City weed stores’ loyalty-points program may not be legal, lawyers say By: Solomon Israel Posted: 7:00 PM CDT Thursday, Apr. 11, 2019

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This article was published 10/04/2019 (2087 days ago), so information in it may no longer be current.

Legal experts are questioning whether a customer loyalty program offered by a Manitoba cannabis retailer violates federal law, which places strict limits on inducements to buy marijuana.

Garden Variety operates two cannabis stores in Winnipeg. The company lets registered customers earn points on cannabis purchases, which can be redeemed for discounts on cannabis, cannabis accessories and shipping charges. Customers can also earn points for reviewing products on the Garden Variety website, or for celebrating a birthday, sharing posts about Garden Variety on social media or referring friends to create accounts.

“We want to do something that’s going to create an exceptional experience,” said Garden Variety regional manager Sheilagh Dohie. “Our tagline is ‘anything but ordinary,’ and I think that this loyalty program really establishes that.”

Federal cannabis regulator Health Canada reviewed a general description of the loyalty program, and said it couldn’t comment on the specific situation. But “in general, rewards programs are not permitted under the Cannabis Act,” department spokesman Geoffroy Legault-Thivierge wrote in a statement.

Garden Variety believes the rewards program is legal because it doesn’t give away cannabis or accessories.

“Loyalty members must always provide monetary consideration in exchange for cannabis and cannabis accessories,” the company said in a statement.

The Cannabis Act does indeed prohibit offering free cannabis or accessories as an inducement. But it also prohibits marijuana retailers from offering “any thing that is not cannabis or a cannabis accessory, including a right to participate in a game, draw, lottery or contest, if it is provided or offered to be provided as an inducement for the purchase of cannabis or a cannabis accessory.”

That legal language doesn’t explicitly mention loyalty programs, but lawyer Matt Maurer thinks Garden Variety’s rewards initiative could be construed as a violation of the law.

“If you’re providing points, which is something, and that’s being provided as an inducement to buy cannabis, then arguably you’ve got a problem,” said Maurer, a partner with Torkin Manes LLP in Toronto who practises commercial cannabis law.

Maurer also wonders whether Garden Variety could face trouble for offering rewards points to customers in exchange for writing product reviews on the company’s website.

“You’re not allowed to compensate someone for writing a review,” he said.

Cannabis business lawyer Whitney Abrams also doubts whether Garden Variety’s rewards program complies with the Cannabis Act, and said she’d advise her clients to avoid such loyalty initiatives. She pointed out that the law itself identifies “(protecting) young persons and others from inducements to use cannabis” as a key objective.

“If you’re looking at really the spirit of what this legislation is, it’s the opposite of what they’re doing,” said Abrams, who practises with Minden Gross LLP in Toronto.

Abrams said her cannabis-industry clients are still trying to parse out exactly what’s allowed under the six-month-old law — and it’s not always obvious.

“I think everybody’s trying to navigate the waters, but when you’re doing that, our advice is always to take the more conservative approach,” she said.

Maurer said he gets regular calls from clients who need guidance on what the law permits and what it prohibits.

“Until people get more comfort with what’s allowed and what’s not, there’s a lot of uncertainty and people are just going to do things,” he said.

“Because it’s not even clear right now, when you do something like these points, is that OK? Has the government looked at it and (they’re) onside, or did they just not notice?”

Although cannabis inducements and promotions are covered under the federal law, provincial and territorial governments are directly responsible for supervising the non-medical cannabis stores who might use those marketing tactics. The Liquor, Gaming and Cannabis Authority of Manitoba, which regulates retail stores in the province, said Manitoba’s cannabis laws don’t address promotions and inducements.

“These issues were discussed as the provincial laws were developed, but ultimately the province decided that we did not want to duplicate federal requirements,” LGCA spokeswoman Kristianne Dechant said in a statement.

LGCA inspectors focus on enforcing provincial law, but will notify Health Canada of possible breaches of federal law observed during visits to Manitoba’s cannabis stores, Dechant wrote. She wouldn’t comment on whether LGCA has referred the issue of Garden Variety’s loyalty program to Health Canada.

solomon.israel@theleafnews.com

@sol_israel