The spectre of Big Marijuana is often raised as a problem to be avoided in legalized markets (including, it must be said, by the Blue Ribbon Commission, of which I was Public Safety Chair). Though Big Marijuana is most often discussed in the context of adult-use markets, it is also of concern in the medical market—particularly one as large as California’s. The new regulations (AB 266, SB 643, and AB 243) no longer require market participants to be patients, and they no longer exclude for-profit companies. This doesn’t mean, however, that Big Marijuana is inevitable. California’s new medical marijuana regulations address concerns about market concentration in a number of ways, particularly when it comes to licenses.
At the outset, AB 266 allows for three sizes of cultivation license, each one bigger than the other. But taking a page from Starbucks (or Orwell), these are not small, medium, and large licenses: instead, they are specialty, small, and medium licenses. That’s right: the largest size of 3 cultivation licenses is a medium. To be fair, these cultivation sites aren’t all that large, as is spelled out in AB 243. The smallest licenses (type 1, or specialty) are 5000 square feet of canopy or less, the medium—er, small/type 2—size is between 5001 and 10000 square feet of canopy, and the “bigger than small but not large” medium/type 3 licenses are 10,001 square feet to an acre for outdoor grows and 10,001 to 22,000 square feet for indoor and mixed-light grows.. The Department of Food and Agriculture “shall limit the number of licenses”, but, as with many areas covered by the new regulation, substantive details about the limited numbers are going to be worked out administratively.
In addition to cultivation licenses, there are licenses for distribution, testing, dispensaries, and manufacturing. Distribution licenses can only be combined with testing licenses; they may not be combined with other kinds of licenses. This seems familiar enough, taking a page from the alcohol producer/wholesaler/retailer model–except that there is also a carveout for combining licenses. It is possible to hold cultivation, manufacturing, and dispensary licenses provided the dispensary license is 10A (permitting a maximum of three locations) and the total area of cultivation is not more than 4 acres of canopy. This suggests that vertical integration on a smaller scale (Medium Marijuana) is permissible. Not being a horticulturalist, I’m not sure whether 4 acres of canopy is a sufficient limitation to prevent market concentration—it would depend on the yield of those four acres and on the number of “medium”/type 3 cultivation licenses that are ultimately authorized. We might also need to consider geographic/local market concentration as well. Given the relationship between state and local regulations, it might still be possible to have geographic concentrations of stores or cultivation sites that could result in local Big Marijuana, but this would, of course, depend on whether the local permitting system enabled that.
Finally, note that the licensed market does not include everyone authorized to grow medical marijuana. Individual patients can still grow their own marijuana, though they are limited to 100 feet of canopy and are not permitted to sell or even give away any of what they grow. Caregivers are allowed to care only for 5 patients at the most and their compensation is limited by 11362.765(c) (limiting compensation to, generally, expenses and that which is “reasonable”). Already, one pro-patient group has indicated its displeasure with these new limitations and has threatened to sue on the grounds that the legislature has taken away rights granted by Proposition 215, a claim which, if true, would indeed invalidate the provisions. However, it is unclear whether Prop 215 granted an explicit right to be a caregiver for, say, more than 5 people or to grow for personal use with a total canopy size that was either unlimited or at least bigger than 100 square feet. At least for these patient groups, the medium sized marijuana market, personal edition, is not nearly large enough.