, thereby creating a loop-hole of which big chains and corporate growers could take advantage.
Today, millions of dollars disguised as “data fees” are flowing from the big corporate growers to retail chains, funding the predatory pricing that is bankrupting independent shops.
To compete, some independent shops are joining “buying groups” where a number of small shops join together and try to do the same thing the chains are doing. The problem is that the only ones getting rich are the buying group organizers! Retailers are not getting enough to compete with the big chains.
This also hurts the smaller, independent craft growers because they don’t have the money to pay the kickbacks – or to “pay to play” as many call it. Everywhere they turn, some retail chains and “buying groups” are now demanding money from growers. Kickbacks are limiting consumer choice by inducing retailers to only carry products from producers that can afford to pay to play.
We shouldn't have to break the rules to survive as cannabis retailers.
Ther rules banning inducements were put in place intentionally by the Ontario government, namely to ensure a fair and level playing field for cannabis retailers and growers alike. “Data deals” are the loophole – a disguise for kickbacks or “pay to play” – and they are running rampant in the Ontario Cannabis Industry.
The Alcohol and Gaming Commission of Ontario has done nothing to stop the data sales deals it otherwise prohibits as an inducement.
The vast majority of Ontario’s retailers are independent shops, and some of the best Cannabis growers in the country are small craft growers: they are both at risk.
It is time for the Ontario government to put an end to the “data deal” loophole and crack down on chains that are using it to fund predatory pricing designed to put the small retailers out of business.
It’s time to cancel kickbacks!