Wednesday, May 23, 2018

Massachusetts recently provided parameters within which marijuana businesses may promote and market themselves and their products. At first blush the new regulations may seem straightforward, but there are some significant ambiguities and subjective standards that could create unlooked-for exposure for businesses. Due to some quirks in the Massachusetts consumer protection laws, strict compliance with the regulations will help limit significant exposure to consumer protection claims.

Significant Room for Disagreement on Compliance

Limitations on Branding & Logos

In Massachusetts, marijuana businesses will be permitted to use logos to promote their products, with the exception of medical symbols, images of marijuana or marijuana paraphernalia, and the incorporation of “colloquial references” to cannabis and marijuana in the logos.

The ability of out-of-state companies to market their well-known brands in Massachusetts may be affected. A review of marijuana brands demonstrates that terms such as “high,” “baked,” “jane” and other borderline terms are fairly popular in this space. Brand recognition is extremely important in the industry and these restrictions may impact the ability of businesses to capitalize on the fame of their already existing marks.

The prohibition on “images of marijuana” in company logos also presents a significant limitation and potential hurdle for established brands entering the Massachusetts market. It will behoove new businesses seeking to establish a brand and logo to avoid investing time and money on a branding effort that could ultimately be determined to violate the Cannabis Control Commission (CCC) regulations.

Limitations on Advertising & Marketing

Marijuana establishments may engage in reasonable marketing, advertising and branding, within certain parameters. Of course, as with any other industry, deceptive, false, misleading or untrue advertisements are prohibited. To comply with the agency regulations, advertisements, marketing and branding must not jeopardize public health, welfare or safety and not promote the use of marijuana by individuals under 21 years of age.

The statement “Please Consume Responsibly” must be included on the face of the ad along with at least two of the following warnings:

“This product may cause impairment and may be habit forming.”

“Marijuana can impair concentration, coordination and judgment. Do not operate a vehicle or machinery under the influence of this drug.”

“There may be health risks associated with consumption of this product.”

“For use only by adults 21 years of age or older. Keep out of the reach of children.”

“Marijuana should not be used by women who are pregnant or breastfeeding.”

This warning must be included as well:

“This product has not been analyzed or approved by the Food and Drug Administration (FDA). There is limited information on the side effects of using this product, and there may be associated health risks. Marijuana use during pregnancy and breast-feeding may pose potential harms. It is against the law to drive or operate machinery when under the influence of this product. KEEP THIS PRODUCT AWAY FROM CHILDREN. There may be health risks associated with consumption of this product. Marijuana can impair concentration, coordination, and judgment. The impairment effects of edible marijuana may be delayed by two hours or more. In case of accidental ingestion, contact poison control hotline 1-800-222-1222 or 911. This product may be illegal outside of MA.”

In addition, marijuana businesses are prohibited from advertising that their products are safe or that they have therapeutic effects unless the CCC has determined that there is substantial evidence or clinical data to support the claims. Businesses should be cautious about making such claims in any event, as they could be construed as warranties.

For the precise requirements on packaging and labels, see 935 CMR 500.105(5)-(6). Packages also must display easily recognizable marks issued by the CCC to warn that products contain marijuana and are not safe for minors.

A marijuana business may display samples in secure locked cases and allow consumers to inspect a sample, but may not allow consumers to consume or use it on-site. The business may post prices in the store and respond to telephone inquiries about pricing, in addition to creating a catalogue of prices that can be posted on its website. Giveaways are not allowed: the use of gifts, coupons and free or “donated” marijuana is not allowed, nor are promotional items such as t-shirts, cups and “novelty” items.

Consumer Protection Violations Established via Safety Regulation or Warranty Breach

Massachusetts’s consumer protection statute, known as Chapter 93A, has teeth. Any act or practice found to be unfair or deceptive can constitute a violation, entitling a successful claimant to actual damages (or $25), which can be doubled or trebled for willful violations, along with reasonable attorneys’ fees. In addition, liability has been found even in cases where the existence of an actual injury is highly questionable.

Under regulations promulgated by the Massachusetts Attorney General, any act or practice is, as a matter of law, a violation of Chapter 93A if it does not comply with existing “statutes, rules, regulations or other laws, meant for the protection of the public’s health, safety or welfare promulgated by the Commonwealth or any political subdivision thereof” if intended to protect consumers. 940 CMR 3.16(3).

The regulations do allow for preapproval of packaging and labeling by the CCC, which could provide a limited “safe harbor” to businesses that request and obtain it. However, the regulation specifies that the preapproval process is not a substitute for compliance with labeling requirements. It may at least, if employed, provide a defense to claims of willful or knowing violations.

With all of these potential sources of exposure, marijuana establishments should maintain a close watch on all advertising, marketing, branding and promotional activities, which will be critical to managing risk exposure. The only safe bet is that consumer advocates and members of the plaintiffs’ class action bar will be watching for any potential violation of these regulations.