Sask. pot plan could put big biz at advantage over smaller outfits, says economist

Saskatchewan's plan for the impending legalization of marijuana doesn't do enough to ensure smaller businesses don't get shut outand the black market is stymied, according to a University of Regina economics lecturer.

GeorgeHartnersays Saskatchewan's regulatory framework for cannabis, released Wednesday, takes a free market approach that could allow major pot producers to take control of the commercial supply chain all the way down to the retailers. That's largely because there aren't restrictions on producers also being retailers, or selling their own product.

Saskatchewan is approaching legalized cannabis with a private wholesale/distribution model (as opposed to the Saskatchewan Liquor and Gaming Authority being the distributor). Those distributors purchase pot from federally licensed producers. Then,theysupply retail stores that are selected througha pre-screening process, followed by a lottery system. Retailers will also be able to buy directly from producers.

Hartner said this approach could lead to large cannabis firms like Aurora, which bought out Saskatoon's CanniMed also owning retail outlets in Saskatchewan. The potential result: large firms with increasing market power.

"Most of the economic benefit or the potential profit in this market is going to be captured by thevery large cannabis producers,"HartnertoldCBCRadio's TheMorning Editionon Thursday.

"Producers having a foothold in this market are also going to be highlyincentivizedto keep out local production, keep out craft producers. They'll be able to squeeze them out so at the end of the day it's not going to do a lot to generate small business in Saskatchewan."

Free market could be good for black market: Hartner

That could,Hartnersaid, have an effect on cannabis prices and the variety of products in stores: lesscompetitionequalsless incentive for competitive prices and products.

Hartnersaid Saskatchewan'scannabis framework is missing measures similar to that of British Columbia or Alberta, where the provincial governments will regulate and distribute product to businesses a move the Albertan government says "will ensure a level playing field for large and craft producers."

If the province is not going to distribute weed itself through the Saskatchewan Liquor and Gaming Authority,Hartnerwould like to see alimited number of distributors licensed instead. But Saskatchewan has not placed a limit on distributors.

In addition to potentially keeping prices competitive with the black market, Hartner said by keeping the number of distributors low, the likelihood of untested, illicit and potentially unsafe marijuana from the black market making it into the supply chain is reduced.

Limited distribution licensing could create a monopoly, but that could be remedied by regulating the mark-up price of products, he added.

If there was an SLGA-typemodel, where all marijuana coming to Saskatchewan would have to go through the government and then to retailers, Hartner said producers would not have "undue influence on retailers to try to capture more profit."