How we legalize marijuana, Part 4: The bad

This is part 4 of my series on the proposed Control, Regulate, and Tax Adult Use of Marijuana Act (“the Act”) that will likely reach the California ballot in November 2016. The series started hereThank you for reading.

The bad: pitfalls of creating big business and market concentration.

The biggest problem I see with the Act is its friendliness to big business. Although the Act regulates marijuana in half a hundred ways, mostly beneficial or at least benign, it has very little to say about market concentration. If the outcome of legalization is that a few major firms get bigger and bigger and come to dominate the field, that is not a good thing, even if they comply with all the laws. Who knows what exactly Big Cannabis might end up doing – covertly enable sale to minors? engineer strains for greater dependency? prevent discovery of unsafe agricultural practices? – but there’s bound to be something not effectively prevented up front, and they would over time gain the resources and power to pursue whatever makes the most money, including blocking new regulations or blunting existing ones (cozy relationships with regulators). As we know from the economy at large, bigness also blunts competition and hurts consumers and small businesses. We would be well advised, therefore, to prevent bigness as a rule, and the Act does not really do that.

The recent statewide medical marijuana laws made some moves in this direction: they limited large-scale cultivation, and prevented vertical integration, trying to keep cultivation, distribution, and retail separate, except for small-scale businesses. This Act does not do this, except that as recently amended, it prevents large-scale cultivation sites (more than 1 acre outdoor or 1/2 acre indoor) from being licensed until 2023, and those licensees when they exist cannot vertically integrate with distribution or retail. But I’m not sure how far this works, since a business could hold any number of license types if they maintain multiple smaller premises. The state can also deny licenses that would aid monopoly power, but it is unlikely to exercise this authority.

The Act does offer special small business licenses, including microbusinesses where one license would cover a small amount of cultivation, distribution, manufacturing, and retail all together. It also contemplates another possible category, nonprofits that focus on “providing whole-plant marijuana and marijuana products and a diversity of marijuana strains and seed stock to low-income persons”, which could get taxes and license fees reduced or even waived, but only if the state finds it feasible. These are decent and make sense on their own but are largely token gestures.

Possibly our state will add on enough other rules in time to build a healthy, competitive market from the ground up, rather than the stagnant, concentrated kind we see so often. But if so, the public will have to fight for such measures independently after the Act is passed, and success is far from guaranteed.

Tomorrow, part 5: what the Act does not do.

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