With the first retail sales of adult use marijuana slated to take place in just over five months, the Massachusetts Cannabis Control Commission (the “Commission”) is working overtime to regulate an industry that some project will exceed $1 billion in revenue by 2020. As the July 1st target date for the opening of retail cannabis shops approaches, one area that will undoubtedly become the focus of much attention is the ability of retailers to market their wares. Expect retailers to advertise their goods and services aggressively to maximize their share of this potentially enormous market.
Not surprisingly, the Commission has already begun to craft detailed regulations specific to the retail cannabis industry. Included among the 100+ pages of draft regulations approved by the Commission on December 21, 2017 are a litany of “permitted” and “prohibited” advertising practices applicable to “Marijuana Retailers” – including storefront businesses, delivery services, and social consumption establishments. (The Commission will be holding numerous public hearings on the draft regulations between February 5 and 13 and expects to promulgate final regulations by March 15.)
While some of the draft advertising regulations mirror guidelines applicable to medical marijuana dispensaries, most are new. Individuals and businesses seeking retail licenses would be well served to take a careful look at the draft regulations, as violations could pose serious consequences. But retailers should also understand that the specific guidance contained in the draft regulations—and, eventually, the final regulations— are not the only rules of the road. Government regulation of advertising is a complex area, with regulators at both the state and federal level.
The Commission’s draft advertising regulations fall broadly into four categories: (1) regulations prohibiting false or misleading claims; (2) regulations seeking to restrict advertising to anyone under twenty-one years old; (3) regulations limiting conspicuous advertising; and (4) regulations warning of potential risks associated with marijuana consumption. Of these categories, the last three are likely to be enforced primarily at the state level (whether by the Commission or the Attorney General’s Office), but the first could in time become a focus of the federal government’s chief advertising regulator, the Federal Trade Commission.
Prohibition of False or Misleading Claims
The regulations prohibit advertisers from making claims that are deceptive, false, misleading, untrue, or that tend to create a misleading impression. These are broad concepts that defy simple definition and, instead, incorporate traditional legal requirements that all claims made in an ad – whether express or by implication – must be substantiated by reliable and competent evidence.
Given the potential for health-related claims, it is not surprising that the Commission specifically prohibits advertisements asserting that marijuana products are “safe” or have “therapeutic effects,” unless such claims are supported by “substantial evidence or substantial clinical data with reasonable scientific rigor as determined by the Commission.” Any advertisement making health-related claims (e.g., “reduces anxiety,” or “safe pain relief”) are highly likely to draw attention from regulators and should be avoided unless backed up by strong clinical data. Anecdotal evidence is not enough.
But the focus on claim substantiation should not be limited to health claims. Any claim related to the quality, performance or characteristics of a product, including cannabis-related products, are subject to scrutiny by federal and state regulators. This includes virtually any objective, measureable statement about a product – everything from claims that a product is “natural” or “organic,” to claims that the product is the “lowest price” or “best value.” In many respects, the rules for marijuana will be no different than any other consumer product: if you make a claim, it must be true and backed up by reliable evidence.
In a move that will significantly curtail the ability of retailers to reach a mass audience, the Commission has restricted all advertising, marketing and branding unless at least 85% of the audience is reasonably expected to be 21 years of age or older. This provision is mandated by statute (G.L. c. 94G, §4), and was inspired by a similar provision in effect in Colorado (although Colorado cannabis advertisers are required to show only that at least 70% of the audience is 21 or older). The 85% restriction applies to television, radio, the internet, billboards, print publications, as well as at charitable, sporting, and similar events. The burden of proving compliance is on the advertiser, and can be met only through the use of “reliable, up-to-date audience composition data.”
Even where an audience is comprised solely of individuals at least 21 years old, however, a retailer’s ability to advertise may still be restricted. Specifically, the regulations prohibit signs or other printed matter advertising any “brand or kind of marijuana product” on the exterior or interior of any “licensed premises wherein marijuana products are not regularly and usually kept for sale.” As drafted, this regulation would prevent at least some types of advertising in bars, clubs, and other venues where 100% of the audience is reasonably expected to be 21 years of age or older.
