Wednesday, April 29, 2015

Vancouver to Regulate Dispensaries

 Also Available at Cannabis In

            The day after 4/20 the Chief Licence Inspector of Vancouver sent the Vancouver City Council a policy report with the subject: “Regulation of Retail Dealers – Medical Marijuana-Related Uses”. There are more than 80 medical cannabis dispensaries in Vancouver; with a growth rate of 100% in the past two years. This boom is unprecedented for several reasons. For starters, there is no legal grey area: these dispensaries are for every intents and purposes illegal. But given what City Councillor Kerry Jang called Ottawa's “prohibitionist approach,” Vancouver authorities feel compelled to act.

            The BC Compassion Club opened in Vancouver in 1997. Once R. v. Parker made access to medicinal cannabis a Charter issue, Health Canada responded with a plan on how patients could access medicinal cannabis. There was nothing in these regulations – or in the new regulations – about retail storefronts. But Vancouver and B.C.'s cannabis farmers were, and still are, miles ahead of the other medical cannabis regimes.

            Yet for the past couple of years, Vancouver's cannabis market has been testing its limits. Since the BC Compassion Club opened in 1997, those eighty more sprouted up; all of them unhampered by the city's regulatory framework and bureaucracy. Consumer demand for cannabis combined with easily obtainable medical prescriptions makes it an easy sell. Lack of regulation keep costs low and profits high. It's clear the failure of the “medical marijuana” regimes of the federal government caused this, but lack of regulatory control over Vancouver's dispensaries do not justify the recommended actions outlined in Chief Licence Inspector's report.

            There is clearly a consumer demand for cannabis. Eighty dispensaries don't pop up out of nowhere. All transactions within the dispensaries are voluntary; nobody is forcing anybody to become a registered patient and purchase cannabis. Unlike the federal government's MMPR, where patients are forced to register with one of the 17 LPs, in Vancouver patients can patronize many dispensaries. One medical prescription may, and likely will, allow you register with every dispensary in the city (if you so chose to). The key principle in this situation is voluntary association, one of our fundamental freedoms under the Charter.

            Voluntary association is not a principle to disregard. The associations the dispensary owners made in order facilitate such retail space – the exchanges with construction crews, electricians, and other various trades people – were all voluntary. It's a seemingly trivial observation but it packs quite the punch. For if the exchange between a buyer and seller is voluntary, you can infer correctly that the exchange is mutually beneficial.

            If two people are trading, each must have reverse preferences and thus value more what they are receiving than what they are giving up. Otherwise no exchange would take place. Exchanges – once involving money and spread out over a large number of people – will result in market prices and an economy. But even then, on an individual level there is a bargaining mechanism going on behind every transaction. A buyer and seller will agree on a market price because this price was established by buyers and sellers interacting and finding an appropriate range where every buyer and seller will have their preferences satisfied. Note: not every potential buyer and seller will have their preferences satisfied because that potential is infinite and Earth is bound by scarcity. Hence, prices are numeric objectives for a disperse array of goods and services built from more primitive capital resources (also priced accordingly) and reflective of supply, demand and consumer valuation. Without prices, there would be no civilization.

            So what does this have to do with Vancouver's dispensaries? Everything! The inferences made from voluntary association and exchange will explain why the dispensaries have been so numerous and profitable. Cannabis is a highly desired commodity. For years it's been pushed underground by government coercion. Over the last decade, it's become increasingly available via retail storefront. With 86 dispensaries operating in Vancouver, with the top three registering at least 10,000 members each, and with a total of $300 million added to the local economy each year, it's clear: voluntary association works. So what are the complaints? Why regulate?

            While it makes some sense (arguably) for Vancouver City Council to ensure that all medical cannabis businesses in their jurisdiction are “healthy, safe and in the public interest,” how broadly those terms may be defined matters a great deal.  The Chief Licence Inspector sees it in the City Council's authority to, “Protect Youth,” namely banning minors from dispensaries. This includes employment, and prohibiting advertising to minors. From my experience, most dispensaries are already following this practice. There are many regulations in this report that are straightforward and born of common sense.

            Where things begin to go wrong is under the “Prevent Crime” category, which is also aptly titled, “Discourage Gang Involvement.” Far from living up to its name, the pre-crime initiative treats all dispensary owners as criminals first, which I suppose they technically are. Albeit, criminals of a victimless crime. Although I hate to use the term victimless since the drug war has claimed many.

            In a section of the report that was likely influenced by the Vancouver Police Department, dispensary owners would be required to provide police background checks and photo IDs on themselves and their staff on an annual basis. There is also a limit of one business licence per person, so no expanding or franchising. Somebody tell Don Briere from Weeds. Looks like the consumer satisfaction that led him to profit and expand his business will now face the coercive arm of the arbitrary City Council regulations.

            Under “Prevent Crime” there is also no corporate ownership. Sounds good on paper (i.e. no LPs) until someone wants to incorporate for liability reasons and is unable to do so. There are also no transfers of licences to other parties. Nor can owners use the same premises for other uses like offering massages, food, liquor, or even ATMs. We saw above that voluntary exchange creates wealth. Using the same principles, we can infer that the blockage of exchanges by non-market participants destroy wealth – whether by the thief that steals your wallet or the city council that taxes and regulates your business. With regulations like these, wealth is destroyed before it can be created. If the City acts on this report, they will be like a vandal that breaks the window of a dispensary so the dispensary owner is unable to buy a new suit with his disposable income (thus enriching the tailor). Just as the dispensary owner will buy a new window and think, “no new wealth has been created,” despite the glass-blowers additional income - the dispensary owner can only look at these regulations and ponder at how far the definition of “health, safety and public interest,” can stretch.

