Cannabis Trade Associations Call on LA City Attorney to Expand Enforcement against Unauthorized Retailers

Earlier this week, the Southern California Coalition, a trade association that represents all sectors of the cannabis industry, released a white paper that was presented to Los Angeles City Attorney Mike Feuer, calling on his office to heighten enforcement against unauthorized shops.

Entitled “Permanent Closure,” the document aims to impose “a combination of charges and fines so onerous that the shop[s] cannot relocate and re-open.” Prior to delving into details on how to go about this, the Coalition underscores that the document is “not a critique of previous or current enforcement efforts,” but, rather, a framework on how to build on them. Moreover, given that unlicensed cannabis sales are a challenge across California, if Los Angeles succeeds in stamping out unauthorized retailers, the Coalition holds that “The leadership of the City Attorney’s office in this area may well become the template for how this problem is eradicated throughout the state.”

According to the Coalition, the City Attorney’s office “has diligently pursued closure since 2013” and formerly provided a list of the unauthorized retailers it shut down on its website. This information, says the Coalition, has since been taken down, “but as early as 2015, the City Attorney’s office had already closed over 500 shops.”

The Coalition also acknowledges that the city of Los Angeles “has adopted a wide array of enforcement techniques,” including “the first civil enforcement action in California to allege [that] cannabis sold by an unpermitted location contains pesticides.”

However, in the Coalition’s view, it currently “appears that the City’s enforcement is focused on closing illicit retail businesses, not dismantling them.” This method, it insists, in ineffective because “all the entity’s assets are still intact.” To operate, unauthorized retailers need only find another address, as they “have everything else they need: inventory, fixtures, employees and cash.”

Highlighting the proliferation of unauthorized retailers in the Crenshaw Corridor and Van Nuys (neighborhoods with predominantly African American and Latino populations), the Coalition maintains that city officials “must not merely close down illegal retailers but must also render them bereft of all assets that would enable the illegal actor to reopen in another location or sell the business to a successor-in-interest.”

Moving forward, the Coalition also calls upon the City Attorney’s office to prioritize enforcement against retailers whose products contain contaminants. Doing so is essential, says the Coalition, because “the effects of pesticide poisoning and the accumulation of heavy metals in the body are cumulative,” so “they may not fully manifest immediately after exposure.” Failing to close shops “peddling poison,” it adds, “may precipitate a health crisis that drags on for years.”

The Coalition also places a premium on barricading unauthorized cannabis shops. This practice, it says, “relieves the City of the obligation to seize bulky fixtures, such as huge display cases, and other things necessary to run the business.” This tactic, it adds, is preferable to other enforcement tools, such as seizure of assets prior to conviction, which “has long been a drug war tactic, and we’d like to avoid it here.”

Following these closures, says the Coalition, the city must launch “targeted public information campaigns” against illicit retailers to completely uproot their business.

“Typically, the rogue operator is advertising on Weedmaps and may have a website for his business,” it continues. “He may also have carefully collected the emails of his customers so he can communicate about sales and specials.” Once closed, the Coalition recommends that unauthorized operators be obligated to take down their Weedmaps pages and websites and replace them with a “notice in large type which says: THE CITY OF LOS ANGELES HAS CLOSED THIS FACILITY BECAUSE IT IS UNLICENSED. THE INVENTORY OF THIS BUSINESS WAS TESTED AND WAS FOUND TO CONTAIN IMPURITIES, SOME OF WHICH MAY HAVE A PROFOUND EFFECT ON CONSUMER HEALTH.”

A similar sign would be posted on windows of barricaded business, “large enough to be seen from the street.” Additionally, “every email address the operator has collected should receive a similar message to that outlined above.”

According to the Coalition, these measures are necessary not only because existing authorized retailers “are being driven towards bankruptcy because they are surrounded by rogue operators” unburdened by taxes who can afford to offer products at discounted prices, but also to ensure the success of Los Angeles’ upcoming social equity program. If the city fails to “eradicate all illicit retail operators, and to do so in a way that makes it impossible for any other bad actor to take their place,” says the Coalition, retailers who are part of the social equity program “will come into a marketplace so saturated with unlicensed competition that they will be unable to acquire enough market share to survive.”

This argument was also made by the California Minority Alliance, another cannabis trade association, which sent a letter to City Attorney Mike Feuer late last month, threatening to sue for the “lack of enforcement” that has turned communities in South Los Angeles “into havens for illicit activity encouraging the proliferation of unlawful cannabis operations.”

Mirroring the Southern California Coalition concerns regarding authorized retailers’ inability to successfully compete, the California Minority Alliance alleges that illicit cannabis shops undermine the city’s social equity program.

“The unlicensed shops are consuming all of the retail real-estate, leaving no viable location space for Phase 3 applicants,” it reads. And if those applicants “are lucky enough to find suitable locations to open for business, now they will be competing with unlicensed shops, which do not pay the LA City and CA State taxes of 34% or any licensing fees.”

The City Attorney was not immediately available for comment.  However, on its end, the city of Los Angeles has been working to develop more tools against unauthorized retailers. In May, the City Council unanimously approved a motion that directs the City Attorney to establish a policy that will force landlords who lease properties to illicit cannabis businesses to pay for all the costs associated with shutting them down, including, but not limited to, utility disconnection.


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