Posted by Lori Ann Reese on 09/08/2020 in Marijuana Marketing
Weedmaps, the world’s largest global resource for cannabis news, reviews, and products, is now being investigated by the Royal Canadian Mounted Police (RCMP). The Canadian federal authorities were notified by a letter from eight (8) licensed dispensaries and cannabis business owners for illegal advertising practices.
The licensed dispensaries that lodged the legal complaint stated that promoting illegal and unlicensed dispensaries causes legitimate businesses to suffer increased competition. The complaint also said that it is a public health and safety concern, as unlicensed dispensaries are not regulated in Canada.
If you are a cannabis business insider, you may be feeling a little Deja vu. It is not the first time that Weedmaps has run into trouble for listing cannabis dispensaries that were not licensed. In 2018, Weedmaps received a ‘cease and desist’ order from California cannabis regulators regarding advertising dispensaries not licensed by the state.
Weedmaps were forced to change their procedure for accepting new dispensary advertisements. They were required to confirm that a dispensary was licensed in California before permitting the business to be listed on the Weedmaps website. And the marketing provider was forced to delist 2,700 listings on its website.
Leafly (a direct competitor of Weedmaps) saw the legal action and, within a month, made a public statement that they too would no longer accept unlicensed dispensaries. Leafly also provides marketing services and directory listings for cannabis-related businesses.
The head of the Bureau of Cannabis Control in California (Lori Ajax) sent the cease-and-desist letter to Weedmaps. At that time, Weedmaps was warned to immediately remove the advertisements for unlicensed dispensaries, or face criminal and civil legal penalties. The California BCC also threatened a fine for each illegal ad at that time.
The Bureau of Cannabis Control used Weedmaps also to send 900 cease-and-desist letters to illegal dispensaries. And the Bureau continued to use Weedmaps as a directory to double-check dispensaries operating without a legal license in the state of California.
California represents many states (and Canadian provinces) that have experienced tremendous growth in dispensary locations. To open a dispensary, a business license is required. There are few steps to acquire a business license for a medical marijuana business in states like Oklahoma. However, in other states, the licensing process is rigorous, and it can be costly. Some states also issue cannabis business licenses based on a lottery system.
That is the reason why there is a growing problem with illegal dispensaries. Not only have these businesses failed to take the right steps to register (and pay the fees to the state), they are also operating outside of safety inspection laws. When a dispensary is licensed to operate, they are subject to third-party inspection, product tracking, and reporting to ensure compliance and public safety.
The administrative steps and the legal costs of licensing can add up quickly. So it is not hard to understand why the problem of unlicensed dispensaries continues to grow. In states where vertical licenses are required, dispensaries must grow, process, manufacture, and retail their products. The vertically integrated dispensary handles every step of the growth and supply chain.
A concern about unlicensed dispensaries is where they are getting the cannabis they sell. If it is being grown by the dispensary, it is not subject to state inspection standards. This means that the products could contain harmful chemicals and additives.
A second consideration is the possibility of integrated criminal involvement. Individuals with criminal records cannot get a traditional dispensary license (particularly if they were charged on a drug-related crime). The licensing and inspection requirements effectively keep the criminal element out of the legalized medical and recreational cannabis industries.
When legal action was threatened against Weedmaps in California, President Christopher Beals defended the advertising listings’ acceptance. Beals was interviewed by the OC Register, and stated that Weedmaps was “showing the same information that Google and Yelp and Craigslist and 30 other websites are showing”.
A quick search online in both Canada and the United States will confirm what Christopher Beals shared. Who owns the responsibility for advertising a company that is not legally registered to do business? Does that accountability rest with the advertising platform, or with the business who purchases advertising and agrees to terms, conditions, and limitations?
The warning letter sent by the Bureau of Cannabis Control in California was the first letter ever sent by the state to an advertiser. Weedmaps is a global leader, but the BCC asserted that more than 20 dispensaries were being advertised on the site for Anaheim, California. A city that had banned any kind of dispensaries.
Since 2018, Google has radically changed the advertising policies on marijuana-touching businesses. That includes banning advertisements for cultivators and dispensaries. The only companies that can advertise on Google are ancillary businesses. Such as cannabis business consulting, marketing, or financial services.
Social media platforms like Facebook, Instagram, Twitter, LinkedIn, and Snapchat do not allow cannabis advertising. They do not differentiate legalization in individual states but rest on the federal Schedule 1 classification of prohibited substances.
When Weedmaps experienced the complaint and threatened legal action in California, it was the advertising company’s first infraction. Weedmaps had already committed illegal advertising activities in California. That may result in fines and additional legal action in Canada because there is a precedent.
Weedmaps had the defense of “we didn’t know” and “everyone else is doing it” for the legal defense against the Bureau of Cannabis Control in California in 2018. Since then, digital advertising laws have strengthened against illicit substances and paraphernalia. The complaint is likely to result in punitive legal action in Canada. And a delisting of unlicensed dispensaries conducting business illegally and outside the law in Canada.
Other advertising and marketing companies that provide promotional services to the medical or recreational cannabis industries will be watching closely—and likely adjusting terms and conditions of their own advertising. Which will include verification of a legitimate business license, before placing profiles on a high traffic online directory.
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