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Parliament passes plain tobacco packaging law, regulates vaping

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The Liberal government has passed a sweeping overhaul of the country's tobacco laws — legislation that will formally legalize (and heavily regulate) vaping and give Health Canada the powers it needs to mandate plain packaging for cigarettes.

The bill, S-5, is one of the most ambitious overhauls of the Tobacco Act in a generation. It enacts changes that have prompted vocal opposition from the country's largest tobacco companies — and their allies, like convenience store owners — who are steadfastly opposed to measures that will force them to remove their brands from cigarette and other tobacco packages.

The bill doesn't dictate exactly how plain packaging should be imposed, but a Health Canada backgrounder says the new Tobacco and Vaping Products Act will "provide … a range of options such as standardized colour, font and finish, and prohibitions on promotional information and brand elements, such as logos."

A spokesperson for Health Canada did not say exactly when the new regulations would land, but added such regulations typically come into force 180 days after they are finalized by the department.

The bill's defenders have said these new regulations will make smoking less appealing by all but eliminating the uniqueness of particular brands, and help end an "epidemic" of tobacco-related deaths — which the government suggests number over 45,000 per year.

Under existing regulations, branding is already quite limited because health warnings cover roughly three quarters of a traditional cigarette pack.


What the bill does:

  • Gives Health Canada the power to implement plain and standardized tobacco packaging.
  • Applies many of the existing tobacco regulations to vaping products.
  • Prohibits the sale of vaping products to minors.
  • Restricts "lifestyle" advertising for vaping products, the use of testimonials, or any reference to e-cigarettes as healthier than standard tobacco products.
  • Bans certain flavours — like "confectionery" and cannabis — for vaping products.

Critics argue the new rules will simply bolster an already flourishing market for cheaper contraband cigarettes, and often cite the mixed (and contested) results of Australia's move to enact plain packaging.

"The real reason that people start smoking is not because of the pack. There is no evidence of that in every piece of research that Health Canada has cited," Eric Gagnon, the director of government relations at Imperial Tobacco Canada, said in an interview with CBC News.

"The people who start smoking do not see a package today and say, 'Well, this package has red on it. I think I'm going to start smoking.' That's not the way it works … It's more of a PR initiative than anything else."

The packages on the left are what cigarette packs used to look like in Australia before a plain packaging law was passed. The new plain packages are shown on the right. Canadian lawmakers hope to emulate, at least in part, the cigarette packaging strategy pursued by Australia. (David Hammond/University of Waterloo)

But Rob Cunningham, a policy analyst at the Canadian Cancer Society, said he thinks the tobacco industry is upset by plain packaging for a good reason.

"Of course plain packaging would be effective. Why else would the tobacco industry be so opposed?" he said.

"The package is the most important type of tobacco advertising that remains in Canada today. Tobacco is addictive and lethal, and should not be sold in packages made to be more attractive, period."

Gagnon said Imperial Tobacco, which produces popular brands like du Maurier, Pall Mall, Peter Jackson and Player's, is considering legal action to protect its intellectual property rights if Health Canada proceeds with "extreme" regulations.

"It's too early to say because we haven't seen the regulations, but it is one of the avenues we'll have to look into if we believe the government is going too far," he said. "It's not off the table."

Plain packaging rules are already in place, with some variations, in Australia, France, the United Kingdom and Ireland. A legal challenge by tobacco firms in the U.K. was rebuffed by that country's highest court.

A sample of plain packages used in the United Kingdom. (Action on Smoking and Health UK)

'Less harmful source of nicotine'

The Liberal government has pitched the other major component of the bill — new regulations for vaping devices — as a tool to move adult smokers away from traditional cigarettes, while giving them access to the nicotine they crave.

"Bill S-5 will also provide adults the legal access to better-regulated vaping products. These products can serve as a less harmful alternative to cigarettes and can be a much-needed option for those who have been unable to quit smoking," Peter Harder, the government's representative in Senate, said in a recent speech on the bill.

Independent Quebec Sen. Chantal Petitclerc, the bill's sponsor in the upper house, called regulated vaping "an important tool" for ensuring "a less harmful source of nicotine" as the government looks to cut the percentage of the population that smokes from the current 15 per cent to less than 5 per cent by 2035.

The vaping industry has been operating largely beyond the reach of regulators since e-cigarettes emerged as an alternative to smoking some ten years ago.

The e-cigarette — a battery-powered device that looks like a traditional cigarette — delivers inhaled doses of nicotine-containing vapour. Until now, vaping products have been sold under a lighter regulatory burden than the one imposed on cigarettes.

The bill, which is expected to receive royal assent shortly, demands compliance with the new vaping regulations within 180 days.