In addition, the regulations restrict advertisements that depict anyone under the age of 21 or that use elements like mascots, cartoons, sponsorships, or and celebrity endorsements that “deemed to appeal to a person less than 21 years of age.” (Interestingly, these standards are more lax than in the alcohol industry, where actors and models must be at least 25 to appear in advertisements.) The cannabis regulations permit advertising on a website, but they require the operators of such websites to verify that the entrant is at least 21 years old.
Restrictions on Conspicuous Advertising
Judging from the draft regulations, the Commission very much wants to keep promotion of marijuana products on the down-low. Of course, that is contrary to the very purpose of advertising. The Commission’s goal of restrained promotion is evident in the age-based restrictions identified above, but it is also evident in a number of additional regulations aimed to restrict conspicuous promotion of marijuana establishments and products.
Consider, for example, the rules specifying what elements may be used in an advertiser’s logo. While the regulations explicitly allow cannabis-related businesses of all types (cultivators, testing labs, manufacturers, and retailers) to use a logo, they prohibit any reference to cannabis, including images and “colloquial references.” Effectively, this means that logos must be comprised of elements that give consumers no clue as to the nature of the business.
Other regulations only further hamper advertisers’ ability to engage in anything but the most discreet of ad campaigns. Among the marketing activities expressly prohibited by the regulations are—
the illumination of external signage during daylight hours (more than 30 minutes before sundown) or after closing;
the use of vehicles equipped with radio or loudspeakers for the advertising of marijuana;
the use of radio or loudspeaker within a marijuana establishment to attract attention to the sale of marijuana;
the use of unsolicited pop-up ads on the internet;
advertising of marijuana or marijuana products on clothing, cups, drink holders, apparel accessories, electronic equipment, sporting equipment, and novelty items;
advertising on or in public or private vehicles and at bus stops, taxi stands, transportation waiting areas, train stations, airports, or other transportation venues;
display of marijuana or marijuana products so as to be visible to a person from the exterior of a marijuana establishment; and
promotions offering giveaways, coupons, or free products.
On top of these restrictions, some of the largest online advertising venues like Facebook and Google still prohibit marijuana advertising.
Within the fairly narrow confines of permissible advertising, the regulations require extensive risk disclosures. These warnings are mandatory (right down to the required use of ALL CAPS) and should be displayed clearly and conspicuously on all marketing materials.
Compared to the succinct warnings often used in alcohol advertising (“Drink responsibly”), the Commission’s proposed marijuana warnings are a mouthful. In addition to the phrase “Please Consume Responsibly,” all ads produced by or on behalf of a marijuana establishment must include the following 113-word disclosure (which, if one adheres to the Attorney General’s retail advertising regulations, should be displayed prominently in at least eight-point font):
This product has not been analyzed or approved by the 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 intoxicating effects of edible products may be delayed by 2 hours or more. In case of accidental ingestion, contact poison control hotline 1-800-222-1222. This product may be illegal outside of MA.
But that’s not all. As drafted, the regulations also require ads to include at least two of the following five warnings (even though most of these are redundant of warnings included in the statement above).
“This product may cause impairment and 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 and older. Keep out of reach of children.”
“Marijuana should not be used by women who are pregnant or breastfeeding.”
Given the extensive scope of these disclosures – which are, in effect, compelled commercial speech—it would not be surprising if advertisers were eventually to bring a constitutional challenge in court. Similar efforts in the context of food and beverage advertising (including cases about compelled salt and sugar labeling, which you can read about here) have had mixed results. We’ll have to wait and see whether compelled labeling for marijuana is viewed through the same lens. In the meantime, advertisers should leave plenty of room in their ads for mandatory disclosures.