Pot shops face dilemma in bid for legitimacy

Owners of illegal pot dispensaries in Ottawa are welcoming the shift in the province's approach to retail cannabis sales, but say they're facing a serious dilemma in their quest for legitimacy.

Illegal dispensaries must shut down before applying for licence to operate in Ontario

Illicit marijuana dispensaries in Ontario will be allowed to bid for licences to begin operating legally next April, but must close their doors in the meantime. (David Horemans/CBC)

Owners of illegal pot dispensaries in Ottawa are welcoming the shift in the province's approach to retail cannabis sales, but say they're facing a serious dilemma in their quest for legitimacy.

Under the plan announced Monday, the province will handle online sales of marijuana when it's made legal Oct. 17, but private retailers will be allowed to sell the drug directly to customers beginning next April.

"[Overall] it's positive news," said Benoit-Claude Briand-Turpin, a volunteer at Cannabliss, one of more than a dozen illegal pot shops operating in Ottawa.

In February, CBC News counted 17 of the dispensaries operating in the city, but it's believed some have closed or relocated since, while others have opened.

Currently, only licensed producers regulated by Health Canada are allowed to sell to authorized medical marijuana patients, and only by mail. Canabliss and stores like it are currently operating outside the law — at least for now.

The illegal dispensaries have been the subject of numerous police busts since 2016, and were expecting to face even harsher penalties once recreational pot becomes legal in October.

Cannabliss on Preston Street was one of the illegal pot shops raided by Ottawa police earlier this year, but re-opened within a few weeks. (Simon Lasalle/Radio-Canada)

New direction

The new direction announced by the Ontario government this week appears to offer the illegal shops a reprieve, but there's a catch.

They'd be required to close their doors before applying for a license under the new rules.

"We won't want to do business with people running an illegal business," Ontario Finance Minister Vic Fedeli said Monday.

Briand-Turpin wouldn't say whether Cannabliss will comply.

"It's possible, but I'd rather not comment further on that," he said.

CannaBliss volunteer Benoit-Claude Briand-Turpin says he doesn't see Ontario's new pot plan rolling out smoothly, even though it is positive news for shops. 0:27

Shops reluctant to close

Shawn MacAleese, a former pot shop worker who says he's authorized to speak on behalf of several Ottawa dispensaries, said stores will be reluctant to lose out on sales, sever ties with loyal customers and cancel leases, all with no guarantee of a licence come April.

"It becomes frustrating that they have to shut down in the interim," MacAleese said. "The frustration is not knowing whether that's going to give you any advantage."

MacAleese said there's also a danger customers will turn to riskier methods of procuring their marijuana if their regular source shuts down.

Shawn MacAleese says the government's offer presents small pot dispensaries with a dilemma. (Darren Major/CBC)

Fierce competition

Competition for the retail licences is expected to be fierce. 

One of the largest businesses vying for a piece of the action, National Access Cannabis, has already applied to open retail outlets in provinces that have opened the door to private marijuana sellers.

The Ottawa-based company's CEO, Mark Goliger, said it also intends to apply for retail licences in Ontario municipalities including Ottawa and Toronto.

The company has already put together an agreement with Second Cup that could see some of the coffee chain's  locations converted to pot shops. 

Smiths Falls-based cannabis producer Canopy Growth is making moves to enter the retail market. (Chris Wattie/Reuters)

Industry giants making moves

Meanwhile some established cannabis producers have put together deals with retail operators to compete for licences.

Industry giant Canopy Growth, based in Smiths Falls, Ont., has acquired pot retailer Hiku, which has already secured licences to operate in other provinces.  

"If [Canopy Growth] chooses to be aggressive, they can own the whole market," Goliger said.

Goliger said he'd like to see rules limiting ownership so smaller operators don't get squeezed out of the market.

Other provinces have already taken steps to avoid pot monopolies: the Alberta Gaming and Liquor Commission caps ownership at 15 per cent of stores in the province, while B.C.'s Liquor and Cannabis Regulation Branch restricts owners to eight outlets. 

"There's a fine balance that has to be struck here," Goliger said.