Marijuana regulators agree to license home delivery
Will cap number of warehouses a company can own
DESPITE CONCERNS BY marijuana shops, municipal officials, and some lawmakers, Massachusetts marijuana regulators voted Tuesday to go ahead with licensing marijuana delivery companies. But the Cannabis Control Commission did make some changes to limit the size of any one delivery company and avoid market domination.
“I feel very comfortable we can roll this out fairly and safely and equitably,” said Cannabis Control Commission chairman Steven Hoffman.
While the commission must still take a final vote later this month, Cannabis Control Commission executive director Shawn Collins said applications could be available in the first quarter of 2021.
“I’m really looking forward to it becoming reality sometime next year,” said Commissioner Shaleen Title.
Retailers complained that these delivery companies would undercut them by selling directly to consumers, with lower overhead costs. Municipalities worried they would lose tax revenue if retailers in their towns lost sales. Some lawmakers questioned whether the model was even legal, since the state marijuana law envisioned retailers as the only licensees to be able to sell to the public.
For their part, delivery companies asked for looser regulations to make the business more profitable, including eliminating a requirement that any marijuana delivery car have two people and letting delivery companies repackage marijuana bought in bulk.
During a wide-ranging discussion, the biggest change commissioners made to the proposed regulations was in limiting any company to applying for two delivery licenses, which means they can have just two warehouses in the state. For retail shops and other license types, there is a three-license cap. The caps are meant to prevent one or two companies from dominating the cannabis market.
Some retail groups have worried about the “Amazon-ification” of the delivery market, if one company can control delivery statewide.
Hoffman initially proposed allowing just one delivery license per company. He worried that if a delivery company has three warehouses in three parts of the state, that company could gain a large share of the statewide market. “If they were limited to one warehouse, I think the geography could prevent any one entity from being able to dominate the market,” Hoffman said. While some, in public comments, suggested capping the size of a warehouse or the number of delivery vehicles a company could have, Hoffman said he could not develop a way to do that that was not “arbitrary.”
But Commissioner Jennifer Flanagan said the delivery license was meant to help increase equity in the industry, since the licenses are reserved for the first several years for “social equity” applicants, who are people disproportionately affected by prior enforcement of drug laws. She worried about opening the industry to these applicants, then trying to limit their potential for growth. She also expressed concerns about “being too prescriptive,” rather than letting people make their own business decisions.
“I feel like we’re trying to protect people from themselves, when individuals need to decide whether to get into this business or not,” Flanagan said.
Commissioners also took a step toward encouraging competition by limiting third party technology companies to having a financial interest in just one delivery company. There are large cannabis delivery logistics companies operating in other states – and in Massachusetts’s medical marijuana market, where home delivery is allowed – and commissioners worried that one large company could disproportionately affect the market, by contracting with multiple delivery companies, then dominating the cannabis marketing or logistics space.
“To prevent market domination, putting controls around what those third-party technology platforms can do and their involvement in licensees is wise,” said Commissioner Britte McBride.
In other states, companies like Eaze or Lantern contract with multiple retailers to list their products online and arrange for delivery. Hoffman said after the meeting that he was worried about these technology firms “self-dealing,” having financial investments in multiple delivery companies, then using algorithms to distort the market by sending more sales to those companies. Hoffman clarified that the commission did not intend to prohibit companies like Eaze and Lantern from contracting for services with many companies – but Eaze or Lantern could not have an ownership interest in the companies.
Commissioners decided against the major changes proposed by delivery companies and kept in place the two-person-per-car rule and the limitation on repackaging products.
Flanagan suggested that commissioners postpone licensing delivery companies until 2023. She said the myriad public comments make it clear that there are “still a lot of questions, there’s still a lot of uncertainty around delivery.” Flanagan said she wants to “give the cannabis industry time to mature in Massachusetts” before adding delivery.
Her motion was voted down 3-1.
McBride said there is “always this element of unknown” in any new segment of the industry, and the commission did vote to study the delivery industry in two years and make any necessary changes. McBride said standing up marijuana delivery companies is a way to increase equity in the industry and cut down on the illicit market. “I don’t think we can wait on those any longer,” McBride said.Asked after the meeting about a letter written by some legislators questioning the commission’s legislative authority to create delivery licenses, Hoffman said, “We respectfully disagree.”
Chris Fevry, president of the Massachusetts Cannabis Association for Delivery, said he believes the policy decisions made by the commission are fair. “Even though we didn’t get everything we wanted, it creates a fair playing field and gives the commission time to reassess things over a two-year period,” Fevry said. “I’m happy with it.”