JACQUIE MILLER, Postmedia Network, Inc.

Cannabis companies are intensifying efforts to get attention for their brands even as Health Canada launches another crackdown on the promotion of pot.

Oct 11, 2018  -There appears to be a game of regulatory chicken emerging. Some companies are seemingly testing the boundaries with billboards, digital ads, websites describing their recreational marijuana, free events and sponsorships.

Health Canada says it has issued five warnings to companies since July, “requiring that they take immediate corrective measures to bring their activities into compliance with the current law.”

The new cannabis law will ban mass advertising, sponsorship, contests, endorsements and promotions that associate cannabis with attractive lifestyles. But that doesn’t go into effect until next week, when Canada legalizes recreational marijuana.

Until then, companies must abide by the Narcotic Control Regulations, which ban advertising cannabis, directly or indirectly, to the general public.

Under those regulations, it’s not entirely clear what is out-of-bounds.

Health Canada officials declined to identify the companies that have been warned, but listed some activities they have engaged in that it considers inappropriate: sponsoring events such as music festivals; engaging in promotional activities at events, booths and pop-up venues; and publishing advertisements about cannabis on company websites and social media platforms.

Companies say they are abiding by the current law as they interpret it. They say they are providing information, not advertising, for instance, or promoting their company, not cannabis. Most of the websites about recreational cannabis have “age-gates” that ask readers to check a box confirming they are 19 before reading the contents.

Toronto has been at the epicentre for the marketing buzz.

Aurora, one of the country’s largest cannabis growers, operated a pop-up “House of Aurora” for parties and news conferences with the stars at the Toronto International Film Festival. The company was a sponsor of the festival. Aphria, another large grower, unveiled a mobile information truck to dispense information about its Solei brand.

Tweed spokesman Jordan Sinclair says the company has cancelled some of its marketing and outreach activities based on recent guidance from Health Canada. For example, Tweed will stop the adult-only kombucha bars it had been operating at public events such as festivals and Pride parades.

“We’re always appreciative of the guidance they provide as we interpret the regulations and introduce campaigns we believe to be within those regulations,” he said in a statement.

“Our intention is not to promote the consumption or sale of cannabis to the general public in a manner that is not consistent with the law. Our goal is to engage the public in a dialogue where they feel comfortable approaching Tweed, and other licensed (cannabis) producers, to ask questions and gather information in a safe and well-informed way.”

A representative for Aurora said officials were too busy preparing for legalization to make an official available to answer queries from this newspaper on marketing and whether the company had received a warning from Health Canada.

Aurora’s billboards say: “How will cannabis legalization change your life? There’s more to the conversation,” and direct viewers to the AuroraCan.com website, which offers the opportunity to sign up for more information.

Aurora also sponsored free concerts across the country this summer by popular acts such as the Kings of Leon and The Sheepdogs.

In an earlier interview, Aurora spokesman Cam Battley said officials believed the concerts complied with the law because they were advertised under the name “Aurora,” not “Aurora Cannabis Inc.,” the company’s official name. Aurora advertised the concerts as a celebration of arts, legalization and culture.

U.S. biotechnology company executive David Sutton said the battling billboards by Tweed and Aurora remind him of the marketing wars between two other corporate giants. “They are going to be like Coke and Pepsi,” he joked. Sutton, president of NanoSphere Health Sciences, which develops delivery systems for cannabis products, was in Canada recently to speak at a cannabis conference about marketing.

There is a lot of money at stake as companies jostle for position in the recreational market, he said in an interview. “I think companies are going to take a lot of risks, and ask for forgiveness later.

“You have to look at the opportunity cost. If you toe the line, you may be 100 per cent compliant (with the law) but you may be zero per cent profitable.”

One company may end up as the enforcement guinea pig, said Sutton. “(Companies) are going to continue down this path of testing the waters, walking that line, until Health Canada either continues to passively say, ‘Uh oh, you shouldn’t be doing that,’ or they say ‘That’s enough, we are placing sanctions on you,’ and they come down hard.”

Sutton considers Canada’s cannabis advertising restrictions “grossly overstepping and prohibiting normal business activity.” If companies can’t promote their brands it stifles competition, which is essential to push them to improve the quality of their products and allow the best operators to rise to the top, he said.

“It’s naive at best to allow something, then basically lock it up in the dark. It’s going to be very interesting.”

David Hammond, a professor of public health at the University of Waterloo who has testified at Canadian parliamentary committees about cannabis advertising, said he’s been taken aback by the prominence and pervasiveness of marketing in recent weeks.

Health Canada should provide more guidance about what is allowed, and crack down on companies that are overstepping the limits, he said.

“From a public health regulator standpoint, you don’t want to come out and be soft. It’s like raising a child. It’s harder to say no after you’ve said yes five times.”

The companies, said Hammond, should prove they are responsible by abiding by the spirit and the letter of current regulations and the new law.

A spokesperson for Gatineau’s Hexo Corp. says there is confusion among cannabis companies about what promotions are allowed.

“There are a lot of different interpretations as to what the (new) legislation and (current) regulations say,” said Terry Lake, Hexo’s vice-president of corporate social responsibility. “Until things are tested, it’s always hard to know exactly how things will be interpreted. The industry is struggling with it and Health Canada is, too. We’re all in this together.”

Companies may be “pushing the envelope a little bit,” said Lake, but “no one is trying to go outside the lines. We are trying to find out where the lines are.”

