Effects of Marijuana Legalization on the Black Market

“Can legalization of marijuana in Canada eliminate the black market and effect the supply chain in a positive way?”

A secondary qualitative approach will be used to test the theories behind marijuana legalization, while comparing the supply chain that pertains within United States. However, a supply chain in Canada doesn’t exist currently but study will cover consequences of creation of market. How the market creation will lead to problems of demand and supply?

For Example – In Quebec, it is stated that it can produce up to 150 metric ton of cannabis per year worth $750 million and therefore, it can effect share prices which can go down and as a result may increase demand which can result in shortage of marijuana (as seen in Washington in 2014).

  • The external sources that will be used to collect the secondary data will include –

Study of states like, Colorado, Washington, Oregon where cannabis is already legalized and how the supply chain works within these states.

A few of the main topics that my paper will cover will be –

  • Reasons for legalizing Cannabis in Canada – Firstly there was a rise in black market of marijuana. Secondly, it was available to youth easily.
  • Still because of high taxes on production and price inflation within retail market will continue to rise black markets.
  • Supply chain problems – Transportation costs, Availability of raw materials, Demand and supply creation.
  • Generic Literature which will include how supply chain works especially in medical sector within Canada and United States.

I also believe that quantitative methods need more authentic and reliable sources like graphs, figures, etc., which are not easily possible to get in my case.

  • I will be obtaining the data by collecting information from various online and library resources. Furthermore, study of laws within the United states regarding marijuana across different states will be quite helpful to make relevant recommendations and conclusions.
  • The data that I will gather will possess certain strengths and weakness:


  • North American market especially United states and Canada possess similar nature, as a result the data I will find of United States will be well justified for Canadian market too.


  • Data gathered can be quite useful but difficult to present.
  • As Canada (especially BC) lack proper supply chain in this field, it will be difficult for me to find out exact data for BC.
  • Might be difficult to present data statistically.

A few constraints that could be faced while conducting the research are:

  • Choosing the Right Methodology – As it is understood that methodology comes from research question and therefore it is quite important to make the respondent answer the question in an appropriate manner. It is important to identify the solutions of the following questions: “the problem is…”; “the purpose of this study is…”
  • Staying motivated and working your plan – sometimes, in large research projects, it is not possible to be motivated as the beginning of research. Therefore, to overcome this barrier, it is necessary for me to monitor my attitude, be focused on my passion and my purpose.
  • Dealing with the data – The last and most relevant constraints that I could face while research is to deal with my data. Having too much or least information and to synchronize the data and apply it into the paper could be hectic sometimes. To overcome such barriers, it is important to stay focused and stay focused on the methodology and research question.
  • It is quite important to ensure the validity and reliability of the data. As the majority of data will be taken from laws penetrating within United states and then will be implied according to Canadian markets could be quite reliable as the nature of markets which are almost similar in nature. Also, the data collected by me will be recent as legalization of cannabis in Canada is recent, which will make the research more authentic.

Ethical considerations

As my research will be covered majorly from external and secondary sources like news articles, journals, articles, government websites and finally case studies there might be various factors that may lead to duplicity or may lead to unintentional plagiarism. To overcome these challenges, I will:

  1. I will ensure that I am taking information from reliable sources and properly stating the references and in text citations as it is important to acknowledge the original work.
  2. I will ensure the data or information that I am using does not contain any misleading information that might harm any individual’s feelings and must not deviate from the topic on which I am doing research.

Research Plan

My research includes a study of marijuana industry and supply chain within United States and how it will also behave within Canadian market. For this research I have to schedule some deadlines in order to achieve the goals within the deadline. The schedules for following topics are to be made:

