California may take its cannabis advertising restrictions to the next level if Senate Bill 162 makes it through the Assembly Appropriations Committee. SB 162, which the Senate passed unanimously last month, would prohibit future cannabis licensees from advertising their cannabis products “through the use of branded merchandise, including, but not limited to, clothing, hats, or other merchandise with the name or logo of the product.”
This legislation would fill some of the gaps in the proposed rules for the implementation of both Proposition 64 and the MCRSA, now known cumulatively as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”). Many opponents of Proposition 64 raised concerns that legalization would lead to increased public consumption due to the measure’s “lax rules on marketing.” Well, if there was any concern over allegedly lax marketing standards, California’s legislature is now swinging in the extreme opposite direction by essentially eliminating any branded merchandise for cannabis businesses.
Originally, Prop. 64 limited ads in broadcast, cable, radio, print and digital mediums to placements where at least 71.6% of the audience is reasonably expected to be at least 21 years old, based on reliable, up-to-date audience data. This restriction was not included in any of the proposed rules for the MCRSA (which has now been repealed), but it is included in SB 162.
Prop. 64 required any advertisements or marketing by a state-authorized marijuana licensee satisfy the following:
- Accurately and legibly identify the licensee responsible for the content;
- Use a method to confirm age if involving direct, individual communication by the licensee; and
- Be truthful and appropriately substantiated.
Prop. 64 also specifically prohibited licensees from advertising or marketing marijuana in the following ways;
- On a billboard located on an Interstate Highway or State Highway that crosses the border of any other state;
- In a manner intended to encourage people under 21 to consume marijuana;
- With symbols, language, music, gestures, cartoon characters or other content known to appeal primarily to people under 21;
- On an advertising sign within 1,000 feet of a day care center, K-12 school, playground, or youth center; and
- Through free giveaways of marijuana or marijuana accessories as part of a business promotion.
SB 162 includes these restrictions, but takes things one huge step further with its extremely broad ban on branded merchandise. Ostensibly, the ban could extend to employee t-shirts or uniforms bearing the brand of the licensee, and would prohibit merchandise produced by an unlicensed third-party if that merchandise were created on behalf of a licensee (or if that third-party company was owned by a licensee in their individual capacity).
These advertising restrictions in SB 162 are more restrictive than we’ve seen in any of the other adult-use states in which our cannabis lawyers worked, and we’re pretty shocked California is trying to kill this kind of creativity because they truly believe that if kids see branded merchandise they’ll start using cannabis. Washington State, for example, prohibits licensees from selling branded merchandise in their stores or facilities such as hats and t-shirts, but allows separate or affiliated ancillary companies to sell this merchandise on a licensee’s behalf. And Washington does not prohibit the sale of branded paraphernalia, which would likely be included under the definition of “branded merchandise” in SB 162.
We think this piece of legislation goes way overboard in its attempt to regulate advertising. These types of onerous restrictions will not allow licensed businesses under the new regulatory regime to thrive, and it will definitely kill the swag game at all cannabis-related events in The Golden State, undermining cannabis business’ ability to grow, compete, and spread their brands. We will be keeping tabs on the progress of SB 162, and will provide an update on its final fate, but we really hope the California legislature comes to its senses and stops this form of modern reefer madness.