The ads promote the company, not cannabis, said Lake. “Really, it’s geared to investors more than anything, people concerned about whether the industry is ready, whether Hexo is ready on Oct. 17. We’re trying to say ‘We are the company, we are ready, the industry is ready.’ That is quite different than saying, ‘Buy our cannabis.’”

Whether it’s reasonable to make a distinction between the company and the products it sells is “a very good question,” acknowledged Lake. One of the challenges companies face is that Health Canada does not approve cannabis marketing in advance; the department just lets companies know if they’ve crossed the line.

“With time will come clarity,” said Lake. “But in the meantime, many of us are struggling, yet we want to make sure we get some messaging out there about our company, particularly from an investor viewpoint, because it’s such a critical stage in this industry. Companies that get a good start will be successful.”

In Hammond’s view, the billboards, digital ads and posters all promote cannabis.

“From a consumer standpoint, they are seeing a poster, or clicking on a link that brings them to information about cannabis products. Even if there is a legal distinction (between the company and the product) it’s immaterial in terms of its impact on consumers.”

Health Canada should clearly tell companies what is allowed, said Matt Maurer, a Toronto lawyer specializing in cannabis business law. And while he understands that Health Canada may not want to embarrass companies by publicizing which ones have been warned and for what activities, doing so would help everyone understand the rules, he said.

Health Canada said it will investigate digital ads and the companies that publish them “if warranted,” with each situation assessed on a “case by case basis.”

“The purpose of any message by a licensed (cannabis) producer, its content, its context and its intended audience are all factors to consider when determining whether that message falls within the definition of advertising,” said the Health Canada statement.

The Narcotic Control Regulations define advertisement as “any representation by any means … for the purpose of promoting directly or indirectly the sale of a narcotic,” said the statement.

Postmedia, which owns this newspaper, publishes digital ads on its cannabis news site thegrowthop.com as well as websites for papers in the chain. It declined to answer questions about whether the ads comply with the law. The company provided this statement from Phyllise Gelfand, vice-president of communications: “Postmedia accepts cannabis-related advertising across our print and digital brands. It’s a rapidly evolving area and we endeavour to stay apprised of applicable guidelines.”

The Winnipeg Free Press and its cannabis website, theleafnews.com, runs ads for Manitoba-based Delta 9, which grows cannabis and will soon operate stores. The newspaper won’t accept ads that describe products, said Catharine Beattie, advertising account executive. She said she’s doing her best to understand the rules and comply with them.

Health Canada has also said it’s concerned about some company websites that advertise cannabis. It’s not clear which websites, or what they contain that runs afoul of the rules. Some of the websites offer little more than a chance to sign up for more information, while others include photos and descriptions of cannabis strains.

Who has been warned?

Health Canada says it has given written or verbal warnings to seven cannabis companies about eight instances since last spring that it believes violate regulations against advertising pot. Five of those warnings have been since July.

This newspaper reported on two of those instances last spring, when Aphria and MedReleaf (a company since bought by Aurora) were asked to remove content on websites introducing their recreational marijuana brands. A spokesperson for Aphria said the company has not received any other warnings. “Aphria has made every effort to comply with Health Canada regulations as we understand them, and we will continue to do so once the regulations change come Oct. 17,” said a statement from Tamara MacGregor, VP of communications.

Health Canada, in a statement, said it does not usually name companies that have been warned if they “take corrective measures to bring their activities into compliance.”

The department works collaboratively with cannabis growers to “educate and promote compliance with their legal obligations,” said a statement from the department.

“To date, all licensed producers contacted have or are in the midst of addressing the issues raised by Health Canada.”

Tweed Inc. has changed some of its marketing after conversations with Health Canada this summer.

Two other large growers, Aurora and Tilray, did not respond to questions about their marketing.

Officials at five other major cannabis companies contacted said they had not received any warnings: CannTrust, OrganiGram, Hexo, WeedMD and The Cronos Group. The CEO of The Supreme Cannabis Company said he doesn’t comment on regulatory matters.

Health Canada officials held a conference call last month with cannabis growers to discuss advertising restrictions.

Federal officials “emphasized that the intent of the new law is to minimize promotion as much as possible and to keep brands away from youth,” said Ray Gracewood, the chief commercial officer of OrganiGram in New Brunswick, who took part in the call.

Companies were told that “In the spirit of the act, any initiative that is for the purpose of brand promotion is offside,” Gracewood said.

“We certainly have not been warned,” said Gracewood of his company. “We’ve tried to be as cognizant as possible of the regulations.”

Some companies are heading into grey areas, such as pop-up events that combine education about cannabis with free swag, which, in his opinion, is clearly promotional, he said.

“If you get into the platforms of some of the creative strategies of some of the cannabis companies here in Canada over the last few months, that has been the logic, that as long as I wrap it up in education it should be fine.

“It’s still going to be very interesting over the next weeks and beyond to see what kind of repercussions are put in place for (growers) that either choose not to comply or try to get creative in how they skirt the rules.”

Up Cannabis, the company that has a financial and creative partnership with The Tragically Hip, got a call from Health Canada officials in the summer, said Jay Wilgar, CEO of parent company Newstrike Brands Ltd.

Health Canada had questions about a party Up hosted in July for the media and others to introduce the company’s brands, said Wilgar. It was a private event intended to educate, he said. “We talked about our company, our story, the products.” Up did not receive a written complaint, and has a good relationship with Health Canada, he said.

Wilgar said his company’s strategy does not include mass advertising such as billboards, and he assumed they would not be allowed anyway.

“I’m actually driving along the Gardiner (Expressway) in Toronto,” said Wilgar during a phone interview, “where there are three large billboards up by my competitors.”



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