Cannabis Advertising Regulations: A Step Closer to Clarity
On June 12, 2023, a panel of the Alberta Gaming, Liquor and Cannabis Commission (the “AGLC”) released its decision in the matter of Canna Cabana Inc.  (the “Decision”). The Decision provides valuable (and previously lacking) guidance regarding the permissible content for cannabis advertisements and promotions in Alberta. Further, given similarities among advertising rules across the country, the Decision is likely to be of assistance to cannabis advertisers in other jurisdictions as well.
The AGLC, as Alberta’s cannabis regulator, has published policies for cannabis advertising and promotions in the Retail Cannabis Store Handbook (the “Retail Handbook”) and the Cannabis Representative Handbook. Perhaps out of a desire to maintain flexibility, the AGLC’s advertising policies are drafted generally, with little in the way of guidelines or examples. Failure to comply with the AGLC’s advertising policies can result in license suspensions and significant fines.
While cannabis advertisers are encouraged to consult directly with AGLC’s Regulatory Services Division (the “RSD”) regarding proposed advertisements and promotions, assessments are done on a case-by-case basis, and advertisers are largely left to interpret the policy on their own, resulting in significant financial, operational and reputational risk. The Decision is the first significant commentary from the AGLC to clarify and define certain parameters for compliant cannabis advertising.
In late 2022, Canna Cabana Inc. (the “Retailer”), one of Canada’s largest chains of cannabis dispensaries, sent a promotional email to its members, featuring:
- a graphic accompanied by the text: “get higher than your streaming bill, for less” and “maximize your evening in” (the “Tagline”); and
- anonymized product review quotations, including:
- “Great for a pleasant afternoon reading a book or doing an odd job”;
- “Love this one. Relaxing and chill without the need for a nap. There’s no harsh burn or coughing. Great high”; and
- “Great taste, wicked high! Freaking amazing. What a treat!”
(collectively, the “Customer Reviews”).
Acting on a public complaint, the RSD investigated and determined that the Tagline and Customer Reviews were non-compliant with AGLC policy. Specifically, the RSD alleged that the Retailer contravened the AGLC’s policies under s. 6.1.5 of the Retail Handbook, which prohibit:
- the promotion of irresponsible cannabis consumption or service (s. 6.1.5(l));
- the use of testimonials or endorsements (s. 6.1.5(c)); and
- claims of positive or negative impacts as a result of cannabis usage (s. 6.1.5(i)).
The RSD imposed an administrative penalty of $25,000 or a 100-day suspension (the “Administrative Sanction”).
The Retailer requested review by a panel (the “Panel”) of the AGLC. Two main issues were considered by the Panel:
- Did the Retailer fail to comply with the advertising policies; and
- If so, did the Retailer take all reasonable steps to prevent contravention of the advertising policies, in accordance with s. 121 of the Gaming, Liquor and Cannabis Act  (the “Act”)?
The Panel concluded that the Retailer failed to comply with, and failed to take all reasonable steps to prevent its contraventions of, the AGLC’s advertising policies. Accordingly, the Panel confirmed the Administrative Sanction imposed by the RSD.
- The Retailer Failed to Comply with Advertising Policies
The RSD submitted that the Retailer’s advertisements breached the advertising policies in three ways: (i) the Tagline promoted irresponsible consumption; (ii) the Customer Reviews were prohibited testimonials or endorsements; and (iii) the Customer Reviews claimed positive impacts from the usage of cannabis products, in particular the enhancement of recreation.
The RSD submitted that the Tagline encouraged use of cannabis for the purpose of becoming intoxicated, which brought it under the prohibition on promoting ”the irresponsible consumption of cannabis. ” The RSD drew an analogy between the use of the phrase “get higher” in the Tagline, with a direction to “get drunker” in a hypothetical liquor advertisement, and argued that the Tagline implied the existence of varying degrees of intoxication and encouraged consumers to achieve higher degrees of intoxication through excessive consumption.
The Retailer argued that a reasonable reader of the Retailer Handbook would interpret “irresponsible cannabis consumption” as synonymous with “illegal, excessive or unsafe” consumption.  The Retailer submitted that the Tagline promoted only moderate, legal and safe consumption. The Retailer drew a distinction between the message “get higher than your streaming bill,” which it argued did not promote irresponsible consumption, and a hypothetical tagline stating “get higher than the moon,” which would promote irresponsible consumption. Further, the Retailer argued that one could “maximize [their] evening in” responsibly.
The Panel agreed with the RSD, concluding that the phrase, “get higher” does not promote moderate consumption, but rather “uses a comparative to promote irresponsible (a higher degree of) consumption.” 
Regarding the Customer Reviews, the Retailer argued that the prohibition on testimonials and endorsements contemplated only endorsements by recognizable and influential public figures (e.g., celebrities and social media influencers), and excluded anonymized reviews from ordinary members of the general public. The Retailer also argued that the Customer Reviews were not an endorsement by the Retailer itself, and “should not be considered promotions by [the Retailer] about the impacts of a product.” 
The RSD submitted that the Customer Reviews qualified as endorsements or testimonials, and contained descriptors that clearly referred to the positive impacts associated with cannabis use. Terms such as “relaxed,” “chill,” and “great taste,” were highlighted as claiming positive impacts arising from cannabis usage.
The Panel again sided with the RSD, holding that neither the advertising policies nor legislation limited the scope of endorsements and testimonials to statements by identifiable persons. The Panel further noted that an employee of the Retailer had referred to including the testimonials as a “temporary lapse in judgment.” Further, the Panel held that the Customer Reviews themselves, by including phrases such as “relaxing and chill” and “great for a pleasant afternoon reading a book,” impermissibly claimed positive impacts from cannabis use.
