Viewpoints

California should create a pot cartel

Oscar Mejia receives his medical marijuana delivery from Kody Kolstrup and Amanda Campos of GramUp on Sept. 8 in Sacramento.
Oscar Mejia receives his medical marijuana delivery from Kody Kolstrup and Amanda Campos of GramUp on Sept. 8 in Sacramento. aseng@sacbee.com

If California is going to transition successfully to full legalization of marijuana, our state is going to need its own cartel.

For the record, I am not smoking anything. And I’m not suggesting that California encourage a criminal syndicate like the Zetas. The California cartel would need to be a legal corporate oligopoly with the size and resources to control the distribution of cannabis so that our state can properly track, regulate, price and tax America’s largest marijuana market.

Without a powerful force to wrangle the motley cannabis players in remote corners of the state, California marijuana could quickly spawn the sort of convoluted, unaccountable regulatory mess for which our state is famous.

Early attempts to design regulation around cannabis are worrying. Instead of designing one system to cover all forms of cannabis, regulation is moving right now on two separate tracks – one for medial marijuana and another, via Proposition 64, for recreational pot.

Proposition 64, at 62 pages, is the longest initiative on the Nov. 8 ballot, and it outlines so many different priorities that a regulatory system based on them would be highly complicated.

A cartel is the best way to bring order to this chaos. For one thing, it’s proven. Alcohol has long had this sort of three-tier system, with a middle tier of powerful distributors connecting a diverse array of brewers with all the various places that sell beer.

For another, a powerful distributing cartel allows for ownership and accountability in the system. The cartel must buy the product from growers, thus providing a check on supplies, quality and licensing. And the cartel must sell to retailers, tracking the amounts and the quality of product sold. And by tying together the system, distributors provide the natural vehicle for regulating and taxing cannabis.

The cartel has another important role – keeping the price high enough to protect small players. Without a choke point in the industry, legalization of recreational cannabis will likely mean a big drop in price. Demand is unlikely to spike after legalization; most of those who use cannabis in large amounts already have access to it via medical marijuana and the black market. But legalization is all but certain to increase supplies significantly, as growers move out of the shadows and make their once-illegal businesses more productive.

A dangerous drop in prices could encourage more people to use marijuana. Distributors, as middlemen, would by their existence keep prices higher.

So, what sort of person could assemble such a cartel?

My own choice would be someone like Eric Spitz, who has already publicly raised his hand as a person interested in shaping the future of pot in California. Spitz ran a brewing company and founded a casual food chain before coming to California to become co-owner of the Orange County Register, when I met him.

He talks messianically about how those experiences make him the right man to help the state design a new structure for the marijuana industry. His goal? To help shape the system and eventually become a distributor.

Spitz is advising local governments about how to regulate cannabis businesses, and he’s been talking with former state Attorney General Bill Lockyer. “We have a responsibility to do it right, not only to make sure our system works, but because we know how California is going to tilt the scales for the rest of the country,” Spitz says.

And how will you know if the system is working? My view: When people in the marijuana business stop complaining about the chaos in their emerging industry and start complaining about the decisions of the cartel in charge.

Joe Mathews writes the Connecting California column for Zócalo Public Square. He can be contacted at joe@zocalopublicsquare.org.

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