Special interests from the Teamsters to the makers of marijuana-infused mouth spray are sending lobbyists to the California Capitol as the state seeks to reconcile existing medical marijuana laws with the measure to legalize recreational pot voters passed in November.
By the end of the year, lawmakers are seeking to establish a singular regulatory system that allows a multibillion-dollar industry to flourish, ensures safe products and prevents monopolies.
Distinctions between the two laws are pitting labor unions against one another as they attempt to grow their memberships in the new industry. Investors and entrepreneurs want versions of the regulations that fatten their wallets.
“It’s a growing industry that has come out of the shadows and into the light,” said Assemblyman Rob Bonta, D-Alameda, who helped craft the medical marijuana legislation. “There are a lot more players who are interested in talking to us than when we started.”
Californians legalized medical marijuana in 1996. The Legislature failed to pass comprehensive regulations governing the industry for the next 20 years.
Lawmakers finally set out to develop a framework as Colorado, Oregon and Washington legalized recreational pot and it became clear that California was likely to follow suit. A coalition of marijuana growers, police officers, unions and lawmakers helped pass the Medical Marijuana Regulation and Safety Act in 2015. It gave legislators until Jan. 1, 2018, to establish agencies and implement sweeping regulations on the industry.
Now they are trying to blend the existing law with Proposition 64, the recreational legalization measure. The measure, funded largely by billionaire Silicon Valley entrepreneur Sean Parker and Drug Policy Alliance, mirrors the medical legislation in most regards, according to Richard Miadich, the lawyer who wrote it.
There are nevertheless key differences, including who can move marijuana from farms and manufacturers to market – hence the Teamsters’ involvement. Interests are debating the key question of whether businesses are allowed to grow, transport and sell their own products.
It also was written in a way that allows the Legislature to make some changes.
It’s a growing industry that has come out of the shadows and into the light.
Assemblyman Rob Bonta, D-Alameda, who helped craft the medical marijuana legislation
“We already did this hard work,” said Hezekiah Allen, executive director of the California Growers Association. “Then the flood came and washed everything away, and we have to start building again.”
The growers association is part of a coalition with the Teamsters, local governments, police chiefs and a West Sacramento distribution company called RVR.
The group supports the medical legislation it helped craft, which limited how much businesses can do to avoid monopolies, and are pushing to apply some of those guidelines to the new regulatory structure. Distributors like the approach, which is much like the system that governs the alcohol industry, because it gives them a mandatory cut.
Meanwhile, the United Food and Commercial Workers, the California Cannabis Industry Association and manufacturers have banded together on the other side. Their goal is to uphold the more free-market model voters passed in November.
“Right now the Teamsters have a different vision for this industry than UFCW, in terms of how it’s structured,” said Jim Araby, executive director of UFCW Western States Council. “We feel the voters have spoken under 64, which did not mandate a neutral third-party distributor.”
Proposition 64 allows growers and manufacturers – makers of such products as cannabis-infused olive oil and mouth spray and marijuana churro cookies – to distribute their own wares, with some exceptions.
Medical marijuana laws require an independent third party to act as a middleman and distribute the product from the growers and manufacturers to retail outlets, much like the alcohol industry. Distributors would also act as a tax collector and transport marijuana products to labs for testing, which lawmakers favor.
“It’s to prevent diversion and market concentration with one company dominating everything and preventing fair competition,” said Barry Broad, a lobbyist for the Teamsters who pushed the clause into the medical marijuana legislation. By diversion, Broad means it will cut down on manufacturers’ ability to sell their products on the black market.
UFCW believes the mandatory independent distribution the Teamsters support would do more harm than good.
The distribution model may work with alcohol, but marijuana products are different, Araby said. Bottles of booze have long shelf lives and can mostly be transported the same way. That’s not the same for marijuana, he argues, which can vary from weed-infused ice cream to plants that dry out and grow stale.
Kenny Morrison owns VCC Brands, a Los Angeles company that makes and sells edible products. He also heads the California Cannabis Manufacturers Association. Without a regulatory system in place, he’s allowed to distribute his own products.
The Teamsters only got into the mix in the eleventh hour because they wanted a cut of the industry for themselves.
Kenny Morrison, owner of VCC Brands, which makes and sells edible products
Morrison wants to preserve his business model. He invested in the trucks, equipment and warehouses necessary to store and move his goods. If he’s forced to hire an independent distributor, he says, he’ll end up having to teach them everything he’s learned and pay them to do it. He believes his drivers are far better stewards of his brand than a third-party distribution company.
“I don’t want to be reduced to one page in someone else’s brochure, not when they haven’t stood up for cannabis the way I have,” Morrison said. “The Teamsters only got into the mix in the eleventh hour because they wanted a cut of the industry for themselves.”
The growers’ association does fear that taxes and payments to distributors and testing labs will cut into their profits. But Allen said the growers have been at the mercy of retailers for years. In some instances they negotiate prices over the phone, only to be charged more when the growers deliver the product to the stores. He hopes a third-party distributor will offer some protection on pricing.
“These manufacturers and retailers have not been treating growers well for the last 15 years,” Allen said. “These distributors may not treat us well either. But we’ll take the unknown evil over the known evil.”
Licensing is another point of contention between the two groups.
Sen. Mike McGuire, D-Healdsburg, represents Mendocino, Trinity, Humboldt and Lake counties, where much of the country’s marijuana is grown. He envisions a regulated market in which local farmers in his district become the craft brewers of the marijuana industry. He’s concerned that they’ll be pushed out of the market if corporations can move in and control the supply chain from seed to store.
“Having an integrated system makes it extremely difficult for those farmers to succeed in a regulatory world built for the big boys,” he said.
So when he helped guide the medical marijuana legislation, lawmakers allowed businesses to obtain up to two different types of licenses.
The recreational initiative allows marijuana operators to apply for as many license types as they choose, with some exceptions. It allows most businesses to grow, manufacture, distribute and sell marijuana to consumers.
Nate Bradley, executive director of the California Cannabis Industry Association, argues that the restrictive licensing concept is “more based in fear than fact.” He thinks farmers will be able to make more money if they don’t have to pay a distributor and can go directly to retailers themselves.
“You’re going to have to fight with a lot of people to get your products on the shelf through a distribution firm,” Bradley said.
Legislators will have to sort out countless other issues before the state begins issuing marijuana licenses next year. Lobbyists expect squabbles about whether businesses should have to obtain licenses from both state and local governments and whether regulators can examine the facts of a prior drug conviction to bar someone from obtaining a license.
Calling it a daunting task, McGuire doubts the Legislature can agree on regulations before the system is expected to go live on Jan. 1.
Others are more optimistic and believe progress on medical marijuana regulations will make implementation easier.
“We’re on track if this reconciliation process works out,” Allen said. “The question now is can the marijuana millionaires spend enough money to kill the reconciliation bill? In which case we may move into a tailspin.”