DOES ONTARIO DESERVE ANOTHER MONOPOLY?

(Originally written for Lift Cannabis on 21 June 2016)

Ontario may seek an LCBO-like model to control marijuana distribution but this approach with alcohol, tobacco and gambling has done a poor job to limit use.

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The Ontario Finance Minister tossed in his two-cents this past week on the commercialization of cannabis for personal use, reinforcing Premier Wynne’s previously stated support for an LCBO-style distribution model in the province.

When asked about the future of dispensaries in the province, Finance Minister Charles Sousa made it clear: “I, at least, don’t see that being the distribution mechanism. It’s going to have to be controlled.” He went on to highlight his government’s record in the “responsible management” of other similar industries:

“Frankly, we’ve got a lot to draw on. We’ve got a lot of experience already when it comes to regulating alcohol, regulating tobacco (and) regulating gaming. I have all these agencies reporting up to me right now relative to this. That is helpful as we proceed in this discussion,” the finance minister said.

Minister Sousa is right – having been in power since 2003, the Ontario Liberal’s have given us plenty to draw on. Let’s break down the Minister’s claims to see if they have earned the right to another government run monopoly.

Regulating Alcohol

For those who are not familiar, liquor distribution in Ontario is highly regulated. The Liquor Control Board of Ontario (LCBO) is a crown corporation with the near-monopoly on the distribution of liquor, wine and beer in the province. Beer can also be procured at the Beer Store, which is owned and operated by a consortium of three foreign-owned large brewers (Molson Coors, Anheuser–Busch InBev and Sapporo Brewery). There are a few exceptions to the rule, notably that producers (vineyards and craft breweries for example) are able to distribute their own product on site. Recently, the province began allowing the very restricted sale of small volumes of beer and wine at a few grocery stores across the province.

How successful has the model been?

We could get into whether the monopoly protects consumers with lower prices and more variety (it doesn’t), or whether tax revenues and profits for the province from the LCBO are greater than we would see under a privatized system (based on the experience of other provinces, they are not). We could talk about how the LCBO is the single largest purchaser of alcohol in the world, and the many incidents where this has brought us into conflict with international trading partners. And we could get into the shady backroom dealsbetween the provincial government, the LCBO, the Beer Store, and their respective unions.

But in theory, so long as the model protects children and communities, then it could be argued that the higher price point and reduced accessibility are worth it.

According to a Cross-Canada Report of Student Alcohol and Drug Use however, this is not the case. Over 65% of Ontario students (grades 7, 9, 10 and 12) reported having used alcohol in their lifetime. This puts Ontario in the middle of the pack, behind BC, Alberta, Manitoba and PEI – which have all, except for Manitoba, privatized the sale of liquor to a certain extent. When these numbers are broken out further, the data looks worse — Ontario falls in the bottom three provinces for Grade 7 students who report having used alcohol in their lifetime. And when we look at students who have reported using alcohol in the last year, Ontario finds itself at the very bottom of the list, with nearly 62% of students reporting consuming alcohol within the last 12 months.

Needless to say, it appears this government monopoly has done little to prevent young people from accessing alcohol.

Image of tobacco via canadianbusiness.com
Image of tobacco via canadianbusiness.com

Regulating Tobacco

A cursory look into the regulation of cigarettes nation-wide would appear to support Minister Sousa’s claims that they have been good stewards of this particular vice. Ontario has one of the lowest rates of reported smoking in the country, second only to BC, and they have managed to do so while keeping the cost of cigarettes relatively low compared to other provinces.

But then you dig a little deeper, and the case becomes less clear. A central argument in favor of the legalization of cannabis has been that it will reduce the flow of money to the black market and organized crime. While Ontario has clearly made progress in terms of reducing the overall number of smokers, they have done little to effectively curb the black market sales of contraband cigarettes. In fact, Ontario and BC have the highest rates of contraband cigarette use in country. Even more disturbing, these contraband cigarettes are found in the greatest concentration around high schools and other areas frequented most commonly by young people.

Again, the Provincial government has failed where other provinces have succeeded in curbing the illegal trade of cigarettes. The province has recently introduced a task force to address the ongoing problem of contraband cigarettes. However, given the prevalence of this problem, it is interesting to note it took them 13 years into their mandate to do so.

Image via rabble.ca
Image via rabble.ca

Regulating Gambling

Gambling in Ontario looks no better or worse than other provinces in the country. There are higher rates of casino usage in Ontario than most other regions, but lower on lotteries and VLT use.

Problem gambling and youth gambling remain significant challenges for provincial governments across the country. Just over 35% of Ontario high school students (grades 7-12) engaged in at least one gambling activity in 2013.  And a report from CAMH found that 17,000 students across the province admit to struggling with problem gambling. These numbers are on par with the rest of the provinces.

Evaluation

If Minister Sousa’s claim was meant to assure Ontarians that his government was well positioned to design, implement and manage a fair and equitable distribution model that prioritizes the safety of young people, he has failed. The Government of Ontario has done little to curb youth drinking or restrict access to alcohol for young people. They have failed to slow the tide of contraband cigarettes, allowing the black market to continue supplying cheap, unregulated cigarettes to young people. And if nothing else, they have done nothing of note to demonstrate that they are exceptionally responsible stewards when it comes to gambling.

And we have not even begun to look at other monopolies in this province. From the AIR ORNGE debacle, to the widely criticised sale of Hydro One and the less-than-transparent backroom deals with energy unions that followed, this government has done little to engender the trust of its citizens when it comes to management of large corporations.

It should not be surprising that the provincial government has chosen to create an internal working group of high-ranking officials to examine the potential distribution models rather than holding a wider public discussion. But it is disappointing to see that once again the Wynne government has chosen to remain insular in their deliberations. With by far the highest concentration of Licensed Producers in the country, Ontario is well positioned to be a national leader when it comes to the safe production and distribution of commercial cannabis. It would be shame to see them forego this opportunity in order to make a quick buck.

Featured image via Wikipedia

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