The AGCO published, on January 2, 2019, the Rules for the Cannabis Retail Store Licensing Expression of Interest Lottery to select potential operators for the initial 25 retail store authorizations.
The Rules are designed to ensure that the 25 stores open on April 1, 2019. The Expression of Interest and Lottery process was put in place to address the Government of Ontario’s decision to phase-in the introduction of retail stores for the sale of cannabis.
The Government had initially (October 2017) put in place an open market approach; given supply issues for the supply of lawful cannabis from federally-licensed producers of cannabis, the Government decided to limit the number of retail outlets to 25, distributed by Region throughout Ontario. The phased approached is discussed in the previous Briefing Note Cannabis Reboot: Dealing with Shortages in Ontario. The AGCO received its policy direction in Regulation 497/18, which amended Ontario Regulation 468/18. It is expected that O.Reg. 468/18 will be amended prior to December 13, 2019 to implement the open market approach, subject to there being sufficient supply of lawful cannabis.
Rules for the Expression of Interest Lottery
Be Sure You Want to Enter the Lottery
The Rules are set out on the AGCO’s website at https://www.agco.ca/cannabis/cannabis-retail-lottery. There are two important points to make based on the Rules:
- If the applicant is not confident that it will be “ready, willing and able” to open its retail store on April 1, 2019, it should consider very seriously not submitting to the Expression of Interest and not participating in the EOI Lottery. The Rules are designed to ensure that only those applicants who will be able to open on April 1, 2019, if successful in the Lottery, apply. There are significant penalties for failing to open on April 1, 2019.
- Any applicants should be very clear on their legal and organizational structures and that there are no issues with respect to “affiliates” when the Expression of Interest is submitted. Applicants should also be very certain that they are fully compliant with the Rules throughout the process and that they will be in compliance with Ontario Regulation 468/18 and the Registrar’s Standards as of April 1, 2019. Failure to comply with the Rules, for example, can result in severe penalties including disqualification. And this disqualification can occur any time between January 2, 2019 and December 13, 2019 – even after the store has been opened.
Process and Timeline for Expression of Interest and Lottery
The Rules for the Cannabis Retail Store Licensing Expression of Interest Lottery have been reviewed by the AGCO’s fairness monitor, accounting firm KPMG, which will also be monitoring compliance and implementation. The lottery being used was developed by the AGCO’s Gaming Laboratory, which is internationally-accredited. In addition, Gaming Laboratories International, a recognized testing laboratory, reviewed and certified the AGCO’s lottery system.
That system is intended to ensure that “winners” for the 25 retail outlets are selected on a random basis in accordance with the Rules. The AGCO will be publishing the results of the lottery – including those selected and those who are placed on the “waiting list” – and KPMG’s report as the fairness monitor. It is evident from the Rules, the processes that have been put in place, and the accountability measures, including the use of a fairness monitor, that the AGCO’s intention is to conduct a lottery that is fair and transparent.
The AGCO has included in the Rules its timeline, which is summarized below in the AGCO’s infographic. The initial key dates leading to the Selection List and the Waiting List are:
- January 2 – Rules are published and in effect
- January 7 at 12:01 a.m. EST to January 9 at 12:00 p.m. (noon) EST – Applicants may submit an Expression of Interest
- January 11 – Lottery selection will take place
- January 12 – AGCO will publish the Selected List (25 operators for 25 retail sites) and the Waiting List for each Region