Licensed cannabis retailers are popping up all over New York State, making it more convenient for consumers to find a State-sanctioned establishment. But with the proliferation of licensed retailers comes necessary regulatory oversight. The Office of Cannabis Management ("OCM") was formed to implement regulations applicable to the production and sale of adult-use and medical cannabis in New York State. Notably, the State regulations govern the marketing of cannabis, among other things. Companies doing business in this space must ensure that their cannabis ads comply with State regulations.
State Prohibits Certain Cannabis Ads and Branding
One important regulatory provision prohibits "cross-tier" conduct, namely engaging in manufacturing and retail of a cannabis product, which includes marketing and branding. In a recent case, the OCM announced a settlement with a manufacturer that violated the rule against both producing and also being on the retail side of the industry. The company agreed to stop such conduct (including discontinuing the promotion of certain non-complaint cannabis ads) and paid a fine of $50,000. Here, a company by the name of Basin Mixture, a licensed manufacturer, created cannabis products for Charlie Fox Dispensary, who then sold the items under its own Charlie Fox brand.
Trade Practices Bureau ("TPB") Investigates Cannabis Ads
The TPB's investigation found that both companies/licensees violated the law by engaging in illegal cross-tier conduct. Specifically, the TPB found that the licensees participated in "unauthorized branding and promotion of cannabis products under a proprietary dispensary brand," a violation of New York State regulations applicable to cannabis ads. Both companies agreed to settle the claims and will update their internal compliance procedures.
The TPB was recently created for purposes of holding State licensees accountable for regulatory violations that may arise within the cannabis marketplace. As we see from this investigation and settlement, the Bureau's regulatory purview extends to the realm of cannabis ads and branding.
Be Aware of New York State Regulations Governing Cannabis Ads
This case is a prime example of the need for companies to observe and obey State regulations applicable to cannabis advertising and marketing. If you are interested in learning more about this topic or require legal assistance in connection with the marketing of cannabis-related products, please e-mail us at: info@kleinmoynihan.com, or call us at (212) 246-0900.
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