  • Reading up on key theories and tools –  As the next step is to design the research instruments, currently I am working on tools that I have to use while keeping the next step i.e. designing the research instrument in mind. Tools that will provide the base for the research are to be continuously focused upon in order to keep next steps on track with the research methodology and objectives.
  • Designing your research instruments (including the Ethical Review) – The relevant data and resources are being worked upon also some information regarding Canadian marijuana industry has been already drafted.
  • Arranging your pilot sessions with respondents to test your instruments – N/A
  • Carrying out your fieldwork – As my project is majorly based on secondary research therefore it will not involve any fieldworks as a part of my research project.
  • Carrying out your data analysis – Once I get relevant data and information, through which I can make conclusions or could be beneficial to my research, I will carry out my data analysis step.
  • Producing tables, charts or diagrams, as appropriate – After analyzing data, I will see that weather there is any need for any chart, graph or table. Maybe (not sure) I can highlight a table showing increase or decrease of marijuana consumption among youth over the past years, if I get relevant information.
  • Writing up your findings – My final step before analyzing final paper will be to write up relevant findings and draft a proper conclusion based on my findings related to marijuana industry in United States and Canada.

Literature Review

1.1 Introduction

Canada is the second country in the world to fully legalize the drug which is also known by the name of Marijuana or Cannabis. It is still a challenge for government to ensure the best way to regulate and retail the product. Furthermore, existence of black market, consumption of marijuana by youth and supply chain problems within the Canadian economy will affect the nature of demand and supply of Canadian marijuana industry.

Evolution of cannabis legalization in Canada

Announced as a fulfilled election platform in 2017, the Liberal government in Canada made public its’ intent to legalize cannabis retail and use, with markets set to open on July 1, 2018 (Austin, 2017). With only a short period of time to design and implement a fully operational cannabis retail system, the Government began a fast-tracked regulatory pursuit, beginning with the development of a cannabis policy Discussion Paper (Government of Canada, 2016).

In a North American context, Canada can understand and apply lessons learned from Colorado and Washington State, where cannabis use and retail has been progressed to legalization from as early as 2012 (Kilmer, 2014). Unfortunately, these states were prohibited from pursuing a distribution system in the form of a publicly owned system, as cannabis use and retail remains illegal at the federal level in the United States (Hall & Lynskey, 2017). For Canadian policy-makers, this represents a drawback, as the ability to learn from the outcomes and mechanisms of a previously established publicly owned system for cannabis distribution would have been valuable. Furthermore, currently as there is a lack of established market and therefore supply chain within the Canadian territories, it is difficult for retail sector to analyze demand and supply for marijuana. Given the fact that cannabis has recently been legalized in Canada, the effect of marketing and retail tactics to encourage uptake of cannabis use will likely not show effect for some time.

Cannabis and public health

The Controlled Drugs and Substances Act (S.C. 1996, c. 19) or CDSA is Canada’s federal drug control statute. The CDSA oversees the National Drug Scheduling and establishes eight Schedules of controlled substances and two Classes of precursors. Cannabis (Marijuana), its preparations and derivatives, is a prohibited Schedule II drug.

While the health effects of cannabis are a debatable topic (Caulkins & Kilmer, 2016), there is one side of debate that cannabis use poses risk to public health (Rehm, Crepault, & Fischer, 2017). Use of cannabis is associated with mental health issues including psychosis (mental disorder where thought and emotions tend to become impaired and contact is lost with external reality) (Fergusson, Poulton, Smith, & Boden, 2006) and additionally found to hinder professional, educational and social achievement (Valkow, Baler, Compton, & Weiss, 2014). Cannabis use also poses high risk to the developing brains of children and young adults (Van Ours & Williams, 2011). With over 20% of youth aged 15-17, 33% of Canadians aged 18-24, 16% aged 25-44, and 7% aged 45-64 having reported cannabis use (Statistics Canada, 2015), it will be important that the resulting legalization of cannabis, its distribution and regulatory system facilitates a reduction in use, as opposed to encouraging use.

Given that cannabis tends to pose a negative impact on public health, many stakeholders and government officials have proposed a ‘public health approach’ to cannabis regulation and retail (Health Canada, 2016; Government of Canada, 2016; Room, 2013; Subritzky, Pettigrew, & Lenton, 2016b), and as follows, a publicly-owned, monopolized distribution format (Haden & Emerson, 2014), which finally resulted in legalization of cannabis in Canada on October 17th 2018.