Finally, the Panel observed that the advertising policies in the Retailer Handbook were derived from the federal Cannabis Act and are identical to policies imposed in other provinces. Accordingly, in the view of the Panel, the policies “should be well known and understood by [the Retailer].” 
- The Retailer Did Not Take All Reasonable Steps to Prevent Contravention
The Retailer submitted that the AGLC’s advertising policies were ambiguous and that it had taken all reasonable steps to prevent the alleged contraventions. The Retailer pointed to the sophisticated internal processes it had implemented to address compliance with AGLC policies, including the establishment of a dedicated compliance team that liaised with the Retailer’s other departments on compliance issues, and which was in regular contact with the AGLC.
The Retailer’s compliance team conducted weekly and monthly compliance audits on all online activities and conducted in-store spot checks. The compliance team also relied on compliance guidelines that the RSD reviewed and confirmed contained accurate information. Employees in all departments, especially in marketing, were provided with education on these guidelines. The compliance team also communicated regularly with the Retailer’s marketing department to discuss advertising and promotional strategies.
The Retailer had a demonstrated history of voluntary communication with the RSD to clarify questions about the interpretation of the AGLC’s advertisement policies. During the hearing, the RSD confirmed its willingness to provide feedback on the compliance of advertisement materials, but cautioned that it did not “sign-off on” or approve submitted advertisements. In this instance, the Retailer had not submitted the offending advertisements to the RSD prior to publication.
The Retailer also submitted that although the extent of its violation was minor, the consequences to it were significant. The contravention in question was considered a second violation for the Retailer because it had previously received a caution from the RSD on another advertising matter. Under the AGLC’s guidelines for administrative sanctions, a third violation would result in an immediate license suspension, and the closure of the Retailer’s 77 stores in Alberta pending a hearing, with devastating results for the Retailer’s business.
The RSD argued that the Retailer had previous training and had been in communication with the AGLC about the advertising policies, and therefore had sufficient knowledge of those policies, and the demonstrated ability to inquire with the AGLC regarding whether proposed advertisements were compliant. The RSD submitted that the Retailer had failed, in this instance, to perform its due diligence.
The Panel again sided with the RSD and found that the Retailer had sufficient access to resources to inform their promotional decisions and failed to take all reasonable steps to avoid non-compliance.
Potential for Judicial Review?
A judicial review of the Decision is likely, including given the significant penalty imposed and the potential consequences to the Retailer of subsequent contraventions. It may be argued, for example, that the Tagline (“maximize your evening in”) encourages domestic as opposed to public cannabis use, and therefore tacitly encourages responsible consumption in that regard. Further, one could argue that the RSD’s analogy between liquor and cannabis use is flawed and inconsistent with how consumers actually use these products; e.g., most cannabis use – even in moderation - involves some degree of “getting high”; conversely, not all liquor use – and arguably no “moderate” liquor use – involves “getting drunk,” rendering the analogy suspect.
Further, regarding the Retailer’s attempts at avoiding contraventions, the Panel suggested that the Retailer having an internal compliance team, and its history of consultation with the RSD, rather than being evidence of “due diligence,” served only to increase the threshold for the Retailer to establish its defense. This conclusion appears to be out of step with other AGLC panel decisions (including those canvassed in our companion blog post here), where similar conduct and internal controls have been treated as mitigating factors.
Should a judicial review proceed, we will report on the outcome here.
Notwithstanding the potential for judicial review, the Decision provides some helpful – and unprecedented - guidance for cannabis licensees seeking to maintain compliance when promoting their businesses.
Some key takeaways from the Decision include:
- Promotion of irresponsible consumption includes promoting “a higher degree of consumption.”  Retailers (and their advertisers) should avoid comparative phrases such as “get higher,” which in the AGLC’s current view promotes immoderation. It may be prudent to avoid references to “getting high” in advertisements altogether.
- The prohibition on testimonials and endorsements is not limited to recognizable public figures or celebrities, but also includes anonymous consumer product reviews. In any event, consumer reviews are also likely to contravene the prohibition on claiming positive impacts from cannabis consumption.
- Phrases describing positive impacts of cannabis consumption (e.g., “wicked high,” “relaxing and chill,” or ”great for a pleasant afternoon reading a book”) should be avoided. Consider limiting the content of advertisements to identifying the product being promoted, and its objective characteristics such as THC and CBD content, without connecting those characteristics to any specific subjective effects (e.g., relaxation, mental stimulation, or pain relief).
- Reasonable steps to maintain compliance may require more than establishing internal processes for compliance, including consultation with the appropriate provincial regulator whenever an advertising campaign approaches a “gray area.” A failure to consult with the regulator regarding an offending advertisement, after establishing a general practice of consultation, will tend to undermine the legitimacy of a “due diligence” defense.
- The RSD will not “sign off” or “approve” of submitted advertisements; however, running proposed advertisements past the RSD (or the other provinces’ equivalents thereof) will tend to support a due diligence defense, which in many cases results in a reduction of the applicable administrative penalties, and will help to identify and avoid non-compliant advertising before it occurs.
McCarthy Tétrault LLP regularly advises participants in the cannabis industry, including cannabis suppliers, distributors, retailers, and advertisers, regarding compliance with provincial and federal regulations.
Canna Cabana Inc (12 June 2023), online: AGLC at paragraph 102. This conclusion appears vulnerable to challenge; one might reasonably question whether the scarcity of detail and guidance in Alberta’s advertising policies can be justified by a scarcity of detail and guidance in other jurisdictions.