Since the AGCO’s first announcement about the private retail process in Ontario, aspiring private cannabis retailers in Ontario anxiously awaited December 17th, the day upon which the AGCO formerly stated it would release its application process. On December 13, just before “application release day” the government announced its new lottery process as a new way to allocate cannabis retail licenses in a “phased approach”.
The AGCO’s stated reason for the change was a shortage of cannabis supply from federally licensed producers. As a result of a limited supply, the AGCO will now only allow 25 stores to be licensed off the bat. This is a huge change for many large players who expected to be able to open up to 75 stores under one operator’s license.
The government released a new regulation under the Cannabis License Act, 2018, called Ontario Regulation 497/18 (the “Lottery Regulation”), which allows a lottery system to be implemented to determine who will be able to apply for one of these highly coveted 25 stores. The AGCO will run the lottery which will be overseen by a third-party fairness monitor, who they are currently sourcing.
Those who wish to be considered for the lottery will be required to submit an Expression of Interest through the AGCO’s online form, from January 7-9, 2019. The Expression of Interest will need to set out the Region in which the person wishes to apply for and locate their cannabis retail store if they are successful in the lottery.
The Lottery Regulation states that persons may submit Expressions of Interest with respect to more than one region, but may only be selected in relation to one of the Expressions of Interest. A person who submits to the Registrar more than one Expression of Interest with respect to the same Region may not apply for a retail operator license. It will be important to be mindful of this and not try to skirt the rules, the Lottery Regulation specifically states that if two or more persons who are affiliates of one another submit to the Registrar an Expression of Interest with respect to the same Region, those affiliates may not apply for a retail operator license.
Choose your region wisely, as an applicant for a retail store authorization is not eligible to be issued an authorization in respect of a cannabis retail store that is located in a Region other than the Region identified in the expression of interest in relation to which the applicant was permitted to apply for a retail operator license.
Although many independent retailers worry that the large players and licensed producers will dominate the lottery process, some will be calmed by the fact that at the outset, under the Lottery Regulation, licensed producers and/or affiliates of licensed producers will not be eligible to enter the lottery and apply for the first 25 retail stores.
The AGCO has not yet released details on what else will be involved in the submission of the Expression of Interest. The rules of the lottery will be published once the third party fairness monitor has been retained and briefed with the rules. The expectation (or hope, rather) is that the lottery rules will be made public by the AGCO in the first couple of days of the new year.
The Lottery Regulation provides information as to the allocation of the 25 initial retail stores, and does so by defining Regions made up of census divisions, which are divisions as identified in the 2016 Census of Canada, as reported by Stats Canada.
The Regions are:
The East region will be allocated a maximum of five stores, the GTA Region will be allocated a maximum of six stores, the North Region will be allocated a maximum of two stores, the Toronto Region will be allocated a maximum of five stores, and the West Region will be allocated a maximum of seven stores.
When considering where one may submit an Expression of Interest, it is important to keep track of the municipalities who have opted out during their one-time window, open until January 22, 2019. It is also important to note that retail stores will not be issued in municipalities with populations of less than 50,000.
So far, the following municipalities have opted-out of cannabis retail and reported their opt-out to the AGCO:
The AGCO has not yet released the fees associated with submission and if the required fees to apply for a Retail Operator Licence, Retail Manager Licence, or Retail Store Authorization will be required to be paid up front and if so, if they will be refundable or not.
Continue to check CCL for all changes and releases relating to the lottery process and beyond.