License limits and monopolies discussed at cannabis hearing

RULES: A marijuana plant is shown in this file photo. Concerns about the supply chain in the cannabis industry were recently discussed in the last public hearing on rules for cannabis retail operations and cultivation. Post file photo

Various stakeholders in Guam's potential recreational cannabis industry met for the second time Friday night to discuss the draft regulations, again raising the issue of "vertical integration," but also expressing concerns with license fees and rumors about limiting licenses.

Some speakers during the first meeting on Thursday spoke favorably about allowing a business to engage not only in the cannabis retail aspect but also in cultivation or in manufacturing, or any combination.

The draft rules, as written, currently do not allow a cannabis cultivator to also have another type of license.

But Monique Amani, co-owner of Mosa's Joint restaurant, who is looking into starting an edibles business, said Friday that she is against vertical integration over concerns it would lead to monopolies by large businesses able to afford buying up licenses.

"I just believe licenses should not be limited at all. ... Anybody should be able to get a license as long as they can come up with the money to get it," Amani said. But when asked to clarify, Amani said she believed a company should not be able to buy all three types of licenses.

"Just like a liquor license. You can't distribute and own a restaurant, you can't do both. So why should marijuana be any different?" she added.

Limiting participation

Denise Selk also levied concerns with limiting participation to a few companies, and added that vertical integration, while good in theory, could allow wealthy groups to create several companies to vertically integrate.

"There are several important points to consider regarding the proposed rules and regulations that favor the big companies and wealthy groups, which have created barriers to entry in the cannabis business," Selk said as she began her testimony. 

But Selk later lent some insight into the source of some of the concerns of small business owners regarding the acquisition of licenses.

As a member of the Cannabis Control Board clarified a few times Friday night, there are neither any plans nor rules that limit how many licenses are issued.

When asked where this information came from, Selk said it was "spreading like wildfire through Guam" and that "two large foreign companies are being considered."

"That is unsettling, because we'd like to give local companies a chance and not these large conglomerates, where the money will be siphoned off island," she said.

This information is being shared online and by word of mouth, Selk said.

Education campaign

Therese Arriola, director of the Guam Behavioral Health and Wellness Center and a member of the CCB, said there will "definitely" be a proper educational campaign when the regulations are finalized so that these concerns "are laid to rest."

Selk's concerns, however, extended to licensing fees and how more expensive fees can be barriers to entry for small business owners.

There are varying tiers of licenses for cultivation, but the cannabis product manufacturing fee begins with $5,000 for an application and the new license fee is another $5,000. The fee is the same for renewal and a permit to operate.  

This is too high, Selk said, and the board should consider the effects of the pandemic. 

"Right now, my husband and I are baking banana bread and standing at Talofofo Bay and holding up signs and selling them, just to be able to pay our power and our water," she added.

Monopolies

Moving back to vertical integration and monopolies, Andrea Pellacani, of Grassroots Guam, said the proposed cap of 10,000 square feet on canopies for cultivation is the most critical component to avoiding monopolies.

"We're not going to have acres and hectares of cannabis farms here. There is no need to limit to a 60/40 or 70/30 (cultivator distribution rule) at a 10,000-square-foot canopy size. If you can only own one cultivation license and the maximum canopy space is 10,000 ... that is the single most important thing you can do to preventing monopolies," she said.

Anything further would need to balance people's ability to stay in business, and all vertical integration does is allow a certain level of quality control with supply, Pellacani said.

But attorney Vanessa Williams, chairwoman of the Cannabis Control Board, said it will be hard to project what the demand will be and where the sweet spot is between supply and demand. Pellacani acknowledged it would be best to avoid oversupplying the market, and ensuring the market is robust will be a challenge for the board over the next five years.

Public hearings

The public hearings will continue from 9 a.m. to 5 p.m. today.

• Via Zoom: https://bit.ly/2I8w0lG. Meeting ID: 698 255 5129. Password: CCBGUAM. The Zoom meeting is limited to the first 100 participants.

• Show up in the large conference room at the Governor's Complex at Adelup in Hagåtña.

Under the proposed rules, a cannabis business must have at least 51% ownership by a Guam resident. The proposed permits and fees can be as high as $15,000.

More information can be found on the Cannabis Control Board page at https://www.guamtax.com/ccb/index.html.

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