Massachusetts Cannabis Regulators Set New Rules for Branded Goods
Updated: Dec 31, 2020
Disclaimer: The views expressed in this article are my own. They have not been endorsed by the Cannabis Control Commission and are not intended to provide or constitute legal advice.
On November 30, 2020 the Massachusetts Cannabis Control Commission (CCC) approved revisions to the Adult-Use Regulations. In this post, I'll briefly summarize new rules for the sale of branded goods by Adult-Use licensees (rule changes for MTCs are essentially the same with one notable exception mentioned below), as well as some continuing uncertainty. In sum, it is fairly clear that Adult-Use licensees can now sell Branded Goods that don't solely (or predominantly) depict or refer to cannabis or cannabis products, but that they still cannot offer Branded Goods as free or promotional discount items. Moreover, Delivery Operators and Couriers can sell and deliver Branded Goods and there are rules for record keeping as to those sales.
For the sake of clarity, I will refer to the prior version of the Adult-Use Regulations as the Old Regulations and the newly approved version as the New Regulations.
Treatment of Branded Goods under the Old Regulations
The Old Regulations were vague on whether Adult-Use licensees could sell branded goods. The only guidance could be found in two advertising clauses: (1) a clause that permitted licensees to engage in "reasonable marketing, advertising and branding practices that are not otherwise prohibited [and] that do not jeopardize the public health, welfare or safety of the general public or promote the diversion of Marijuana or Marijuana use in individuals younger than 21 years old," Old Regulations at 935 CMR 500.105(4)(a)5, and (2) a clause that prohibited "advertising, marketing or branding of Marijuana Products (i.e., products that contain THC), on clothing, cups, drink holders, apparel accessories, electronic equipment or accessories, sporting equipment, novelty items and similar portable promotional items." Old Regulations at 935 CMR 500.105(4)(b)16. Since the second clause only prohibited advertising of Marijuana Products on merchandise, one might easily conclude that a licensee was still authorized to sell branded goods so long the goods didn't depict or refer to cannabis or cannabis products. However, CCC inspectors - perhaps relying on the vague standard included in the first clause that created discretion to prohibit advertising activities that "jeopardize public health, welfare or safety" - nevertheless banned Adult-Use licensees from from doing just that. This narrow interpretation of permitted advertising practices has had real-life consequences, namely, it has deprived Adult-Use licensees - including many small business owners with limited resources who had waited years to get their licenses - from generating much needed revenue in the highly regulated, federally tax-disadvantaged cannabis marketplace. The CCC's approach seems particularly harsh in light of the crushing burden that has been placed on businesses by the pandemic. Fortunately, the New Regulations take an important step forward on branded goods.
Treatment of Branded Goods under the New Regulations
The New Regulations define a Branded Good as "a merchandise item offered for sale by a Marijuana Establishment... having the Marijuana Establishment’s Brand Name, [including things like] apparel, water bottles or other similar non-edible merchandise." New Regulations, at 935 CMR 500.002. The New Regulations go on to define Advertising to include the marketing and sale of Branded Goods. New Regulations at 935 CMR 500.002. So far, so good right? At this point, you're probably waiting for me to share how revisions to the previously cited advertising clauses contained in the Old Regulations have been updated to clarify that Adult-Use licensees can now sell Branded Goods. Not so fast. Both clauses have been updated, but the changes are far from ideal. Nevertheless, there is still guidance to be found if you know where to look.
Let's start by considering changes to the advertising clauses themselves. First, the clause permitting certain advertising activities has, if anything, become less clear. In addition to retaining the vague standard that created discretion to ban advertising activities that "jeopardize public health, welfare or safety," the CCC has inserted a second vague standard that creates discretion to ban advertising practices that "promote practices inconsistent with the purposes of M.G.L. c. 94G or 94I" (the legislation legalizing Adult-Use and Medical cannabis), whatever that means. New Regulations at 935 CMR 500.105(4)(a)7. Judging by revisions to this clause alone, inspectors will now have more discretion to prohibit otherwise legal advertising practices by Adult-Use licensees, not less.