The proposed legislation would regulate e-cigarettes while allowing adults to access vaping products that are likely less harmful alternatives to tobacco use, Health Canada says. (Frank Franklin II/Associated Press)

Those regulations include a move to cut the number of flavours that can be used in an e-cigarette, banning any flavour designed to mimic "confectionery," cannabis, soft drinks or energy drinks — flavours some parliamentarians believe are designed to hook young people on these devices.

The bill also prohibits the sale of vaping products to minors, or sending a vaping product to a minor.

The bill restricts most promotional activity around vaping products, forbidding the use of testimonials and references to health effects and additives.

Anti-smoking advocates maintain these regulations are necessary because any reference to an e-cigarette as safer than the traditional variety could be misleading. While vaping devices are often sold as smoking cessation aides, critics maintain they're not entirely harm-free.

However, a recent review by tobacco experts at Public Health England found that e-cigarettes are considerably less harmful than traditional cigarettes.

"Anyone who has struggled to quit should try switching to an e-cigarette and get professional help," the government agency recommended in its February 2018 report.

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Former BC premier Christy Clark calls Trans Mountain purchase the 'second-worst solution'

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Former B.C. premier Christy Clark says the only thing worse than the federal government preparing to buy the Trans Mountain pipeline would have been to let it go entirely.

In a wide-ranging interview on the Herle Burley podcast, hosted by Liberal political strategist David Herle, Clark weighed in on the Trudeau government’s decision to fork over $4.5 billion for the existing pipeline.

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“I think the Kinder Morgan solution they came up with is the second-worst solution they could have had,” she said.

“The worst would have been nothing. So at least there is a solution. But I think having government build a pipeline, when government can’t even figure out how to pay its own employees is not going to be the most certain outcome.”

Herle described Clark as a “longtime friend of mine” and the pair know each other from time spent with the federal Liberals.


READ MORE:
Ottawa fails to find private-sector buyer for Trans Mountain pipeline expansion

Clark’s government approved the Trans Mountain pipeline expansion after the federal government met B.C.’s “five conditions.”

The conditions were met, in part, after Trudeau’s government committed $1.5 billion for an Oceans Protection Plan.

The B.C. NDP are opposed the pipeline twinning and are in the midst of a legal challenge to restrict the flow of bitumen by pipeline or rail through the province. The B.C. government’s opposition led Kinder Morgan to threaten to walk away from the project.

WATCH: Federal government announces plan to buy Trans Mountain pipeline project






Clark said Ottawa should not have buckled under the pressure.

“The best outcome would have been to get the approvals done, to stand strong in the face of many foreign-funded environmental groups and to say, ‘We are getting this done and we are going to be tough about it and we are going to do it fast,’” Clark told Herle.

“Everyone saw this storm coming but it all kind of got left to the end when Kinder Morgan threw up their hands and said, ‘We are out of here.’”

Anti-Kinder Morgan protesters are expected to be on hand when the federal cabinet meets in Nanaimo this week for their annual summer retreat.

The former B.C. premier says it would have been”folly” to think 100 per cent of First Nations would support the project. C

lark also questioned the motivations behind protesters with links to organizations outside of Canada.


READ MORE:
Danielle Smith: Foreign interests behind effort to stop Trans Mountain Pipeline

“If the Russians interfered in the American election in favour of Donald Trump, which we know that they did, is it so hard to believe that the Americans or the Russians would try to be interfering in our ability to get our resources to market when they are direct competitors?” Clark said.

Clark also weighed in on LNG development, saying that she spent “five-and-a-half years building social licence for LNG.”

The B.C. NDP changed the tax structure for companies wanting to set up in B.C. and are expected to see a final investment decision from LNG Canada this year.


READ MORE:
LNG Canada committing to start construction on B.C. project this year

“When the government changed I thought that is five-and-a-half years down the drain. And then they changed their minds,” said Clark. “It looks like as the market is improving, LNG is going to happen. I would be so proud of that legacy.”

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Ontario's grey-market cannabis businesses chart paths to regulation

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Business-owner Don Briere says he is about to secure leases on several storefronts across Toronto to fuel an aggressive expansion of his B.C.-based Weeds Glass and Gifts chain, which lists four locations as currently operating in Ottawa and Vancouver.

John Lehmann/The Globe and Mail

Ontario’s dispensary operators are facing an existential dilemma: Shut down in the hopes of securing a coveted cannabis retail licence from the province by next April or continue selling a drug they say should be made easily available now more than ever.

Industry insiders expect that owners of many of the 100 or so dispensaries in and around Toronto will plan to go legal. To do so, they will have to shut down their operations by the legalization date of Oct. 17, when the only way to buy legal recreational cannabis in Ontario will be through the provincial government’s online portal.

