WA House COG - Committee Meeting
(February 24, 2020) - Summary

[ Event Details ]

SB 6057 (the “wholesale discounts” bill) and SB 6206 (the “location compliance” bill) were both heard in the House on Monday - but only one was subsequently advanced.

Here are some observations from the Monday February 24th Washington State House Commerce and Gaming Committee (WA House COG) committee meeting.

My top 2 takeaways:

  • The committee’s first public hearing on cannabis-related legislation was on SB 6057 - “Concerning price differentials in the sale of marijuana.”
    • SB 6057’s public hearing in the Senate was on January 23rd in the Labor and Commerce Committee (WA Senate LBRC). It was passed by the entire chamber during its February 18th Evening Session.
    • Staff Report
    • Pro (1)
      • Chris Marr, Principal at Chris Marr Government Affairs (handout, audio - 3m, video).
        • Former WSLCB Board Member
        • Marr said he joined “many licensees” in thanking the bill’s sponsor, Senator Derek Stanford, before stating that motivation for the bill sprang from a “philosophy that the cannabis industry should be allowed to utilize the same business practices that every other industry relies on, unless there are valid public safety concerns.”
        • SB 6057 would permit “wholesale discounts for bona fide business reasons such as selling 100 units for less than one unit or delivering a product one mile away versus 300 miles away,” Marr explained, calling the measure “pretty much common sense.” He traced the restrictions on price differentials back to “prohibition-era tied house statutes” from when “breweries delivered in horse-drawn wagons.” He said that wholesale discounting had been allowed for “beer, wine, and more recently, spirits.”
        • Marr argued that the common practice in the state’s alcohol sector provided “ample evidence that thanks to today’s regulatory oversight the risk of undue influence related to common business practices is really no longer a valid one.” He also pointed out it was a voluntary discount licensees could offer to cannabis businesses, but not the consumer. “Voluntary discounts have always been allowed with regard to retail purchases at stores with cannabis,” Marr stated. Further, he said he’d already seen the practice occurring and claimed some “are unaware that they’re not allowed.” Marr called the price differentials covered by the bill consistent with “the Washington Court of Appeals spirits discounting ruling in Northwest Grocers, Costco, and Washington Hospitality v. LCB that came down last year.”
        • Marr claimed passage of the bill would “drive down costs, increase efficiencies for licensees, and also lower costs for retail customers which adversely impacts the illicit market” in addition to helping “small and rural producers who lack large delivery fleets or year round distribution and marketing.”
    • Con (1)
      • Micah Sherman, Raven Co-Owner and Operations Director (written testimony, audio - 4m, video).
        • Sherman believed the “main driver” of the legislation was to “create a system where volume discounts can be publicly displayed for large stores for large producers and processors to work together to take advantage of scale.” He doubted the “delivery and transportation aspect” of the bill was relevant since “we can charge delivery charges to cover those costs so that’s easily solved currently.” 
        • Sherman felt another argument for SB 6057 relied on an assumption that producers couldn’t “intelligently change the prices of our products...lot by lot.” Current rules required producers to “lot up all of our products into very small batches and we can adjust the price of each one of those batches depending on the quality of that particular batch.” Sherman suggested that price differentials already existed in the 502 market based on “actual quality and nature of the products” as opposed to “volume pricing” which he felt was the true focus of the bill. He expressed skepticism about volume discounting as cannabis “was not a normal industry” and they could only sell products to a set number of licensed retail stores and not sell outside of Washington. Comparing potential cannabis price differentials with those for alcohol was “a little disingenuous at this point.”
        • Sherman also took issue with the timing of the legislation. He noted that bills intended to help make smaller producers more viable (HB 2871, the WSLCB’s request legislation, and HB 2279, the craft cannabis bill) had failed to advance. He felt this left “small farms at a disadvantage relative to large farms because of the nature of the licensing system and the distribution system.” Until small cannabis growers were aligned with the alcohol industry on privileges like direct sales to consumers, Sherman said some producers would struggle to “differentiate ourselves from these bigger players.” He stated that SB 6057 stood to worsen “the differentiation between a scale model and a small craft model.” Sherman concluded “until some of those changes are in place implementing a volume discounting scheme is just going to exacerbate those differences.”

Although the bill was scheduled for executive session during the WA House COG Tuesday committee meeting, SB 6057 was not moved.

  • On February 21st, SB 6057 (the “wholesale discounts” bill) was scheduled for executive session during the WA House COG Tuesday February 25th committee meeting.
  • After caucus at the beginning of Tuesday’s meeting, Chair Strom Peterson announced the Committee was “holding” SB 6057 because members had “some questions” on the bill (audio - <1m, video).
  • On Wednesday, WA House COG canceled their only remaining committee meeting prior to the opposite house policy committee cutoff on Friday February 28th. At publication time, it appeared SB 6057 would not advance in the House.

SB 6206 was advanced during the WA House COG’s Tuesday February 25th committee meeting.

  • Prior to voting on SB 6206 lawmakers shared remarks on the bill.
    • Chair Strom Peterson said members had “seen this one before” in the form of HB 2359 and designated the legislation “a very important bill, however, that our burgeoning cannabis industry entrepreneurs have a chance at opening up their businesses in a timely manner” (audio - <1m, video).
    • Representative Brandon Vick, sponsor of HB 2359, called SB 6206 “obviously a good piece of legislation that helps the business owners really participate fully in the process” of licensing and siting of their retail stores (audio - 1m, video).
  • The Committee voted unanimously to advance SB 6206, with Vice Chair Shelly Kloba and Assistant Ranking Member Kelly Chambers excused. The bill was referred to the House Rules Committee (audio - <1, video).