How To Prevent Monopolies Dominating The Cannabis Market

Federal cannabis legalisation in the US appears increasingly inevitable, and while such an eventuality would provide cause for celebration, concerns over fairness and inclusivity remain. Unless policymakers put certain safeguards in place, the opening of the commercial floodgates could enable large companies to establish monopolies within the interstate cannabis industry at the expense of smaller businesses.

Why Monopolies Are Bad For The Cannabis Industry

A new paper from the Ohio State University Drug Enforcement and Policy Centre warns that federal legalisation could result in a “power grab” for industry control. Big tobacco and alcohol companies, for instance, are licking their lips at the thought of the profits that could be theirs if they gain a stranglehold on the legal cannabis market.

Authored by Indian-American attorney and respected drug policy activist Shaleen Title, the report warns against allowing such companies to develop monopolies within a federally legal cannabis industry could have dire consequences. Not only will the exclusion of smaller players result in lower quality products, but the loss of these independent businesses will also erase the social equity gains that have been won so far at the state level.

After all, cannabis legalisation is fundamentally a social justice issue rather than an economic one. That being the case, the end of prohibition should benefit those communities that the war on drugs has impacted the most.

At present, three separate federal legalisation bills are working their way through the US legislative system. Unfortunately, none of these provide for the implementation of antitrust principles. As such, all three pieces of legislation run the risk of encouraging excessive executive consolidation and enabling corporate monopolies to control the cannabis industry.

Avoiding Cannabis Monopolies

In her paper, Title proposes eight steps that policymakers can take to prevent large conglomerates from taking over the interstate cannabis industry.

The first is to allow people to grow weed at home. Doing so would prevent the creation of a captive market in which consumers are left with no choice but to hand their money over to commercial growers. Enabling personal cultivation would also incentivise companies to provide products that compete with homegrown cannabis on price, quality and variety.

Title also calls for vertical integration to be banned so that no one player can obtain licenses for all stages of the supply chain. On a related note, she recommends against capping the total number of available business licenses to avoid bidding wars and says regulators should limit the percentage of the market that any person or entity can own.

In addition, she encourages lawmakers to create financial incentives for states to provide more licenses to small or disadvantaged businesses and urges the establishment of a task force to prevent monopolies from forming within the cannabis industry. Disqualifying corporations with a history of fraudulent or predatory activity and the close regulation of mergers can also help avoid unfairness in the market.

Finally, Title says that states should be allowed to continue to ban interstate commerce even after federal legalisation. This, she says, will provide time and space for local social equity programs to develop and smaller businesses to grow before being thrust into competition with other companies from across the country.

Ultimately, Title cautions against ending prohibition in one fell swoop and allowing the corporate sharks to fight it out for supremacy. Instead, she insists that “opening a national market slowly and deliberately, while promoting equitable paths to starting businesses, could help counter consolidation and promote a diverse and competitive market.”

“The biggest lesson from Big Tobacco and Big Tech is that free and open competition is not an issue we can safely figure out after the fact,” she says. “Decisions made today will have lasting impacts on the future of the market, determining whether the cannabis market is dominated by a few powerful companies or open to all types of entrepreneurs.”