WSLCB Bulletin Update (January 2016)

On January 8th, 2016 the Washington State Liquor and Cannabis Board announced impacting changes in the recreational cannabis industry. So far the flow of money and capital has been very restricted specifically in allowing companies to support one another. Unfortunately, the WSLCB has seen some areas they felt they needed to correct, and some areas they need to allow more opportunity in this great experiment. Lending and gifting money from a producer to a retailer will be completely prohibited. The WSLCB has cinched up many loopholes that involve direct money and indirect money.

 

Direct Money’s Worth:

Direct money’s worth involves a producer or processor giving tangible items such as money or gifts to a licensee. This would include loans of money or gifts or services (WSLCB Bulletin No. 15-02) In addition, a producer or processor is prohibited from lending and giving finances to a retailer for any reason. Also, no gifts can be given from a producer/processor to a retailer; this means gifts of any kind, so rethink that $100 Starbucks card you got for your highest buying retailer last year.

 

Extension of credit, it seems you cannot “front” your retailer, this is surprising as this has been a staple of the industry for decades. Many people involved in this industry started with a “front” and built their “business” up to become what they are today. No more fronts, at least not in the recreational market.

 

Lastly, a Producer or Processor cannot do any activity on the retailer’s premises that the retailer would normally pay for. Arguably, this would mean that events that may be sponsored (paid for) by a producer and processor to help expose a new brand or exceptional brand will now be prohibited unless the retailer pays for the entire event and chooses to represent specific brands with no compensation from the brand.

 

Indirect Means:

It seems that all the loopholes that were in the WAC were exposed and tied up tighter than before. The LCB states they wish to mitigate influence and possible enticement with regards to unfair business practices. Before giving specific examples of this type of means the board states that “Any act of the processor or producer to entice customers into a retailer’s store would be considered in-direct money’s worth. “ So think of Producers and Processors being pharmaceutical companies and the retailers being doctor’s offices. The heyday of free coffee, pens, bagels, kickbacks, and other swag are long gone, and the LCB seems to want to mitigate similar influence.

Examples of prohibited activities also include;

Producer/Processors creating a subsidiary or second company to give away items to the retailer on their behalf. The sponsoring of events such as birthday celebrations or just throwing a party to build their brand is now expressly prohibited. Producers/Processors cannot create incentive programs, so that punch card for the “20th ounce is free” is now worthless.

 

Producers and Processors are prohibited form promoting their product on the premises of a retailer, so no strain release parties or product release parties are to be done by the producer/processor. The last example they give is that producers and processors are prohibited from negotiating any type of discount for customers on their product. It is up to the retailer to decide what specials and discounts they customer will receive.

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