“As the power grab for control of the multibillion-dollar cannabis industry heats up, consumers and patients need antitrust protection.”
By Shaleen Title
If you think two or three powerful companies owning and controlling the sales of all regulated marijuana sounds like a good thing, you can click away from this article and go on with your day in peace. But if the thought of a market controlled by Marijuamazon, Canna-uber, or Weedbook (excuse me, Weedaverse) is unsettling to you, I want to introduce you to a valuable concept: antitrust laws.
What are antitrust laws, and why should you care? In short, when we lived in a different but similar “Gilded Age”—when oil tycoon John D. Rockefeller rocked a top hat as opposed to Jeff Bezos wearing a space helmet on his rocket joy rides—our government was pressured to address rising inequality by creating laws to prevent monopolies. Corporate influence has led to these laws being scaled back in practice, but the basic objective of antitrust laws remains: to protect the process of competition for the benefit of consumers.
As the power grab for control of the multibillion-dollar industry heats up, consumers and patients need antitrust protection. By applying the concepts of antitrust law to all federal cannabis reform now, we can avoid the creation of national monopolies before it’s too late and create a diverse and fair marijuana market instead.
Big tobacco and alcohol companies are making significant investments into cannabis and creating their own front groups, and even larger conglomerates are openly expressing their interest in getting into the industry once the product is federally legal. If you listen to them, you might think it’s a foregone conclusion that cannabis has to end up like so many other industries, from cigarettes to peanut butter, where the largest three or four firms control over 90 percent of the market.
And yet, nothing is a foregone conclusion. The future of federal legalization is up for grabs. To the frustration of all of us rooting for federal marijuana law reform, no piece of legislation has even made it to a vote in both chambers of Congress. As Politico observed recently, so-called “Big Weed” hasn’t been particularly effective, despite spending hundreds of thousands of dollars a year on lobbying efforts and hiring big names like John Boehner and other former members of Congress who never supported legalization while in office.
Instead of relying on profiteers, we can stick with the roots of our movement: the people. This moment calls for a united effort to preemptively crack down on national cannabis monopolies. Instead of further entrenching oligopoly-like markets, where consumers complain of high prices, we can put consumers, patients, workers and small businesses first.
We don’t need to start from scratch. Marijuana regulation may be relatively new, but regulation itself isn’t. Neither are antitrust laws that lead to more competition, better wages and innovation. When regulators have actively enforced these laws—as in the case of oil and railroad monopolies—they’ve been able to rein in corporate excesses and encourage a more diverse marketplace. But when enforcement is lax, as with Big Tech, concentrations of wealth and power can accumulate rapidly.
Prohibiting vertical integration (preventing one business from controlling all stages of production of the supply chain, from seed to sale) is a historically tested method of avoiding anti-competitive market dominance, for example. This rule is often cited as the reason the alcohol industry is not as concentrated as others—in the beer industry, the largest three firms control 75 percent of the market and craft brands have a chance to be successful.
To promote broader market access, many states, including Washington, West Virginia, Maryland, Pennsylvania, Massachusetts and Michigan have sensibly set some type of limitation on the number and type of marijuana business licenses that one entity may hold. But federal limits should reinforce them. The proposed Cannabis Administration and Opportunity (CAO) Act takes a significant step in the right direction with anti-monopoly provisions prohibiting commercial bribery and uncompetitive trade practices in the cannabis industry, modeled after similar rules for alcohol. But that alone is not enough.
Congress must also authorize states to continue their existing policies that offer state-level advantages to local and social equity businesses, which are becoming increasingly robust and starting to show results. Many of these programs would otherwise likely become invalid when marijuana is legalized due to the dormant commerce clause. Invalidating state benefits could make it impossible for small businesses to survive federal legalization.
But there’s an easy fix. By authorizing states to ban or delay interstate commerce, Congress can allow the states with expertise to continue their social justice efforts, instead of voiding their policies overnight, and use the data and information gathered from those states to better regulate the industry. To avoid protectionism, Congress could choose to only allow states to restrict interstate commerce as part of a plan for racial and social justice.
In a new paper, “Bigger is Not Better: Preventing Monopolies in the National Cannabis Market,” I argue for these and several other detailed policy recommendations for any federal cannabis bill, including the legalization of home cultivation and the creation of a multi-agency task force to enforce laws against anticompetitive conduct and predatory behavior.
One might reasonably wonder if this is all necessary. As a consumer in the Northeast, for example, I would love to enjoy craft cannabis from Oregon—wouldn’t simple federal legalization toss the status quo and create an open and free market to fix that? Unfortunately, no. The legal cannabis market is neither open nor free, and federal legalization does not automatically solve that. Even after cannabis is descheduled, under the current proposals, businesses would still need to navigate the state and local processes which have been marked by limited licenses and exorbitant applications that stifle a fair market and create bidding wars that reward larger, better resourced businesses.
How much more difficult will it become for small businesses once multinational conglomerates get involved? We cannot leave that question up to chance. If our goal is to protect consumers and support small businesses, then we need to enact proactive policies that prevent concentrated market power from squeezing them out.
Lawmakers must consider that without intentional protections, federal legalization could reverse the progress many states have made when it comes to public health and racial and economic justice. With most social equity programs only recently implemented, it’s difficult to imagine how the programs’ participants could possibly compete against would-be cannabis robber barons. The playing field will be dramatically changed for all cannabis businesses when they are competing with companies that can, for example, ship in their own supply from another state with their own existing infrastructure. None of the proposed federal legalization bills address that problem yet—perhaps relatedly, Amazon has endorsed all three of them.
We don’t have to stay on our current path and assume that every cannabis company will get gobbled up by bigger ones until we all work for the same employer producing the same three overpriced, low-quality strains. Instead of following the lead of aspirational Big Marijuana, we can choose to use national legalization to usher in a new golden age of the market that puts people first. Time-tested antitrust concepts developed for the economic freedom of all Americans are the key to do it.
Shaleen Title is a former top cannabis regulator for the state of Massachusetts who currently serves as CEO of Parabola Center and Distinguished Cannabis Policy Practitioner in Residence at The Ohio State University Moritz College of Law’s Drug Enforcement and Policy Center. (Disclosure: Title supports Marijuana Moment’s work through a monthly pledge on Patreon.)