Denver Creates a Cannabis Cartel, Reinforcing Colorado's Pot Protectionism


Jacob Sullum

Last week the Denver City Council approved an ordinance that gives existing medical marijuana centers (MMCs) a lock on the new recreational market, which is supposed to start operating in January, until February 1, 2016. That two-year period of protection against new competition is a lot more generous than the regulations approved by the state legislature last May, which merely gave MMCs a three-month head start in the licensing process. It is also more generous than the one-year "grace period" recommended by the Amendment 64 Implementation Task Force last March. Since Denver is Colorado's largest city and home to most of its MMCs, the cannabis cartel it is establishing will have a big impact on the industry, especially since other municipalities are apt to copy Denver's approach.

Another regulation adopted by Denver, forbidding pot shops within 1,000 feet of a school, child care center, drug or alcohol treatment center, or another marijuana business, will limit competition even after the two-year ban on new entrants expires. The city will count those 1,000 feet as the crow flies, rather than by the shortest pedestrian route, which will further reduce the number of legal locations. 

The Denver Post reports that industry insiders are pleased by this cozy arrangement:

Michael Elliott, director of the Medical Marijuana Industry Group, said Denver's ordinance treats the industry fairly, promotes public safety, and respects the wishes of the voters.

"As a new industry, we recognize and accept the responsibility to ensure responsible use by adults and to keep this product away from minors," he said in a statement. "We look forward to continuing to work with the city to meet those shared goals."

Other anti-competitive features of Colorado's regulations include dramatically higher application and licensing fees for newcomers, continuation of a rule requiring marijuana retailers to grow 70 percent of what they sell until October 2014, and constitutionally questionable limits on advertising. State regulations finalized two weeks ago ban outdoor ads, including window signs visible from the street, and TV, radio, online, and print ads unless there is "reliable evidence" that at least 70 percent of the audience is 21 or older. Denver's ordinance reiterates the ban on outdoor ads but exempts ads in general-circulation periodicals, making the city's rules looser in that respect. It is doubtful that either type of restriction could survive a challenge under the Colorado Constitution's free speech clause, although the beneficiaries of these protectionist regulations may refrain from mounting one.

You can read Denver's ordinance here.