Legalization: Has it impacted the black market?

Jun 11, 2019

Since the legalization of Cannabis on October 17, 2018, many Canadian experts have been carefully observing the consequences in order to evaluate its efficacy in decreasing drug trafficking by organized crime. Business columnist Don Pittis discussed insights acquired from legalization of cannabis which could be extended to legalizing other drugs in a recent article published by CBC News.

According to Pittis, many critics suggest that Canada’s legalization has largely been a failure, due to the government failing to learn from the legalization process in Colorado.

Ian Irvine, an economist at Montreal’s Concordia University, said in an interview with CBC News, “The illegal market is really being wiped off the map in Colorado… There were two things necessary for that: One is accessibility and the other was price. But here we still have high prices and have low accessibility.”

In terms of omission on the part of the government in the legalization process, Pittis cites delays in delivering cannabis retail licences in Ontario. Moreover, cannabis retailers in Ontario who failed to open their stores by a deadline set by the government (April 15, 2019), are currently facing a new round of financial penalties. The lack of access to legal cannabis is likely facilitating the operations of illegal drug sellers, says Irvine.

According to Jean-François Crépault, senior policy analyst at the Toronto-based Centre for Addiction and Mental Health, the legalization of cannabis can serve a useful tool for examination of substance use and abuse in new contexts. However, Crépault has voiced his concerns over low pricing and other free market measures in order to compete with pricing from criminal suppliers. A recent study by Statistics Canada demonstrates that people are willing to pay more for a legal product as well, which may mean that all that is required is easier access.

Michael Armstrong, a business professor at Brock University in St. Catharines, Ont., said that cracking down on illegal dispensaries before presenting a legal alternative would be a waste of police resources and would drive illegal trade deeper underground. However, once there are enough legal cannabis retailers in operation, a crackdown would push illegal prices close enough to their legal alternatives, making the black market an undesirable alternative for purchasing cannabis.

Despite the significant differences between cannabis and heroin, Rebecca Jesselman, policy director at the Canadian Centre on Substance Use and Addiction, said that valuable insights can still be gained from cannabis legalization in Canada. Issues such as quality control, which has attracted some cannabis buyers to legal cannabis stores, would apply even more so when it comes to opiates, which have a high risk of being contaminated with deadly substances such as fentanyl. Moreover, Jesseman believes that the experience of legalizing cannabis in Canada may show that legal sources result in a decrease of illicit producers by removing the risk premium.