4/20 COMPLIANCE TIPS

This entry was posted on Thursday, April 16th, 2020 and is filed under Uncategorized.

In anticipation of the cannabis industry’s national holiday, the following are tips and reminders for cannabis retailers to remain compliant on April 20th.

Pandemic Orders Remain in Place

You already know from our prior posts that the state of California and City of Los Angeles have issued Safer At Home Orders requiring certain business practices during the COVID-19 (Coronavirus) Pandemic.  These orders require that employees and customers wear facemasks, maintain social distance from one another, and other similar requirements.  For reminders on these requirements, check these prior posts:

Celebrating the industry on 4/20 becomes substantially less fun in the wake of the pandemic.  We join the United Cannabis Business Associatian (UCBA) in encouraging all cannabis retailers to help flatten the curve by spreading out the rush on 4/20.  Try celebrating from 4/17 – 4/21.  See UCBA’s related post here.

The Breakdown:  Your cannabis businesses must continue to adhere to the Safer At Home Orders even when celebrating 4/20.  Consider celebrating from 4/17 – 4/21 rather than only 4/20.

Marketing / Advertisements

  • PROMOTIONAL TEXT MESSAGES – CUSTOMER’S WRITTEN CONSENT

The newest wave of lawsuits and class actions against licensed retailers are related to automated promotional text messages and calls received by customers who did not expressly consent to receiving promotional texts or calls.

The Telephone Consumer Protection Act (“TCPA”) prohibits: (1) any person from calling a cellular telephone number; (2) using an automatic telephone dialing system or prerecorded message; (3) without the recipient’s prior express written consent. The Federal Communications Commission (“FCC”) has further clarified that consumers are entitled to the same consent-based protections for text messages as they are for calls.

The TCPA permits damages awards of $500 per call or text, and in certain instances of willful conduct, damages of $1,500 per call or text. Cannabis retailers must ensure that 4/20 promotional text messages are only sent to customers who have provided express written consent to receive them. Express written consent typically involves disclosures (what will we send you?) a checkbox (are you allowing us to send it?) and customer’s signature on an Opt-In Agreement.

The best practice for obtaining consent is to provide a stand-alone Opt-In Agreement which would allow customers to grant or withhold consent for promotional text messages.   Opting-Out should also be possible at any time by way of responsive text message, i.e., “Reply STOP to Opt-Out of future texts”. 

Asking for a customer’s phone number at check-in and/or receiving verbal consent for promotional calls and/or text messages is not enough to avoid a TCPA violation.

The Breakdown:  4/20 is a great marketing opportunity.  Comply with the TCPA by only sending promotional texts to customers who have “opted-in” through a signed writing.

  • NO FREE CANNABIS GOODS (except medicinal donations)

Under Section 5040(a)(4) of the California Bureau of Cannabis Control regulations, licensees “shall not advertise free cannabis goods or giveaways of any type of products, including non-cannabis products. This includes promotions such as: (A) Buy one product, get one product free; (B) Free product with any [purchase]; and (C) Contests, sweepstakes, or raffles.”

In other words, retailers must not advertise any promotions offering FREE cannabis goods and/or non-cannabis products (brand apparel, lighters, smoking devices, cannabis accessories). There are two parts to this rule:

  • Any cannabis good must be sold to customers at a nominal value of at least one cent or one dollar so that the State can collect its excise tax on each product.

  • Non-cannabis products may be given away to customers; however, retailers must not advertise the giving away of non-cannabis products.

The Breakdown:  Cannabis businesses may give away non-cannabis products such as lighters and sweaters, but should not advertise specific giveaways.  Do not give away adult-use cannabis.

Medicinal Donations

The no-free-cannabis-goods rule does not apply to donations of medicinal cannabis under the recently enacted Senate Bill 34 (“SB34”). As of March 1, 2020, licensed cannabis retailers may provide free cannabis or cannabis products to qualified medicinal patients with a valid medical recommendation. The donated cannabis and cannabis products are exempt from excise, sales and use, and cultivation taxes.

All cannabis goods intended for donation must be marked as such in METRC Track-and-Trace and on invoices and sales receipts.

Before providing free cannabis goods to a medicinal patient, licensed cannabis retailers must:

  • Verify that the attending physician providing the patient’s medical cannabis recommendation has a license in good standing to practice medicine or osteopathy in the state of California;
  • Keep a copy of the patient’s driver license or other government-issued ID; and
  • Prepare a written certification that the retailer verified the physician’s recommendation as required.

Physicians’ licenses can be verified with the Medical Board of California, the Osteopathic Medical Board of California, and the California Board of Podiatric Medicine using the DCA license search at the following link: https://search.dca.ca.gov/

The Breakdown:  Cannabis businesses may offer free medical cannabis to qualified patients.

  • NO “EVENTS” or “PARTIES”

Many cannabis businesses host food vendors, DJs, and other fun activities at their business premises in celebration of 4/20, but need to take extra precaution to not use the term “event” or “party” when advertising their 4/20 celebrations

The BCC regulations require cannabis event organizers to obtain (1) a cannabis event organizer license and (2) a temporary cannabis license event. Thus, the use of the term “event” in a licensed retailer’s advertisements may result in a direct violation of the BCC regulations.

Further, applicable regulations provide, “No special events or parties of any type shall be held at the Business Premises, including, but not limited to, events for which a Temporary Special Event Permit has been issued by the Building and Safety Commission or any other city Department. (Violation Type – Moderate)”

According to Los Angeles Municipal Code Section 104.13, the administrative fine for a moderate violation type is the amount equal to 150% of the current cannabis license fee for each and every violation.

The Breakdown:  Never use the words “event” or “party” at your cannabis business premises.

Daily Limits – GOODY BAGS

Retailers must ensure that adult-use customers and medicinal patients do not exceed their daily limits when purchasing goody bags. Retailers are required to train their employees on the maximum daily limits allowed. Employees should review a customer’s complete purchase history prior to completing a transaction to ensure that the customer is not “double dipping” (making two separate visits to purchase as an adult-use customer and medicinal patient) or obtaining two goody bags in one day which would exceed daily limits. Retailer licensees should also be aware of weaknesses within their POS systems that bypass the daily limits.

As a reminder, the daily limits for adult-use customers and medicinal patients are as follows:

Adult-Use

  • 28.5 grams of non-concentrated cannabis (aka cannabis flower)
  • 8 grams of cannabis concentrate, including cannabis concentrate contained in cannabis products (vape cartridges, edibles, shatter, wax, kief, budder, etc.)
  • 6 immature cannabis plants

Medicinal

  • 8 ounces (224 grams) of medicinal cannabis in the form of dried mature flowers or the plant conversion
  • 6 mature cannabis plants OR 12 immature cannabis plants
  • An amount of medicinal cannabis consistent with the patient’s needs as recommended by a physician – meaning if the medical recommendation allows for more than the daily limits provided in the regulations, then the patient may purchase the amount prescribed in the medical recommendation.

Daily purchase limits also apply to donated cannabis and cannabis products provided to a medicinal patient and must be tracked.

The Breakdown:  Goody bags and giveaways must count against your customer’s daily purchase limit.

By Nellie Niakossary, April 15, 2020.