1.2 Literature Review

Regulations regarding retail store design is critical for public health as researchers believes that alcohol retail have determined that marketing tactics including product placement, labeling, displays, and co-branding are risky, particularly for youth (Grier & Kumanyika, 2010; Mosher, 2012). a publicly owned system is beneficial in this case as it possesses benefits such as:

From a policy perspective, a publicly owned system governing cannabis distribution would best facilitate the implementation of a range of health-protecting policies (Babor, 2010; Caulkins et al., 2015; Haden & Emerson, 2014; Rehm & Fischer, 2015), whereas a privatized approach would best support commercial interests (i.e. liberalized, or ‘light-touch’ restrictions).

From a design perspective, a publicly owned system could provide access to cannabis from standalone, single commodity stores, thus mitigating the potential negative impact associated with exposure to marketing strategies that may be employed within retail environments (Haden & Emerson, 2014).

This type of retail design may provide the following public health benefits:

  • Decrease exposure to youth
  • Decrease opportunities for impulse purchases of cannabis
  • Eliminate opportunities for co-branding of cannabis and non-cannabis products
  • Decrease, or slow, the normalization of cannabis as an ordinary commodity as would otherwise occur within retail settings that sold cannabis alongside ‘ordinary commodities’ such as grocery or household products
  • Protect against the risks inherent within retail outlets that would sell both cannabis and alcohol, as the concurrent use of these two drugs compounds and creates additional risk to public health (Pacula et al., 2014).

Further points to be studied in further research:

  • Reasons for legalizing Cannabis in Canada.
  • High taxes on production and price inflation within retail market will continue to rise black markets.
  • Supply chain problems – Transportation costs, Availability of raw materials, Demand and supply creation.
  • How supply chain works especially in medical sector within Canada and United States.

In the end a detailed analysis of study will be made followed by recommendations and conclusions.


  • Austin, T. (2017). ‘Trudeau unveils bill legalization recreational cannabis in Canada’. The New York Times. Retrieved from: https://www.nytimes.com/2017/04/13/world/canada/trudeaumarijuana.html
  • Babor, T. et al. Alcohol: No Ordinary Commodity: Research and Public Policy 2nd ed. (Oxford University Press, Oxford, UK, 2010.
  • Caulkins, J.P. and Kilmer, B., (2016). Considering marijuana legalization carefully: insights for other jurisdictions from analysis for Vermont. Addiction, 111(12), pp.2082-2089.
  • Fergusson, D.M., Poulton, R., Smith, P.F. and Boden, J.M., (2006). Cannabis and psychosis. British Medical Journal, 332(7534), pp.172-175.
  • Government of Canada. (2016). Toward the legalization, regulation, and restriction of access to marijuana: Discussion paper. Government of Canada, Task Force on Marijuana Legalization and Regulation. Retrieved from: http://healthycanadians.gc.ca/health-system-systemesante/consultations/legalization-marijuana-legalisation/alt/legalization-marijuanalegalisation-eng.pdf.
  • Grier, S.A. and Kumanyika, S., (2010). Targeted marketing and public health. Annual Review of Public Health, 31, pp.349-369.
  • Haden, M. and Emerson, B., (2014). A vision for cannabis regulation: a public health approach based on lessons learned from the regulation of alcohol and tobacco. Open Medicine, 8(2), p.73.
  • Kilmer, B., (2014). Policy designs for cannabis legalization: starting with the eight Ps. The American Journal of Drug and Alcohol Abuse, 40(4), pp.259-261.
  • Rehm, J., Crépault, J.F. and Fischer, B., (2017). The Devil Is in the Details! On Regulating Cannabis Use in Canada Based on Public Health Criteria: Comment on” Legalizing and Regulating Marijuana in Canada: Review of Potential Economic, Social, and Health Impacts”. International Journal of Health Policy and Management, 6(3), p.173.
  • Subritzky, T., Pettigrew, S. and Lenton, S., (2016b). Issues in the implementation and evolution of the commercial recreational cannabis market in Colorado. International Journal of Drug Policy, 27, pp.1-12.
  • Van Ours, J.C. and Williams, J., (2011). Cannabis use and mental health problems. Journal of Applied Econometrics, 26(7), pp.1137-1156.
  • Volkow, N.D., Baler, R.D., Compton, W.M. and Weiss, S.R., (2014). Adverse health effects of marijuana use. New England Journal of Medicine, 370(23), pp.2219-2227.

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