Analysis: New Zealand's Draft Recreational Cannabis Legislation
With a referendum on cannabis legalisation scheduled for November 2020, New Zealand’s government has revealed further details of what the country’s legal, regulated system would look like. Following on from an initial announcement in May, the government has issued an early version of the draft “Cannabis Legalisation and Control Bill”.
The draft Bill is not yet complete, and at this stage mainly details the areas most relevant to end consumers such as home grow provisions, possession limits and retail regulations. A summary of New Zealand’s proposed model compared to that of Canada and Uruguay is given below.
Adult-use models: New Zealand vs Canada vs Uruguay
On the whole, New Zealand’s proposed regulations are relatively consumer-friendly. The draft Bill allows for the sale of a range of cannabis products including edibles and concentrates, although consumers must be 20 or over to purchase in contrast with a national drinking age of 18. The proposed daily purchase limit of 14 grams for adult-use may prove problematic for those in more remote communities without a nearby retail store - particularly given the prohibition on online sale, which lacks good justification.
Home cultivation will also be permitted, although NZ’s proposal would impose the strictest limit amongst adult-use countries. Adults over the age of 20 will be able to grow two plants on their property, with each household restricted to a total of four plants - a policy to prevent personal cultivation being exploited as a loophole for illicit production. Individuals will also be able to share cannabis and legally gift cannabis products. As is the case in several US states and Canadian provinces, New Zealand would prohibit public cannabis consumption. However, in a progressive move the Bill does allow for the licensing of on-site ‘consumption premises’ in contrast to the reluctance of many North American jurisdictions to allow such activity.
It’s promising to see that New Zealand would license distribution and retail as well as cultivation and manufacturing, allowing private enterprise at every stage of the supply chain. This compares favourably to Canada where provincial governments have been criticised for their involvement in cannabis retail and distribution, including slow store rollouts and inefficient logistics. The Bill also mandates the separation of retail and on-site licenses from those for wholesale, manufacturing and cultivation, in order to prevent the formation of large vertically-integrated companies. Rather than aiding small businesses, this separation will prevent small-scale producers having direct access to their customer base by prohibiting onsite sales at their facilities. It appears that the proposed National Cannabis Agency would have the final say in approving or rejecting retail locations. Depending on the attitude of the regulator this could be a blessing or a curse; a proactive body would be able to overrule NIMBY-ist local authorities to ensure an even distribution of retail locations, while an overly-conservative agency would act as a central chokehold on industry development.
However, those hoping that New Zealand represents a significant opportunity for cannabis brands will be disappointed by the tight restrictions put forward for the sale and promotion of cannabis products. The bill allows for standardised product packaging, including a uniform colour, size and font and mandatory health warnings. This is on top of an outright ban on all marketing and advertising, promotional discounts, and the prohibition of licence holders from sponsoring organised activities in New Zealand. Even more dramatically, the draft Bill appears to prevent retailers from displaying any cannabis, product packaging, smell jars or even images inside their stores - with retailers permitted only to present, upon request, the products available and their price.
Furthermore, the Bill states that maximum limits on THC will be established. It’s unknown whether this would be applied in milligrams or as a specified cannabis ratio, and whether this would apply uniformly across product categories. While capping THC is a popular idea in public health circles, future regulators will need to strike a very careful balance to ensure that limits don’t discourage consumers switching from unregulated to regulated markets. It’s also unclear how such a cap would work for high-THC products such as resin and concentrates permitted under the Bill.
However, perhaps the most significant announcement is that total cannabis cultivation will be capped to a specific level nationally, with a view to reduce this figure over time. This is a major contrast to Canada, where the regulator does not make licensing decisions based on market conditions or a desired end state. Capping and reducing output may lead to two undesirable outcomes in particular: a race to secure licences (potentially simply to flip them) without regard to a sustainable industry development, and a general under-investment in cultivation and manufacturing: after all, why invest millions in research, infrastructure and workforce training if you don’t even know the permitted future size of your operation?
The draft Bill still leaves a lot of questions unanswered, particularly in terms of licensing requirements, production standards and taxation levels, as well as the future regulatory status of CBD. The proposals also say very little at this stage about social equity provisions and Maori engagement, although a full draft Bill is due to be published in early 2020.
As for now, the release of the draft Bill allows legalisation advocates to point to concrete proposals when campaigning, to help counteract the scaremongering and hyperbole employed by some in the prohibitionist camp. This should drive engagement with the issue, and may help to reverse the declining support for legalisation seen in public polling this summer. As of yet however a clear, unified pro-legalisation campaign has not emerged, and it cannot be assumed that the Referendum is a guaranteed win.
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