Capitol Alert

California business groups take on Teamsters in pot battle in Legislature

Some of the state’s leading business associations are taking sides against the powerful Teamsters union in a fight going down in the California Legislature over pot distribution.

As part of the budget package, legislators are crafting a trailer bill that would merge existing medical marijuana laws with the voter-approved recreational pot measure. Their goal is to reconcile differences between the two laws and establish a single regulatory framework governing the new industry. The state is acting on a short timeline to begin distributing licenses to marijuana businesses on Jan 1, 2018.

Business groups, unions and others with a hand in the industry want to shape the laws. The Teamsters in particular have been advocating for a mandatory independent distribution model that would force growers and manufacturers to pay a third-party distributor to transport products to retail market, similar to the alcohol industry.

New opposition to the independent distribution model emerged last week from the California Manufacturers and Technology Association, California Retailers Association, California Restaurant Association, California Business Properties Association and National Federation of Independent Business.

The groups, as well as the California Cannabis Industry Association and the marijuana investment fund Truth Enterprises, sent a joint letter to legislative leaders and Gov. Jerry Brown outlining policy recommendations, including a request to eliminate forced independent distribution.

“Our experience with alcohol is that the distributors have too much power,” said Bill Dombrowski, president of the California Retailers Association. “They control the flow of the merchandise. They control pricing to some extent. We want to point this out and make sure that people understand this is not a perfect model.”

Distributors like the approach because it gives them a mandatory cut. Some lawmakers want distributors also to transport the products to testing facilities, which they believe will ensure safety compliance.

The Teamsters, local governments, police chiefs and distribution companies have banded together to form a coalition in support of the distribution model and other issues. At the urging of stakeholders, legislators wrote the mandatory independent distribution model into medical cannabis laws passed in 2015. The California Growers Association, which had previously indicated support for the mandatory independent distribution model but was officially neutral, announced last week that it supported voluntary distribution for cultivators and manufacturers, said Hezekiah Allen, executive director of the group.

On the other side, the business groups have joined the United Food and Commercial Workers, California Cannabis Industry Association and marijuana manufacturers. They say they want to uphold the free market structure of Proposition 64, the marijuana legalization measure, by allowing growers to distribute the products themselves in most cases.

In the letter, business associations said mandatory independent distribution has been tied to problems in the alcohol industry, including high transportation costs, difficulty for craft distillers to enter the market and “the entrance of organized crime.”

They said it would raise prices and push consumers to the illegal market. To ensure safeguards, the state should instead focus on the implementation of a seed-to-sale tracking system to increase safety and allow police to trace products that move to the illegal market, the groups said.

Barry Broad, a lobbyist for the Teamsters, called the letter “wacky” and questioned the comment about distribution linked to organized crime. He said the business groups are chiming in late in the game.

“These are all groups that have never been involved in this marijuana discussion at any stage whatsoever,” Broad said. “ I don’t even know what their position is. This is their first foray into the industry.”

Dombrowski said he’s been having conversations with marijuana businesses for months and intends to welcome some as new members of the association in the next few weeks. Broad’s a friend, and he’s told him about the association’s interest in expanding into the marijuana retail industry for over a year, Dombrowski said.

“We respectfully disagree,” Dombrowski said. “This is a whole brave new world. We’re looking at the creation of an entire industry that could rival the wine industry, if we do it right. I think it’s a fascinating time.”

Editor’s Note: This post was updated at 9 a.m. March 21, 2017 to clarify the current position of the California Growers Association.

Taryn Luna: 916-326-5545, @TarynLuna