Pubdate: Thu, 20 Aug 2015
Source: Sacramento Bee (CA)
Copyright: 2015 The Sacramento Bee
Contact: http://mapinc.org/url/0n4cG7L1
Website: http://www.sacbee.com/
Details: http://www.mapinc.org/media/376
Author: Jeremy B. White

CALIFORNIA MEDICAL MARIJUANA REGULATIONS MIGHT REFLECT LAWS FOR BOOZE

Pushing hard to at last regulate California's free-for-all medical 
marijuana industry, state lawmakers are wrestling with how a tightly 
regulated cannabis market would work.

Increasingly, the answer looks to be a lot like the market for alcohol.

Long-standing alcohol laws rigidly separate producers, distributors 
and vendors. The decades-old "tied-house" formula was conceived 
largely as an antidote to the gangsterism of Prohibition, seeking to 
disrupt the liquor monopolies organized crime groups had established.

If Assembly Bill 266 passes - as looks more likely than with any 
previous attempt, given the support of law enforcement, cities and 
the large majority of Assembly members who voted it off the floor - a 
similar approach could apply to medical cannabis.

At stake is the future of a medical cannabis market estimated to be 
worth more than $1.2 billion in 2014, from which players profit to 
which strains of cannabis land in front of consumers. Cannabis 
vendors and farmers, law enforcement and organized labor have all 
asserted their vision of what it should look like and whether alcohol 
laws offer a good model.

"This is a brand-new industry, so you don't know how it's going to 
develop," said Barry Broad, a lobbyist representing the California 
Teamsters, who have been advocating the multitier model. "There's no 
question that alcohol is more heavily regulated than other products, 
and marijuana deservedly should be regulated as well."

Under the current version of the bill, farmers who cultivate or sell 
cannabis could not transport it to dispensaries themselves. The 
distribution and transportation would fall to entities like the 
Teamsters drivers Broad represents. They would get licenses 
unavailable to growers or vendors.

Public safety provides part of the justification. Law enforcement 
officials say having additional sets of eyes on the cannabis would 
make it tougher to divert it to the black market. The middlemen 
distributors would essentially serve as a check on the cultivators, 
ensuring their product remains in legitimate channels.

"It's important to separate the cultivation, the processing, the 
distribution or sales for the accountability piece," said California 
Police Chiefs Association President David Bejarano, who is also chief 
of the Chula Vista Police Department. "It would be difficult ensuring 
it doesn't go to the black market if it's all clumped together."

The other argument for the multitiered system is an economic one. The 
purpose of scattering the process among multiple license holders, 
Broad said, is to ensure that large-scale cannabis enterprises don't 
take over the fledgling marketplace.

"What could happen is a dominant market player could take control of 
the entire market and freeze out competitors," Broad said, calling 
the multitiered model "a mechanism for ensuring everyone gets their 
access to the market."

Other provisions in AB 266 seek to prevent large-scale operations 
from monopolizing the market. Companies that hold both cultivating 
and dispensing licenses would face limits on how many stores they can 
run and how many acres of land or square feet of indoor space they 
can have planted.

But members of the increasingly assertive cannabis industry lobby 
warn the system could produce some of the same issues regularly 
spotlighted by small-scale alcohol makers, particularly that it gives 
distributors too much power.

"We're very concerned about basically mandating the distribution 
model for the entire state, because what that will do is allow a few 
organizations to control the price structure for the entire state, 
kind of like the exact same way the spirit distributors do it now," 
said Nate Bradley, executive director of the California Cannabis 
Industry Association.

Critics also complain of overly complex rules and frequent exceptions 
carved out with the help of lobbyists for various alcohol entities. 
Alcohol suppliers are now allowed to own hotels and theme parks or to 
advertise at some sports venues, for example. Wineries and craft 
breweries can sell their products on premises.

"The current alcohol scheme we have has been chipped away at from the 
first day," Bradley said.

Last year, Gov. Jerry Brown signed legislation allowing beer 
manufacturers to sell their products at farmers markets and at 
private events on their premises. This year, small liquor 
distilleries are seeking something similar, backing legislation 
enabling them to sell alcohol during on-site tastings and to have 
ownership stakes in restaurants.

California Artisanal Distillers Guild executive director Cris Steller 
said the liquor bill, which was revived after first faltering in a 
key alcohol-regulating committee, would disrupt distributors' control 
over which products make it onto liquor store shelves.

"There's only so much ability to give up space to smaller brands that 
don't have the same brand recognition," Steller said. "They might 
have the quality, but they don't have the name recognition with the 
public, so the distributors go with larger brands that have much 
larger advertising budgets and have that ability to influence the market."

That same dynamic could recur with cannabis, warned Steve DeAngelo, 
executive director of the Oakland-based Harborside Health Center, 
which the federal government has sought to shut down.

"It would give a huge amount of branding and marketing power over to 
the distributors," DeAngelo said. "Supply and demand is going to 
dictate that the distributors will have much more economic power than 
the farmers would."

Many cannabis farmers see the issue differently. Giving distributors 
a greater role would minimize the possibility that "a retailer can 
fill their shelves with only their product (and) can push anyone else 
out of the market," said Hezekiah Allen, executive director of the 
Emerald Growers Association.

It would also give small-scale growers logistical assistance, Allen said.

"Getting cannabis from the far north in Siskiyou County to the far 
south in San Diego County is virtually impossible," Allen said, but 
"an alcoholic beverage can get from a producer to a distributor to a 
retailer anywhere in the state in two days."

[sidebar]

What are tied-house laws?

"Tied-house laws" are rules that prevent different tiers of the 
alcohol industry - manufacturers, wholesalers and retailers - from 
being tied to one another.

They were conceived largely as an antidote to the gangsterism of 
Prohibition, seeking to disrupt the liquor monopolies organized crime 
groups had established.

They cover both ownership and marketing. A beer or wine maker 
generally can't also own the place where their product is sold, 
though over the years exceptions have proliferated.
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MAP posted-by: Jay Bergstrom