Relatively new developments in New York and some comments

I didn’t notice until today that Crain’s New York Business is following the progress of the Compassionate Care Act, a/k/a the proposed New York “medical marijuana” law.

For the first time ever the CCA is attached to the budget, meaning, it is said, that this year we can expect open debate in the full Senate.

Four upstate Republican Senators are breaking with the party leadership and coming out in support of the bill. (One of them, Mark Grisanti, put it on his website.) There is some irony in this development, since the Republican resistance appears distinctly now to be headquartered in the downstate county of Nassau (one of two comprising Long Island), right across the border from New York City.

I’m curious as to what opposition Senators Hannon and Skelos will assert against the CCA. I assume that for the sake of appearances if they do drop their resistance this year they will need to do it in some way that does not essentially admit that there never was any valid basis for opposition. In other words, they will need to do a Cuomo – come up with some novel (but non-viable) counter-proposal from which they will allow themselves to be negotiated so they can say they are satisfied with compromises in the bill.

My continuing objections to the bill

I continue to oppose the CCA for various reasons but primarily to the extent that it sets an arbitrary limit of ten manufacturers for the first two years. I assume that the limitation will tilt the market at this foundational stage towards very large entities with the capital/credit available to create operations large enough to service the population of the New York City metropolitan area – plus the remainder of the state. It will also likely drive up costs for people in the upstate counties whose product will be transported from other locations in the state, i.e. there will be no option for local cultivations for at least 52 of New York’s 62 counties. (In other words, if each of the manufacturers is licensed in a separate county, there will be still be 52 counties in which there is no manufacturer.)

Since there seems to be no way out of this restriction, I believe that the task at hand will be to convince the Commissioner of Health that the statute permits manufacturers to franchise their manufacturing operations to multiple locations. I see nothing in the statute that would prevent franchising; I also note that the New York franchise law doesn’t seem to include manufacture of products as one of the activities defined as the subject of a contract for a franchise (which then requires registration with the Attorney General’s office).

Since the new version of the statute eliminates the limitations on common ownership of manufacturers and distributors, I assume that there will not be a problem with manufacturers franchising retail operations. That may be something that can be crafted out of the statute. However, there is no arbitrary limitation on retailers so that kind of franchise just helps those ten (presumably) very big manufacturers participate in the retail market as well – competing with businesses that are exclusively wholesale or retail distributors. It won’t likely help small entrepreneurs who seek to get started in cultivation.

Just a few guesses. I’m interested in comments from people with experience in New York franchises.


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