The goal is to ensure a fair rulemaking process that addresses the interests of consumers and regulators while keeping businesses competitive
Imagine an exciting new industry, full of creativity and potential, that is being stifled by an image problem, irrational stigma, a patchwork of confusing local regulations and the specter of an overbearing federal government.
I’m talking, of course, about the movie industry of the 1920s and ‘30s.
Back then, the major studios faced two strong forces threatening the industry.
First, well-organized national citizens groups, such as the Legion of Decency, gained prominence and disseminated self-funded research on the dangers of movies. Indeed, by 1929, more than half of Americans lived in states or municipalities in which a censorship board enforced idiosyncratic, localized content restrictions. Second, the federal government began to take notice, as some of the New Deal’s regulations began to sweep in movie studios, raising the possibility of national censorship. While some of these regulations were later held unconstitutional and federal content restrictions were not ultimately passed, movie studios got the message.
Although studios had already formed the Motion Picture Producers and Distributors of America (MPPDA) and instituted loose content guidelines, they recognized that a more robust approach was needed to counteract the threat of heavy-handed local and federal regulation. So, in 1934, the renamed Motion Picture Association of America (MPAA) self-regulated by instituting the Motion Picture Production Code. Thus, the movie industry was able to address the concerns of government and citizens groups, while protecting their interests as an industry. This ability to balance competing interests is at the heart of the self-regulatory model. It’s also flexible. So, as the culture changed, the MPAA was able to modernize the Code until it became the ratings system we know today.
Many other industry groups have come to a similar conclusion, from the Financial Industry Regulatory Authority (FINRA), to the National Association of Realtors, to the American Bar Association. Cannabis can follow suit.
Cannabis is at a point where various regulatory models are being tested and tweaked.
For an example of overburdensome regulation, we need only look north at the extremely restrictive position Canada has taken on labeling and advertising. Under the Cannabis Act, labels must be a single, uniform color with a standardized font style, and they can use the brand name and logo only once on the package. All other graphics are prohibited, except, of course, for the large mandated warning label. With regard to advertisements, Canada’s rules disallow images of people, characters, or animals — irrespective of whether they are attractive to minors —and further prohibit a company from advertising its brand “in a manner that associates it with, or evokes a positive or negative emotion …”
While there is much to be admired about Canada’s fledging cannabis industry, these overbearing restrictions on packaging and advertising are out of sync with the needs of businesses, and they threaten to stunt the market’s growth and value. As more and more U.S. states legalize cannabis, and as federal regulation becomes increasingly inevitable, regulators will be looking at different legal models. Cannabis businesses cannot afford to sit by and simply hope that they choose the right ones. Self-regulation can demonstrate that cannabis businesses can be ethical and responsible, without draconian top-down approaches.
The National Association of Cannabis Businesses (NACB), the industry’s first and only self-regulatory organization (SRO), is working with its members to create national standards on various topics of concern to regulators and the public.
The aim of any SRO is to ensure that the rulemaking process is fair and inclusive and addresses the interests of consumers and regulators while keeping businesses competitive. The NACB does this by taking input from government, its license-holder members and subject matter experts, as well as applying the lessons of analogous industries like alcohol and tobacco. It then works with those stakeholders to refine the standard, before soliciting comments from the public, each of which is reviewed and considered by the NACB. Following the public comment period, a new draft of the standards is circulated to NACB members for a final vote to approve and adopt it.
Recently, the NACB adopted its second set of national standards, focusing on advertising. This is an especially important standard — and perfect for the self-regulatory approach — because the way that cannabis businesses market their products serves as the public face of the industry to consumers and non-consumers alike.
However, each state has unique laws on advertising, which makes it difficult for the industry to present a unified front for what constitutes good conduct. With the NACB’s national standards on advertising, members demonstrate to the public and to regulators their commitment to operating at the highest levels of ethics, trustworthiness and responsibility. These standards include restrictions on targeting minors, promoting excessive use and showing consumption, as well as tighter audience demographic limits for print, radio, digital and television ads.
Even where the standards go above and beyond what some states require, NACB members recognize that adhering to smarter rules now can mean avoiding more burdensome regulations later. This represents one of the core benefits of the self-regulatory model: the ability to balance the interests of the public, regulators and the businesses themselves.
It is a model that has worked for countless other industries, and it can work for cannabis. By writing and enforcing their own rules, the cannabis businesses can proactively shape the regulatory landscape and take control of their destinies.
Eugene Morgulis is the director of legal and strategic initiatives at the NACB, overseeing the organization’s national standards and heading up its Symposium program. His legal career began at the international law firm Ropes & Gray in Boston. In 2013, he was awarded the Lawyers’ Committee for Civil Rights and Economic Justice Recognition Award for his work on NAACP v. Galvin, which expanded access to voter registration for low-income Massachusetts citizens. More information about the NACB and its national standards can be found at NACB.com.