Now we have been reviewing a raft of Oregon Liquor and Hashish Fee (OLCC) proposed rules that might considerably have an effect on the Oregon marijuana business. These proposed guidelines have implications for licensees, potential licensees and even individuals doing enterprise with business like landlords and lenders. Everybody, actually.
You could find the primary three posts in our collection on the hyperlinks instantly beneath, every by Jesse Mondry right here in our Portland workplace:
Right now, I’ll wrap up the collection with the omnibus publish Jesse promised, masking all the pieces else of notice. Earlier than I dive in, please notice: OLCC held a public listening to on the proposed guidelines yesterday, October 25, however the public remark interval received’t shut till 12 p.m. PST on October 31. So, get your ideas in! You’ll be able to e-mail feedback on to OLCC Guidelines Coordinator Nicole Blosse.
Proposed OAR 845-025-1170(3): No extra companies agreements
I’m on file opining that companies agreements are an issue within the Oregon hashish business. In that publish, I supplied that companies agreements a.ok.a. administration agreements are a “compliance and litigation hazard” and I discussed that “now we have witnessed an alarming variety of compliance points and outright litigation within the context of companies agreements through the years.” OLCC now proposes to manage these agreements out of existence.
Particularly, the proposed rule gives {that a} “proposed licensee or laboratory licensee might not function the licensed enterprise till the Fee approves the change in possession utility and grants a license.” That’s simple and vital. At the least one of many largest gamers in Oregon hashish constructed its footprint largely on the backs of service agreements within the buy and sale context. Going ahead, all compliant patrons are going to have to attend for OLCC approval to begin operations at a website.
From a purchaser perspective, issues with ready for formal OLCC approval might embrace any or all the following: (a) lag instances with OLCC processing and approval; (b) vendor failure to proceed to function its enterprise within the abnormal course throughout the purchaser’s utility interval; (c) vendor compliance points that might jeopardize a transaction within the pre-closing window. We attorneys would proceed to tailor our types for these issues if this rule passes as written.
Arguments towards the rule change embrace that OLCC already prohibits the addition of undisclosed “candidates” and “possession pursuits” on a license. If two events want to enter right into a companies settlement or different type of transition settlement, a vendor can merely disclose a purchaser to OLCC whereas the change in possession utility is pending. That is true in principle, though in observe individuals are inclined to journey on (or ignore) the possession curiosity guidelines within the companies settlement interval. On steadiness, I just like the rule offered that OLCC well timed processes purposes.
Proposed OAR 845-025-1170(6)(b): No stock gross sales to “new location” patrons
This one is a headscratcher for me and I hope OLCC backs up right here. The proposed rule requires {that a} vendor:
“transfers all marijuana objects and hemp objects to a different licensee [a licensee other than the buyer in a transaction]… or destroys any marijuana objects and hemp objects remaining on the licensed premises…”.
OLCC could also be proposing this rule to obviate some logistical complications for its workers. I doubt the proposal stems from issues about product diversion or something associated.
In any case, the proposed rule may end in sure sellers dropping vital earnings in live performance with enterprise gross sales. Many change-in-location gross sales have a list element: a vendor compelled to liquidate stock on the open market would typically obtain much less in return than if promoting to a purchaser within the context of a enterprise sale settlement.
I ought to notice that this proposed rule additionally dovetails with the problematic “change in location” proposal beforehand coated by Jesse Mondry, which requires a vendor to forfeit its license “even when the change in possession utility just isn’t accomplished.” OAR 845-025-1170(6)(a). I can solely assume that these guidelines are part 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): Testing batch re-labeling
Sounds boring; might be pricey for sure licensees. The proposed rule gives:
“When audit testing for efficiency pursuant to this rule, the Fee might require any portion of a batch with a compliance take a look at for efficiency on or after November 1, 2022, to be relabeled with the imply common consequence from laboratories conducting audit testing if the Fee determines that there’s a statistically vital distinction at a 99 % confidence interval between the audit testing results of samples from the batch and the unique compliance testing results of the identical batch.”
Right here, OLCC proposes to make a testing lab’s drawback everybody else’s drawback. If a lab offers unhealthy outcomes, then the related producer, processor or wholesaler could be compelled to relabel its merchandise— an train OLCC itself estimates would price between $10,000 and $30,000 per incidence.
Let’s hope this rule additionally falls by the wayside, or that OLCC crafts a alternative rule to permit audits on merchandise that have already got undergone testing however not but been packaged or labeled.
Conclusion
If you’re considering any facet of those guidelines — together with these coated in prior posts on this collection — I once more encourage you to submit your feedback previous to the October 31 deadline. OLCC critiques and considers these submissions.
We are going to observe up as soon as last guidelines are adopted, no matter these could also be.