Home delivery of adult-use cannabis – expected to start in 2021 – will include a three-year exclusivity period to level out the playing field for smaller companies affected by the drug war after a vote by state marijuana regulators.
The Cannabis Control Commission voted 3-1 on Nov. 30 for new adult-use marijuana regulations, including the home delivery structure for non-medical use marijuana. There will be two different types of delivery licenses available: courier and warehouse.
The courier model, similar to Uber Eats delivery services, involves orders from traditional brick-and-mortar dispensaries delivered to consumers for a fee.
The warehouse license will allow companies to operate without a physical storefront, selling their merchandise online and using a home delivery system.
There will be cap limits on the number of delivery and retail licenses available.
State marijuana regulators clarified the statutory allowance of up to three retail licenses and a regulatory allowance of up to a combined total of two marijuana courier and/or delivery operator licenses.
“The two major pieces here that are embedded ... would be first to prohibit any investment by a third-party tech platform provider in a delivery licensee with which they have a contract,” said Cannabis Control Commissioner Britte McBride.
The second would be to decouple retail license caps from delivery license caps, “so that a licensee may hold up to three retailer licenses and up to a combination of two delivery operator and/or courier licenses. That reiterates the policy that is embedded in the statute, and also what we have worked under as a commission for the past three years,” McBride said.
In addition to the number of delivery licenses a retailer is allowed, there are limitations on who will be allowed access to the licenses. For the first three years, licenses will be granted only to social equity applicants, those from communities disproportionately affected by prior enforcement of drug laws.
Delivery application and license fees will be waived for participants of the Certified Economic Empowerment Priority Applicants and Social Equity Program in their first year of licensure under the three-year exclusivity period.
Michelle Herman, a registered lobbyist and media director at MassSense – the Massachusetts Grower Advocacy Council – said that this three-year exclusivity period will level out the playing field for smaller companies.
“It gives the chance for the little guys to actually get into the industry before the market is flooded with larger companies. It’s really hard for a smaller company to compete against the big guys and this is going to be a way to allow that to happen,” Herman said. “That was what the spirit of the law was for, to help fix the problems of the drug war.”
Jim Borghesani, a recreational pot advocate and leader of the 2016 cannabis legalization campaign, said that the direct consumer delivery models will address the social equity equation of the industry.
“Until now, the Cannabis Control Commission has been struggling to meet its commitment to bring social equity owners and operators into the industry, by no fault of the commission, really by the headwinds that these entrepreneurs face at the local level and at the funding level,” Borghesani said.
“I think that this new license system as designed by the Cannabis Control Commission will go to significant lengths to bring social equity applicants into the industry. But I do recognize that it may come at somewhat of an expense to the existing brick-and-mortar stores.”
Third-party technology platform providers will be allowed to contract with an unlimited number of delivery licensees.
McBride said the regulations are “a very big step forward in the right direction to preventing some of the negative consequences that we have tried to avoid all the way along. We tried to anticipate and cut things off in the past where possible.”
The commission intends to prevent monopolies with the addition of safeguards between third-party technology platforms and delivery licensees by explicitly prohibiting: attempts at monopolization, inducements, investments from third-party technology platforms and restricting determinations of product and licensee placement on an app to objective, customer-oriented criteria.
“I really appreciate the feedback that we received on the particular issue of the interplay between third party tech platforms and delivery operators and couriers,” said McBride. “I think it also puts a stake in the ground for ensuring that there’s an understanding about where this commission stands with regard to policy about preventing monopolies, and also really flags for people, I think, that we will be looking at this very closely and watching and engaging on it.”
Herman said she does not think the commission has yet to define what a monopoly is, nor are they doing enough to prevent against them.
“I think, if anything, they’ve opened the door to let in companies like Eaze and others, so basically a kind of GrubHub situation. There is no limit on how many cars they have, all you need to have is one person who has a lot of money and a lot of cars and they can take over the entire market,” Herman said. “And I do not think that the (commission) has done a good job to protect us against that.”
Given the three-year exclusivity period and its priority to smaller businesses and minorities, the state’s existing marijuana dispensaries will challenge these new regulations, as reported in Boston.com.
Borghesani said that delivery was specifically mentioned in the referendum that was passed in 2016, so nobody should be surprised that a delivery system is going to be up and running.
“There was never any exclusive exclusivity given to bricks-and-mortar. I do recognize that the delivery system as designed is different than what was in the referendum. But I think the Cannabis Control Commission was wise and designing the delivery system the way they did, because they have to address the lack of social equity presence in the new industry,” Borghesani saud,
“And I think this is a good way to do it,” he added. “Every industry, no matter what it is, is facing competition from delivery services. This is just the way that ecommerce and delivery commerce is happening now in our economy. The cannabis industry is really no different.”
Delivery is expected to start in 2021, but an exact timeframe is still to be determined.
“You can’t even apply for the licenses until the regulations and the licensing process has been put forward by the Secretary of State, and at that point they can start the licensing applications, but it’s … impossible to say at this point how long the Cannabis Control Commission will take and approving the licenses,” said Borghesani.