Jack Scrantom
The Washington State Liquor and Hashish Board (“WSLCB”) revealed an industry update on October 25 detailing a latest enhance in complaints by hashish producers and processors of “pay to play” phrases.
Apparently, some hashish producers and processors have been paying retailers to amass shelf area for his or her hashish merchandise. These preparations have change into outstanding sufficient that some retailers are asking processors to pay for shelf area as if it is not uncommon apply.
Paying a retailer for shelf area is illegal
Like many different hashish enterprise actions that Washington prohibits, that is the sort of factor that an abnormal businessperson won’t assume twice about. Nonetheless, pay to play preparations are illegal below the state’s hashish legal guidelines. Washington legislation prohibits producers and processors from having a direct or oblique monetary curiosity in a licensed hashish retailer.
The WSLCB’s place is {that a} pay to play association between a producer or processor and a retailer violates that rule. Furthermore, the WSLCB acknowledged that these offers violate Washington legislation that prohibit a hashish trade member from coming into into an settlement that ends in one member having undue affect over one other. The WSLCB’s place on pay to play preparations is just not off the mark based mostly on the textual content of the principles.
Pay to play is an all-too widespread prevalence
Sadly, we see points like this within the hashish area greater than we want to. Too typically, hashish operators get their licenses however fail to maintain up or function in compliance with the rules. Washington has among the strictest legal guidelines governing hashish operators within the nation and lots of run afoul of the principles with out ever understanding it.
To make issues extra sophisticated, the WSLCB is understaffed and from our expertise terribly busy so each schooling (the WSLCB’s desire in most if not all situations of minor violations) and violation enforcement are sometimes outpaced by what is occurring available in the market.
Finally, when licensees supply the property or fairness of the enterprise on the market, regulatory violations virtually at all times come to gentle whether or not they had been caught by the WSLCB or not. If licensees don’t heed the WSLCB’s phrase, these pay to play preparations could change into the latest skeleton within the closet to emerge down the highway in Washington hashish acquisitions.
The WSLCB deserves some credit score right here for holding its ear to the bottom and posting a well-written article in an try and curb this conduct by notifying the market. Given how busy the WSLCB is, publishing notices prefer it has for pay to play preparations is exactly the precise option to go about coping with rising market traits that violate the principles.
To make sure, licensees are in a troublesome place as a result of the rules are advanced, change typically, and in lots of situations are unclear about what they require or prohibit. With that being mentioned, ignorance of the legislation is not any protection and the burden for guaranteeing regulatory compliance is and at all times has been on licensees.
If a pay to play association is memorialized in a written settlement, licensees ought to contact counsel for recommendation on the best way to terminate it. Typically talking, contracts often comprise a termination provision permitting the events to terminate the contract if its substance is illegal. If no such provision exists within the contract, widespread legislation contract defenses may be accessible.
A life raft and a warning for pay to play licensees
Despite the fact that Washington’s grownup use hashish market has been round for a few years, because the WSLCB’s put up signifies it’s nonetheless considerably of the wild west. Licensees are properly suggested to concentrate to the WSLCB’s posts about regulatory points going down available in the market.
If you happen to’re in a pay to play deal, the WSLCB is providing each a life raft and a warning– get out of these offers now, or else. The place the WSLCB is giving a public warning about enterprise actions it views as illegal, one could be positive it received’t be sympathetic to an uncured violation down the highway.