On the cusp of federal legalization, business-owner Don Briere says he is about to secure leases on several storefronts across Toronto to fuel an aggressive expansion of his B.C.-based Weeds Glass and Gifts chain, which lists four locations as currently operating in Ottawa and Vancouver.

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The underground entrepreneur, who was once arrested for running B.C.’s largest network of illegal marijuana grow operations in the 1990s, says he plans to pursue licences from the Ontario government to sell the drug. But, Mr. Briere says he will not obey a recent call from the Ontario Progressive Conservative government for these grey-market entrepreneurs to “stop now” and close their stores.

“At one point in time, I was sentenced to seven years in prison to do what I’m doing right now,” Mr. Briere said. “And if you think they’re going to tell me to stop and I’m going to stop? It’s not going to happen.”

Earlier this month, Tory cabinet ministers said the province, like the federal Liberal government, is intent on crushing the underground trade in the drug. They said upcoming consultations with communities and stakeholders will determine if and how those who have sold the drug illegally in the past should be allowed into the regulated sector come April.

No one is tracking the number of Canada’s illicit bricks-and-mortar dispensaries, which insiders estimate at several hundred, or the exploding number of online retailers now postering many of the country’s largest cities with advertisements for their delivery services. In total, Canada’s underground trade is estimated at about 400,000 kilograms a year, which dwarfs the legal medical cannabis system that shipped 33,000 kilograms of product to as many as 168,000 patients across the country last fiscal year.

Activists in Ontario say they deserve to compete for these retail licences with large cannabis firms and pharmacy chains. Alberta has banned anyone tied to the illicit trade from joining its legal industry, while British Columbia has signalled only those involved with gangs or large networks of illegal businesses will be kept out of the regulated sector.

Abi Roach, director of the non-profit dispensary trade group, the Ontario Cannabis Consumer & Retail Alliance, said those activists who pushed for legalization now have to endure some short-term pain in order to transition their businesses to the legal market.

Ms. Roach, who founded Canada’s longest-running cannabis lounge, the HotBox Cafe, in Toronto’s Kensington Market neighbourhood, said she is looking to expand her business to five or six other locations in and around the city. Those shops will sell paraphernalia – but not cannabis – while she awaits an eventual licence from the government to transition them into legal dispensaries. She said there is now a rush of investors from all different backgrounds looking to secure leases for storefronts that they are willing to let lay fallow until the provincial licensing regime is up and running.

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“What you saw happen in Calgary, when it came to legal cannabis, will happen in Toronto as well,” she said. “Essentially, every piece of retail on the market will be gone by October. Definitely.”

Paul Lewin, a criminal lawyer who represents clients in the illicit sector, said the interim period of eight months between now and legal face-to-face sales will likely be a time of great confusion for everyone in Ontario.

“Things aren’t going to work right, from October until we have licensed private stores,” he said. “People are going to be confused believing it’s legal but not really having a store where they can go and get it.

“Consumers, the stores, everyone’s going to kind of feel like it’s going to makes sense to have grey-market dispensaries while we wait for actual legal dispensaries.”

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Those shops that do remain open are likely to see strong demand from consumers, who may not trust the government-run website, according to Rielle Capler, interim executive director of the Canadian Association of Medical Cannabis Dispensaries. Ms. Capler, a PhD student at the University of British Columbia, said her research has shown that even when patients have access to the federal mail-order system for medical marijuana, many prefer to keep buying from illegal dispensaries for the “the in-person service that they get.”

Mr. Briere’s empire, which has more than a dozen shops open in five provinces, has ebbed and flowed as police have raided his stores or municipalities have secured injunctions to outlaw his businesses – often a more effective approach to shutting him down. He has said he grosses millions of dollars a year in sales from his network of franchises and is ready to fight in court if he is raided again or shut out of Ontario’s legal retail system.

“Their terms of surrender [in the war on drugs] are not acceptable to us.”

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Tesla board may have too many ties to CEO Elon Musk, experts say

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For years, Tesla’s board remained almost invisible, staying behind the curtain as superstar Chairman and CEO Elon Musk guided the electric car maker to huge stock price increases. Now, given Musk’s recent questionable behaviour, experts say it’s time for the board to step onstage and take action on the company’s leadership.

The list of Musk’s offences include berating Wall Street analysts on a conference call and labeling as a pedophile via Twitter a British diver involved in the cave rescue of trapped Thai soccer players. Add to that his abrupt Twitter announcement to take the company private even though funding hasn’t been solidified, as well as confessing to being overwhelmed with job stress in a recent interview, and it’s likely that most other company boards in a similar position would have taken action, corporate governance experts say.

