Alaska News

Alaska marijuana board bans giveaways, ups security requirements

Alaska cannabis businesses can sell you a hoodie, so long as the transaction is being recorded in high-definition.

The Alaska Marijuana Control Board covered allowable advertising strategies or retail dispensaries, as well as security protocol last week, on the second day of an extra meeting to consider draft regulations.

Board Director Cynthia Franklin argued Montana's greatest mistake was allowing too much advertising for medical marijuana. Montana legalized medicinal marijuana in 2004 only to have a ballot initiative introduced in 2014 to recriminalize it. This followed a ballooning industry that roused the ire of the state legislators and a 36 percent minority of the population who hadn't supported legal medicinal marijuana in the first place.

Because Alaska's initiative passed with a slimmer majority, she worries liberal advertising regulations could cause the same backlash from the 47 percent of Alaskans who voted against the ballot measure to legalize marijuana.

"Advertising is a very public thing," said Franklin. "Take a long view of this industry and don't think that we need to advertise to the max. If we go crazy ... we run the risk of attracting attention not only from our state legislators but the people who voted against this."

No giveaways, no medicinal claims

The board held a lengthy discussion on selling versus giving away branded merchandise like hooded sweatshirts, pens, calendars, or other popular gear.

Selling branded merchandise is legal, but giving it away for free is not, though the board plans to clarify language in a later draft to make those points clear.

"A marijuana retail store may not use giveaway coupons, or distribute branded merchandise as promotional materials, or conduct promotional activities such as games or competitions to encourage sale of marijuana or marijuana products," the draft language reads.

Franklin explained the purpose of the prohibition was to prevent the kind of marketing tobacco used with product giveaways.

"A time-honored tactic of the tobacco industry was to give away Marlboro Man T-shirts and candy cigarettes," said Franklin. "They were giving away branded merchandise to encourage promotion and purchase of their products."

Board members argued product giveaways were part and parcel of any developing business, and the board has no place making an economic restriction. Those decisions, they argued, should be left up to business.

"Should we be removing a business' ability to do this marketing?" asked board member Mark Springer. "They can't give out a calendar. A pen. A refrigerator magnet. I'm not convinced we have any place in that. That's economic management."

Franklin responded the public safety concerns of product giveaways, which she said could attract minors, are just as important as free market law.

"I'm not really sure it's the board's job to make business decisions in the other way," said Franklin, "to write rules that are designed to make businesses maximize their profits."

Springer introduced an amendment to clarify the language to say, "give away for free" rather than "distribute." The vote failed on a 2-2 tie of the five-member board, with Loren Jones recused for a conflict of interest.

The cannabis industry, including growers, brokers, manufacturers, or retailers, cannot claim any therapeutic or medical benefits, a carryover from the state's colorblind marijuana initiative, which doesn't distinguish between medicinal and recreational marijuana.

"Do we really want to invite more federal attention by saying, 'yeah you can put whatever you want on there?'" asked Springer.

Board member Peter Mlynarik brought up a lack of substantiation for medical claims that would simply be inviting too much false advertising.

Members also added language to bar advertising on college campuses or near substance abuse and recovery facilities.

The high price of security

Security regulations will tack on another six figures worth of capital expense for potential cannabis entrepreneurs, regulations industry leaders say, and are onerous reminders of the black-market lens they believe the Legislature views them through.

"This treats us like criminals," said Sara Williams, owner of Midnight Greenery, regarding a regulation that requires marijuana businesses to wait three days before disposing of waste, in order for enforcement officials to inspect and log it for tracking purposes.

The bulk of public comment decried video surveillance, security lighting, and transportation regulations.

Draft regulations currently require extensive video surveillance, following Colorado laws. Alaska's proposed surveillance requirements specify cameras must be placed within 20 feet of a cannabis business entry or exit, with enough resolution to "clearly identify" features, and 40 days worth of video data storage.

Larry Clark, president and CEO of Valkyrie Security and Asset Protection, said the storage requirement alone, for high-resolution storage, will cost around $85,000.

Comments from the public, submitted electronically in writing to the board, expressed fear at the prohibitive cost. Board members echoed the concerns, wondering how strict the enforcement would be.

"It might violate the initiative by making business infeasible," said Emmett. "Let's say we pass this unamended, how strict are we going to be?"

Franklin said in response that enforcement, which will be under her authority as director, will not be looking to agonize over details.

"My management style over my enforcement officers is, this is our community," she said. "It's not designed to be a 'gotcha' environment."

On the transport side, the board removed a part of regulation that would have required a secure lockbox be bolted to the floor of whatever car is delivering marijuana.

After an amendment, the board allowed transporting in a sealed container in the trunk of a car, already required by the Municipality of Anchorage for all personal use.

On a cheap note, all members of the marijuana industry will be required to complete a marijuana handler's course, to be developed later by the board, and keep it in their place of licensed business.

Lastly, the board struck down a requirement of $1 million or greater in insurance coverage for any marijuana business, the unknown cost of which insurance companies have refused to tell the state of Alaska. Insurance will be required, but in no set amount. Insurance is not required by alcohol regulations, and board members again preferred to leave it in the hands of the business owners.

"I don't see it achieves any of our broader imperatives, and I do see this as an unnecessary burden," said board chair Bruce Schulte. "I do think it's good business policy, but it's up to businesses to decide that. It's just an additional layer of regulation we shouldn't be endorsing."

DJ Summers can be reached at (c)2015 the Alaska Journal of Commerce.