            “Prevent Crime” goes far beyond discouraging gang use. (However, one questions how banning ATMs will discourage gang use. Why not ban all ATMs everywhere?) The section also deals with capital requirements that are eerily reminiscent of the MMPR and what's required for the LPs. It will be required for dispensaries to have a monitored security and fire alarm system, including video surveillance. One assumes basic security and fire measures were in place before, as owners have incentives not to become a victim of theft or fire, but having it “monitored” likely means attaching it to the grid. In most buildings in Vancouver, the smoke detectors are “smart” and are hooked to the grid. Disconnect that, and they know about it.

            The other regulations are quite reasonable, such as having a security plan and removing valuables from eyesight and locking them in storage when the business is closed; basic stuff the owners were likely already doing because it is in their self-interest. But other requirements are bizarre, such as prohibiting staff from working alone or requiring transparent storefronts. Many dispensaries have opaque window coverings or shutters. This will no longer be allowed. The regulations also aim to control business hours, ban mail or delivery of products (how will they receive wholesale product? Utility bills? I'm not making this up, it's seriously in there), and rules surrounding aesthetics. However, none of these are as controversial as the banning of all food products.

            Does this mean no more edibles and no more extracts? The regulations make exemption for cooking oils so should we expect cannabis oil to start being labelled as cooking oil? Unlikely. Section 24.5, part 12 of Appendix E says, “No person shall sell food on the business premises of a Retail Dealer – Medical Marijuana-related, except that this provision does not apply to the sale of edible oils in sealed containers.” One can only assume that “edible oils” means all extractions. I don't imagine the Chief Licence Inspector of Vancouver wants to open up that can of worms. Especially since Supreme Court of Canada Judges are currently deciding on that exact issue.

            Existing dispensaries have to apply for a permit within 30 days upon enactment of the regulations. Applications will be submitted and judged by city bureaucrats. Those who don't comply will suffer from VPD enforcement. Stage one of the application process is getting evaluated on zoning regulations and whether the dispensary exists in the appropriate area. Of course, who decides zoning regulations and what area is ideal and appropriate for business is clearly not a result of the matrix of consumer choices in a free and fair market. No, it is decided by city bureaucrats who went to college for city planning and know a whole lot more than you do about where your customers want your business to be located so just shut up and accept it.

            Once an applicant makes it past the first stage, Stage Two is implemented which assigns demerit points if, a) the business is considered a problem by the VPD, b) if the premises contain work conducted without a proper building permit, c) if it has been the subject of complaints by more than one person in the community, and d) if the enterprise operates for profit. And just in case you think I'm being hyperbolic, here is the actual wording of option d: “Is the enterprise operated for profit (i.e. not a non- profit society)?” If the answer is yes, this will cost you one demerit point in your application.

            Tying into Stage One, the demerit tally will also take into consideration “clusters” of cannabis dispensaries. Another zoning issue by those who know best, “clusters” of dispensaries are to be discouraged for whatever reason. Stage Three consists of complying with various bylaw regulations and initiating a “community notification process” that gives busybody residents an opportunity to complain and “provide feedback.” It's all part of the “Good Neighbour Agreement” all Vancouver businesses are coerced into.

            Only after these three stages of approval can a business license be issued. This is, of course, is after the annual $30,000 fee is paid, plus the other hidden fees implicit in the regulations; fees further serve the inflated nature of over-regulation and a bureaucratic, bloated government. And just in case an annual $30,000 sounds reasonable, consider the cost of the other business licences one may compare to an illegal “marijuana dispensary”: an adult entertainment store ($333), a “body-rub” parlour ($10,187), a social escort service ($1,204) a casino ($11,662), betting on horse races ($11,662). A liquor licence will vary depending on size and regulatory “class”, but the minimum is $133 a year and the maximum is $20,375. But an actual liquor store only pays $372, with a delivery service at $162 per annum. And what about a “health enhancement centre” or a health care office (which is what these dispensaries really boil down to)? The former is $249, with the latter only $133 per annum.

            During the process of approval, an existing dispensary can stay open provided it meets, “basic health and life safety standards;” and that, “inspectors will conduct a Special Inspection to ensure this standard is met, and take immediate enforcement action against any unsafe conditions on a priority basis.” One can only wish that, that basic requirement were the sole regulatory requirement for, not only cannabis dispensaries, but also all businesses in the Lower Mainland. It'd give entrepreneurs more freedom to take risks – albeit ones that don't risk their consumer health and safety and thus profitability. But risks that reward innovation and invention. That is how horse and buggies become automobiles; how a room filled with a giant reel-to-reel tape machines become a tiny semiconductor in the palm of your hand.

            That is the opposite of what Chief Licence Inspector is recommending. Vancouver City Council would rather regulation that is openly anti-profit, micro-manages subjective aspects of the business, and discourages any action that would lead to economic expansion and prosperity. Far from regulating Vancouver's dispensaries in a sensible and reasonable fashion, this regulation takes the “prohibitionist approach,” of Ottawa to the municipal level.

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