Yet Tesla’s nine-member board, which includes Musk and his brother, Kimbal, has largely been silent, save for forming a three-member committee to decide on the go-private plan that has already drawn scrutiny from U.S. securities regulators.

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At least five of the company’s eight non-executive directors have strong ties to Musk or one of his other companies, throwing their independence into question.

“I believe Elon Musk is a genius and he needs to be admired and encouraged, but this board of directors has to do more management oversight of the company. The board of directors is not meant to be a cheering committee,” said William Klepper, a professor at Columbia Business School and an expert on corporate governance issues.

Kimbal Musk, Elon’s brother, is among the five directors with ties to Musk. Lead director Antonio Gracias founded a private equity firm and also is a director of SpaceX, Musk’s privately held rocket company. Director Steve Jurvetson is also a SpaceX director. He’s been on leave from his venture capital firm since allegations of sexual misconduct appeared last year.

Another director, venture capitalist Ira Ehrenpreis, is also a SpaceX investor, while director Brad Buss is a former chief financial officer of SolarCity, a solar panel maker that Tesla acquired in 2016.

Australian telecommunications company executive Robyn Denholm was the only other Tesla director until last year, when two were added after investors complained about a lack of independence. James Murdoch, the CEO of 21st Century Fox, and Linda Johnson Rice, the chairman and CEO of Johnson Publishing Co., joined the board in July of 2017.

In a 2017 letter seeking two more board members, five investors wrote that five Tesla directors “have professional or personal ties to Mr. Musk that could put at risk their ability to exercise independent judgment.”

One of the five, New York City Comptroller Scott Stringer, who manages investments in Tesla, said in a statement Monday that it’s time for the board “to take a hard look at Tesla’s governance and compensation structures to ensure that there are proper processes in place for strong board independence and oversight.”

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Columbia’s Klepper said Tesla didn’t need more board members; it needed assertive ones. “They need to make some hard choices about the existing board members and decide whether their expertise really fits with Tesla’s mission,” Klepper said.

Two major firms that specialize in corporate governance issues advised Tesla shareholders to shake up the company’s board earlier this year, citing troubling conflicts of interest and decisions that raised questions about the directors’ links with Musk.

Shareholders wound up rejecting the recommendations of Institutional Shareholder Services and Glass Lewis & Co. at Tesla’s annual meeting in June and re-elected all three directors — Gracias, Murdoch and Kimbal Musk — whose terms were expiring.

Glass Lewis recommended voting against the three; ISS opposed the re-elections of Gracias and Murdoch, but concluded there was no reason to oust Kimbal Musk because he doesn’t serve on any board committees requiring independence from his brother.

Tesla wouldn’t comment about its directors, and members reached Monday did not return messages. But the company pointed to its proxy statement that said seven of nine members are considered independent based on standards set by the NASDAQ stock market, on which Tesla stock trades. The company said Ehrenpreis and Gracias do not own stakes in Telsa.

Tesla’s stock has been on a roller-coaster since Musk used Twitter on Aug. 7 to say he was considering taking the publicly traded company private. Even though Musk said funding had been secured for what could be at least a $20 billion deal, the company later disclosed that it wasn’t. On the day of the announcement, shares rose 11 per cent but since have fallen almost 19 per cent, closing Monday at $308.44.

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Musk disclosed that he tweeted out the proposal while driving himself to the airport — without anyone else seeing or reviewing the post. He wrote later that he notified the board on Aug. 2 and that the board met twice before the announcement.

Experts say under more normal circumstances, the board committee would have evaluated the plan before it was made public, a sign that Tesla’s directors aren’t taking an active role in running the company.

Tesla, which began selling stock to the public in 2010, has a governance structure that more resembles a startup than a company with $11.76 billion in revenue and sales of 101,000 vehicles last year, experts say.

Musk is chairman, CEO and “product architect,” and the company has no chief operating officer, a position that would typically exist to run the day-to-day operations and allow the CEO to focus on bigger picture ideas. In contrast, at Silicon Valley titan Apple Inc., Steve Jobs held a CEO title and was deeply involved in product development while he was alive, but left the day-to-day operations of the company to Tim Cook, then the company’s COO.

Tesla’s problems are compounded by the fact Musk splits his time as head of Tesla and at least three other ventures.

“Musk cannot be all things at all time,” Klepper said.

Charles Elson, director of the corporate governance centre at the University of Delaware, said the board has a duty to evaluate whether Musk can lead the company given his confession last week to The New York Times that the job was taking a toll on his personal health. “It paints a picture of someone who is deeply troubled,” Elson said. “Running a business is difficult enough. Finding yourself in that state of mind is something different.”

With a normal board and normal corporate governance, Musk would have been gone already, Elson said.

“People have been moved on for a lot less,” he said.

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