Some question possibility of a marijuana monopoly

Staff writerJune 19, 2013 

One of the regulators guiding the development of a legal marijuana industry in Washington voiced concerns Wednesday that the industry might end up dominated by a wealthy few.

Liquor Control Board member Chris Marr noted that the rules being drawn up for the board’s approval don’t limit the number of licenses that any one business can have. What would keep one company from snapping up a slew of licenses and setting up a monopoly, he asked?

“How do you prevent a Microsoft millionaire from getting this idea and deciding that — playing by the rules — they’re going to dominate the market?” Marr said at a board meeting.

While Marr said he wasn’t thinking of anyone in particular, a former Microsoft manager, Jamen Shively, has reportedly announced plans to build dozens of stores in Washington and Colorado, where voters legalized marijuana last November.

In Washington, the Liquor Board implementing Initiative 502 issued a first draft of rules last month, to be followed by revisions July 3 that could be approved Aug. 14.

Then the board will take applications, approve all the growers and processors that qualify, as well as a set number of retailers in each county, and hand out licenses by Dec. 1. Initial rules call for a lottery to narrow down the retail applicants, but board members suggested Wednesday that may change.

Marr said a cap of, say, three licenses per license holder might be appropriate.

But board chairwoman Sharon Foster said she thought the market would likely sort itself out without size limitations.

And one state lawmaker sees the opposite problem in the rules: too much allowance for small companies. Rep. Chris Hurst wants the board to require businesses to be well-capitalized and to post a bond to apply for a license.

Otherwise, he sees an invitation for former sellers in the black market to enter the new system.

“I think that the more you invest in it, the less likely you are to break the law,” said Hurst, an Enumclaw Democrat who leads the House committee overseeing marijuana.

The board’s proposed requirements already encourage large operations. The draft rules call for tight security, including surveillance cameras and alarms. Businesses must have liability insurance. And under the initiative, the government will take a 25 percent cut at each level of sale.

“There are going to be a handful of large players that are probably going to dominate the marketplace,” Hurst said. “I don’t think anyone can get into this business for under a quarter million dollars.”

There is no ceiling on the size of business operations or marijuana volume. But there is no minimum size, either, as there is for liquor stores.

The board appears likely to allow marijuana to be grown outdoors, as long as the fields are secured behind fences.

Marr and the third board member, Ruthann Kurose, said they were leaning that way, and Foster said she has been convinced.

“The carbon footprint made a big difference for me,” Foster said.

Indoor production of marijuana makes major use of electricity. Even greenhouses that don’t need lights use a lot of energy in ventilation, advocates for outdoor production say.

Initial rules called for growing only in buildings and greenhouses. But the board’s rules coordinator, Karen McCall, told the board Wednesday the revised rules would allow for outdoor growing.

It’s also less expensive to grow outside, said Alison Holcomb, the lead author of the initiative and the drug policy director for the state chapter of the American Civil Liberties Union.

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