The clause prohibiting certain advertising activities, for its part, seems to authorize sales of Branded Goods by Adult-Use licensees, but then adds to the ambiguity. It prohibits advertising "solely for the promotion of Marijuana or Marijuana Products on... Branded Goods...". New Regulations at 935 CMR 500.105(4)(b)15 (emphasis added) . That must mean that Adult-Use licensees can now sell Branded Goods so long as they are not doing so solely for the promotion of cannabis or cannabis products, right? The obvious question here is what does the phrase "solely for the promotion of Marijuana or Marijuana Products" mean and how will it be interpreted by inspectors. There seems little doubt that a branded t-shirt that contains nothing but an image of a cannabis bud will be prohibited, but what about one that contains that same image together with the phrase "keep away from children," or with slice of pizza? or with a call for greater social equity? or with a famous quote, like this one commonly attributed to Thomas Jefferson: “If people let government decide which foods they eat and medicines they take, their bodies will soon be in as sorry a state as are the souls of those who live under tyranny”? Examples like these are practically endless. Only time will tell where CCC inspectors will actually draw the line. In the meantime, licensees can at least be confident that they can sell unadorned Branded Goods, that is, Branded Goods that only contain a licensee's brand and/or logo and that exclude any images or references to cannabis or cannabis products.
Clearer guidance on Branded Goods for Delivery Operators and Couriers
Compared to the scant guidance on sales of Branded Goods by Adult-Use licensees as a whole, the New Regulations are fairly bursting with clear and helpful guidance for newly established Delivery Operator and Courier licensees. Unlike other licensees (retailers, cultivators, manufacturers, etc.), whose authority to sell Branded Goods can only be gleaned by extrapolating from clauses stating what is not allowed, the New Regulations state the rules for Delivery Operators and Couriers in positive terms by providing that a Courier "may deliver Marijuana Establishment Branded Goods and MTC Branded Goods carrying the... Courier’s brand or that of a licensed Marijuana Retailer or MTC," New Regulations at 935 CMR 500.145(1)(e), and, likewise, that a Delivery Operator "may deliver Marijuana Establishment Branded Goods carrying the Delivery Operator’s brand or that of a licensed Marijuana Cultivator, Marijuana Product Manufacturer, Microbusiness or Craft Marijuana Cooperative." New Regulations at 935 CMR 500.145(1)(f). The New Regulations also helpfully provide that sales of Branded Goods must be recorded and taxed, but that that they don't need to be included in manifests or tracked in Metrc. New Regulations at 935 CMR 500.145(1)(j) & 935 CMR 500.145(7)(a).
A cautionary note on offering Branded Goods as free or discounted promotional items
One final topic Adult-Use licensees should keep in mind is whether Branded Goods can be offered as free or discounted promotional items. The answer, by implication, seems to be no. The best evidence for this view is a separate advertising clause that prohibits advertising by Adult-Use licensees through the marketing of free or promotional items, including gifts, giveaways, and discounts. New Regulations at 935 CMR 5001.105(4)(b)20. Because this clause expressly mentions only two exceptions (employee discounts and brand name take-away bags) and doesn't mention any others, including Branded Goods, it seems clear that CCC inspectors will continue to ban Adult-Use licensees from offering Branded Goods as free or discounted promotional items. It's worth noting here that MTCs are permitted to offer discounts, gifts, and giveaways, so it will be interesting to see how they will approach this issue.
The rules regarding Branded Goods have become clearer, but gaps still remain. In sum, it is now fairly clear that Adult-Use licensees can sell unadorned Branded Goods, but that they cannot sell Branded Goods that solely (or predominantly) depict or refer to cannabis or cannabis products, and that they cannot offer Branded Goods as free or promotional discount items. Moreover, Delivery Operators and Couriers can sell Branded Goods and there are rules for record keeping as to those sales.
Stay tuned for more insights on the New Regulations.