Oregon Proposed Cannabis Rules: Mixed Bag

We have been examining a raft of Oregon Liquor and Cannabis Commission (OLCC) proposed policies that could noticeably influence the Oregon marijuana marketplace. These proposed procedures have implications for licensees, prospective licensees and even people performing business enterprise with marketplace like landlords and loan companies. Everybody, truly.

You can obtain the initial 3 posts in our collection at the inbound links right away beneath, each individual by Jesse Mondry listed here in our Portland office:

Nowadays, I’ll wrap up the collection with the omnibus article Jesse promised, masking anything else of take note. Right before I dive in, please take note: OLCC held a general public hearing on the proposed principles yesterday, Oct 25, but the public comment period won’t shut until 12 p.m. PST on Oct 31. So, get your views in! You can email feedback directly to OLCC Principles Coordinator Nicole Blosse.

Proposed OAR 845-025-1170(3): No more solutions agreements

I’m on file opining that solutions agreements are a dilemma in the Oregon cannabis business. In that article, I offered that solutions agreements a.k.a. management agreements are a “compliance and litigation hazard” and I described that “we have witnessed an alarming amount of compliance troubles and outright litigation in the context of expert services agreements over the many years.” OLCC now proposes to regulate these agreements out of existence.

Particularly, the proposed rule provides that a “proposed licensee or laboratory licensee may well not function the certified company until eventually the Fee approves the adjust in possession application and grants a license.” That’s uncomplicated and substantial. At the very least one of the premier players in Oregon hashish built its footprint largely on the backs of provider agreements in the order and sale context. Likely ahead, all compliant potential buyers are heading to have to hold out for OLCC acceptance to commence operations at a web site.

From a buyer perspective, fears with waiting for formal OLCC approval may possibly include things like any or all of the next: (a) lag moments with OLCC processing and approval (b) vendor failure to proceed to operate its small business in the regular course in the course of the buyer’s application period of time (c) seller compliance difficulties that could jeopardize a transaction in the pre-closing window. We legal professionals would go on to tailor our sorts for these criteria if this rule passes as penned.

Arguments versus the rule improve consist of that OLCC by now prohibits the addition of undisclosed “applicants” and “ownership interests” on a license. If two events want to enter into a providers arrangement or other variety of changeover arrangement, a seller can only disclose a buyer to OLCC when the change in ownership application is pending. This is genuine in theory, though in follow folks are inclined to vacation on (or disregard) the ownership fascination rules in the products and services arrangement interval. On stability, I like the rule presented that OLCC timely procedures programs.

Proposed OAR 845-025-1170(6)(b): No inventory profits to “new location” prospective buyers

This a person is a headscratcher for me and I hope OLCC backs up in this article. The proposed rule demands that a vendor:

“transfers all marijuana goods and hemp goods to an additional licensee [a licensee other than the buyer in a transaction]… or destroys any cannabis things and hemp objects remaining on the licensed premises…”.

OLCC may be proposing this rule to obviate some logistical problems for its team. I doubt the proposal stems from worries about item diversion or anything at all connected.

In any circumstance, the proposed rule could end result in certain sellers shedding sizeable profits in live performance with business profits. Lots of adjust-in-locale gross sales have an stock ingredient: a vendor compelled to liquidate inventory on the open up industry would normally receive fewer in return than if providing to a buyer in the context of a small business sale arrangement.

I need to notice that this proposed rule also dovetails with the problematic “change in location” proposal previously included by Jesse Mondry, which requires a seller to forfeit its license “even if the modify in ownership application is not completed.” OAR 845-025-1170(6)(a). I can only assume that these guidelines are a aspect of a persistent push by OLCC to cull licenses. The proposals make sense from that perspective. In any other case, these are fairly arbitrary new strictures.

Proposed OAR 845-025-5760(4): Screening batch re-labeling

Sounds dull could be pricey for certain licensees. The proposed rule gives:

“When audit tests for potency pursuant to this rule, the Commission may possibly have to have any portion of a batch with a compliance test for efficiency on or following November 1, 2022, to be relabeled with the mean average outcome from laboratories conducting audit testing if the Fee decides that there is a statistically sizeable change at a 99 per cent assurance interval amongst the audit tests end result of samples from the batch and the unique compliance screening end result of the exact same batch.”

Below, OLCC proposes to make a testing lab’s issue anyone else’s issue. If a lab presents poor results, then the relevant producer, processor or wholesaler would be forced to relabel its products— an exercising OLCC by itself estimates would expense amongst $10,000 and $30,000 per event.

Let us hope this rule also falls by the wayside, or that OLCC crafts a replacement rule to allow audits on products that already have gone through testing but not however been packaged or labeled.

Conclusion

If you are fascinated in any factor of these guidelines — such as people lined in prior posts in this collection — I once again stimulate you to post your responses prior to the Oct 31 deadline. OLCC assessments and considers individuals submissions.

We will comply with up the moment last procedures are adopted, whichever those people might be.