Question Period Note: Cannabis Black Market

The government is committed to maintaining the integrity of the legal cannabis market by displacing the black market.

• Since its coming into force on October 17, 2018, the Cannabis Act has created a strict legal framework for controlling the production, distribution, sale and possession of cannabis across Canada.

• This legislation is designed to keep cannabis out of the hands of youth and profits out of the pockets of organized crime by fostering a robust legal and regulated industry.

• A well-regulated legal cannabis industry is in place and is significantly displacing the black market. Today, the legal cannabis market accounts for approximately 67% of market shares.

• However, there continues to be a well-entrenched illegal market in place. As a result, the Government is taking steps to disrupt the cannabis illegal market and ensure that organized crime doesn’t infiltrate the legal framework by working in partnership with other federal departments, provinces, territories, as well as law enforcement.

• Since legalization, the Government’s focus has been to direct cannabis consumers to the legal marketplace. Compliance and enforcement of the Cannabis Act is a shared responsibility.

• That is why the Government has been working with provincial and territorial partners, as well as law enforcement agencies, to disrupt and limit the visibility of illicit online stores, intercept illicit packages through the mail system, and increase public awareness of health and safety facts of cannabis use.

One of the main goals of the legalization of cannabis was to reduce criminal activity by keeping profits out of the pockets of criminals.

The illicit drug trade provides organized crime with one of its most financially lucrative criminal markets. Leading up to the implementation of the Cannabis Act, approximately 44% of assessed Organized Crime Groups (OCGs) were involved in the cannabis market. According to Statistics Canada data, in the first three quarters of 2018 (prior to legalization), the cannabis black market in Canada accounted for approximately $3.8B in retail sales.

In September 2017, the government announced up to $274 million to support law enforcement and border efforts to detect and deter drug-impaired driving and enforce the proposed cannabis legalization and regulation. Of this amount, the Government has committed up to $113.5 million in federal funding, over five years, to Public Safety Canada, the Royal Canadian Mounted Police (RCMP), and the Canada Border Services Agency (CBSA) to develop policy, ensure organized crime does not infiltrate the legalized system, and keep cannabis from crossing our borders.

Current situation

In the second quarter of 2022, the legal cannabis market accounted for 67.2% of total market shares. According to latest Canadian Cannabis Survey (CCS) results, sixty-one percent (61%) of Canadian cannabis consumers reported they had made a purchase from a legal storefront in 2022, an increase from 53% in 2021. Consumers are turning to the illegal market for a variety of reasons, including but not limited to: higher prices, limited selection, and a scarcity of licensed stores in their area. According to Statistics Canada, in 2019, a gram of legal cannabis costs 55 per cent more than one of illicit cannabis ($10.30/gram vs $5.73/ gram). In 2022, the price difference has started to narrow and some legal suppliers are now competing with illegal market prices, however, this is not the case everywhere in Canada.

The Criminal Intelligence Service of Canada (CISC) monitors the involvement of organized crime in the Canadian criminal marketplace. In their latest report published in April 2019, CISC reported that of the assessed OCGs involved in the illegal cannabis market, almost all of these groups were also involved in at least one other illicit drug market and were unlikely to be disrupted by legalization, given their alternate streams of revenue. CISC reported that although the new cannabis legislation makes it harder for OCGs to infiltrate the legal regime, these groups are finding new ways and adapting to changes in the market.

During social distancing measures adopted to counter the COVID-19 pandemic, jurisdictions across Canada reported seeing an increase in cannabis sales, which may have been attributed to consumers stocking up on products. More recently, some jurisdictions are indicating that the increase in consumer demand may be levelling off. Some media predicted that the industry would see a shortage of cannabis in response to the increased demand; however, jurisdictions are indicating that inventory levels remain adequate. Health Canada’s market data confirms this trend, showing that in March 2022, there was 4 times more packaged cannabis inventory than meets demand.

Government Action

Since legalization, the Government’s focus has been to direct cannabis consumers to the legal marketplace. The Government has been working with provincial and territorial partners, as well as law enforcement agencies to implement the Online Illicit Sales Action Plan, which is aimed at limiting the online visibility of illicit stores by seizing website domains, intercepting packages through the mail system, and increasing public awareness of health and safety facts of cannabis use. In fact, most provinces and territories in Canada maintain an official list of authorized cannabis retailers in their respective jurisdiction to better inform Canadians.

In addition, as Canada’s national police force, the RCMP continues to contribute to the implementation of the Cannabis Act by continuing to work towards its strategic priority of combating organized crime and through their mandate to prevent, disrupt and investigate serious criminal activity in partnership with contract partners, law enforcement, outreach services and communities across Canada.

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