Cannabis is currently regulated as a "controlled substance" and "narcotic" (pre-October 17, 2018). The Narcotic Control Regulations prohibit the advertisement of narcotics to the public. Despite this blanket prohibition, there has been a notable upswing in cannabis and cannabis-related advertising over the course of the summer. For many, the benefits of being first to market have outweighed the risk of enforcement. However, once the Cannabis Act and its Cannabis Regulations enter into force on October 17, 2018, cannabis companies should reassess their promotional activities in light of new advertising restrictions and an expectation of heightened regulatory oversight.
At a high-level, the Cannabis Act prohibits the promotion of cannabis, cannabis accessories or services related to cannabis :
- By communicating information about its price or distribution;
- By means that could be appealing to young persons;
- By means of testimonial or endorsement;
- By means of the depiction of a person, character or animal (real or fictional); or
- By presenting cannabis or any of its brand elements in a manner that associates it or the brand element with a lifestyle that includes glamour, recreation, excitement, vitality, risk or daring.
A "promotion" for the purposes of the Cannabis Act, means "to make, for the purpose of selling the thing or service, a representation – other than a representation on a package or label – about the thing or service by any means, whether directly or indirectly, that is likely to influence and shape attitudes, beliefs and behaviours about the thing or service". Literary, dramatic, musical, cinematographic, scientific, educational or artistic works, productions or performances that use or depict cannabis, and reports and commentaries, for which no consideration is given, are not promotions, and neither are business-to-business marketing activities.
The Cannabis Act specifically restricts the use of inducements (e.g. giveaways, and the right to participate in a game, draw, lottery or contest), displays and sponsorship. Although the scope of these restrictions is unclear, Health Canada has advised that it will assess compliance on a case-by-case basis.
It's not all bad news for the legal cannabis industry in Canada. Where certain conditions are met, the Cannabis Act permits limited informational and brand-preference promotion, brand element promotion on non-cannabis "things", and point of sale promotion. It is important to remember that any permitted promotion must not be false, misleading or deceptive, and must not be likely to create an erroneous impression about cannabis' characteristics, value, quantity, composition, strength, concentration, potency, purity, quality, merit, safety, health effects or health risks.
Therapeutic claims cannot be made with respect to any cannabis sold under the Cannabis Act, whether medical or recreational. Only prescription drugs with drug identification numbers (DINs), which contain cannabis, can include an indication for use outlining a health benefit. Prescription drugs are subject to pre-market approval by Health Canada. Prescription drugs are also subject to strict limitations on advertising under the Food and Drugs Act and Food and Drug Regulations.
The Cannabis Regulations supplement the Cannabis Act with particular emphasis on product packaging, product standards and licensing. In terms of advertising, the Regulations require plain packaging for all cannabis products and set out strict requirements for logos, colours, symbols and branding.
In addition, the Cannabis Regulations create an auditing scheme of sorts by stipulating specific record-keeping and disclosure requirements. For example, every person authorized to produce, sell or distribute cannabis or cannabis accessories, under a federal licence, must provide the following information to the Minister of Health on an annual basis:
- The total amount of money that the individual spent in a calendar year on promotion directed at consumers who purchase cannabis at the retail level in Canada, with a description of the types of promotion; and
- The total amount of money that the individual spent in a calendar year on promotion conducted in Canada not directed at consumers, with a description of the types of promotion.
Pursuant to the Regulations, a licence holder who engages in promotional activities must also retain certain records, including a sample or copy of any promotional materials for at least two years after the last day on which the promotion took place.
Industry has requested that Health Canada provide interpretive guidance on the new regulatory framework to assist with compliance. Such guidance, coupled with enforcement activity, could help distinguish promotional activities from non-promotional activities, and give cannabis companies greater insight into what they can and cannot do.
Until then, it is recommended that cannabis companies familiarize themselves with the new advertising restrictions, and tread carefully thereafter in this ever-changing and evolving landscape.