Owen Allerton, co-owner of Highland Cannabis in Kitchener, launched a campaign and a petition urging the Alcohol and Gaming Commission of Ontario (AGCO) to investigate a loophole that he said is hurting smaller retail stores and growers across the province.   

Allerton said that while AGCO regulations prevent the use of payments for product placement, some large cannabis producers are circumventing those regulations by paying cannabis retailers for sales data.  

When cannabis was legalized in 2018, the province created a retail system where chain and independent retailers bought from the same wholesaler—the Ontario Cannabis Store (OCS).  

In this system, all retailers would pay the same price for products regardless of size. Allerton said the rules protected the independent growers who helped create the legal cannabis industry.  

In June 2022, the AGCO introduced rule changes meant to clarify the rules and restrictions on inducements.  

Allerton said the new AGCO guidelines introduced the loophole allowing corporate cannabis growers to offer inducements in the form of payment for store sales data that producers could use for insights and analytics.   

Allerton said that some chain retailers and large producers use this as a loophole that allows chain retailers to offer significant pricing discounts—25 per cent or higher—to consumers.  

“With cannabis being a new industry, the province didn’t want huge companies steamrolling the industry on the retail or production side. There’s a whole group of craft micro-growers that are small startups just trying to make ends meet,” he said.  

AGCO regulations prohibit the use of inducements in the cannabis industry, including cannabis producers paying for preferred placement in retail outlets. Smaller retailers cannot match this without putting their business at risk. 

“Listing fees or shelving fees are pretty normal for other retail industries like grocery and pharmacy. You want to pay to be at eye level or have a display. But that favors well-funded, large producers, “ Allerton said.  

These listing fees were initially outlawed.  

Some independent retailers are asking consumers to sign a petition called Cancel Kickbacks. The petition asks the Ontario government to address the loophole in the AGCO rules to level the playing field for all retailers and producers.  

“One of the arguments you get is that it’s normal in other industries. Well, lots of things are normal and other industries. But in cannabis, we’ve got a giant list of rules and regulations we have to follow,” Allerton said.  

He added that the loophole also hurts independent retailers since chain stores can sell the same products at a discount.  

Profit margins for cannabis are smaller than they appear, Allerton said. A 30 per cent markup is considered high. A 25 per cent discount means that the retailer is selling basically at cost.   

Small retailers like Allerton have called on the AGCO to investigate the loophole and make changes to close it and protect independent retailers and growers. An AGCO spokesperson said that one of the regulatory objectives of the AGCO is to ensure that the retail sale of cannabis in Ontario is carried out with honesty, integrity, and in the public interest.  

“Licensees and their representatives may not, either directly or indirectly, accept or enter into any agreements for any item, benefit or service with a licensed producer or their representatives,” the spokesperson.   

Exceptions to this include accepting items of nominal value, items or benefits designed for training or education, and the sale of data for business intelligence purposes.  

“One of the regulatory objectives of the AGCO is to ensure that the retail sale of cannabis in Ontario is carried out with honesty, integrity, and in the public interest,” the AGCO spokesperson said.   

“While we cannot provide specific details, the AGCO conducts inspections into any allegations of inappropriate cannabis inducements and determines if it gives rise to any regulatory concerns relating to licensed retailers in Ontario.”  

There are over 1,500 cannabis stores in the province, most of which are independent or part of small local chains.  

“There’s really a handful that are trying to go to this ultra-low price model—and they’re the ones damaging the whole industry,” Allerton said.  

Huntsville had six independent shops where the owners knew each other and competed on friendly terms. When a large chain came to the community and offered discounted prices, those six local retailers saw sales drop significantly.   

“Everybody’s sales were cut in half. Now they’re starting to drop like flies, because they’re trying to price match,” Allerton said. 

“The moral of the story is one store doing this with predatory pricing can take out everything in a radius around it. They lower the bar for the whole industry,” he said.  

You can learn more about the Cancel Kickbacks campaign at