FTC raises concerns about ganja policy
The legal ganja sector can improve competition and generate more funds provided it expands its potential client base, limits concessions to small farmers, allows for weed imports, and expands access to financing, according to the Fair Trading Commission.
The competition watchdog FTC made the recommendations in its latest market study titled “Prospects for Development of the Cannabis Industry’.
The FTC study noted that small farmers get charged half the regulatory fees per acre of large cultivators or companies and that while such a policy will keep the ‘small man’ in the business, it can contradict its intent.
That is because it creates a market with very few efficient firms and many state-aided small farmers, the fair trade regulator noted.
“[F]armers on one or less acre of land pay US$1,000 while cultivators that plant on land larger than one-acre pay US$2,000 per acre. Additionally, the Government and the Cannabis Licensing Authority are committed to ensuring that small farmers in particular benefit from the cannabis industry,” the study noted.
“Policies aimed at assisting small farmers should be temporary in nature to minimise the risk of complacency and persistent inefficiency of these types of market participants,” it said.
The market study dated August 2022, but recently released online, did not proffer an optimal timeline for concessions to end.
The report was prepared by the FTC research team of Kevin Harriott, competition bureau chief; Verlis Morris, competition analyst; and Michelle Phillips, legal officer.
The FTC, in fulfilling its mission to maintain and encourage competition, periodically conducts studies on disparate sectors. The regulatory body of the ganja industry is the Cannabis Licensing Authority, CLA, which was established in 2015. It currently doesn’t have an executive to comment on the study as it is currently in the process of hiring its fourth CEO in two years.
A second area of concern for the FTC relates to the expansion of the customer base for the industry. It noted that the governments of Canada, Australia, and Uruguay allow for recreational use but not Jamaica, which confines it to medical usage or as a faith sacrament for the Rastafari movement.
“It must be noted that other jurisdictions include a wider customer base by including the use of cannabis for recreational purposes and thus allow for products such as edibles and infused beverages,” the report noted. “As the market evolves, the CLA could consider reasonably expanding the consumer base to aid competition without undermining safety standards, etc.”
A third recommendation involved the long-standing issue of financing, since regulated financial institutions tend to avoid the cannabis industry, so as not to run afoul of anti-money laundering guidelines.
“Financial institutions will need convincing that funds will not be channelled into illegal activities when funding such initiatives. The CLA must be mindful that the regulatory framework implemented must address this concern and/or provide proper channels from which funding can be sourced,” FTC said.
Up to September 2022, the CLA had issued 106 licences, while 30 applications were at the licence-granted stage, and another 333 applications had received conditional approvals.
The CLA has no cap on the number of applicants and industry entrants, to the dismay of some stakeholders who want a limit to protect their investment, the study noted. FTC has sided with the CLA in its decision to avoid capping the number of licences, saying it would likely “reduce” economic welfare.
“In particular, what stakeholders described as a collapse in prices as a result of entry, would be market forces optimising the amounts invested in that industry. Any reduction in prices would be only transitory since the less efficient suppliers will likely exit the market allowing prices to adjust to a competitive level,” the FTC said.
Apart from local cultivation, Jamaica is one of about 10 countries worldwide with an export regime. Up to November 2021, the CLA had awarded 79 export authorisations.
The FTC is also suggesting that Jamaica should consider approving cannabis imports to improve competition.
“In going forward, Jamaica may have to consider the cannabis imports and their potential impact on our industry. Apart from infringing on international trade treaties, disallowing imports to protect the local industry could have adverse effects on the economy. For example, imports incentivise local participants to become more efficient keeping input costs low for manufacturers in the value-added segment of the production chain,” the FTC market study stated.