Shelf Space or “Pay-to-Play” Agreements
As the Washington cannabis industry continues to grow, the LCB has been receiving complaints alleging that cannabis processors are paying for shelf space at cannabis retailers. Also, processors are reporting that more cannabis store owners are asking processors to pay for shelf space, or to otherwise promote a processor’s product.
While there are obvious financial benefits for retailers to increase shelf space for a cannabis processor and/or enter into agreements to promote a processor’s product, these are illegal business practices under Washington State laws and rules.
Can a processor voluntarily pay for shelf space at a retail location?
The short answer is no. RCW 69.50.328 establishes the tier system in Washington’s regulated cannabis industry that prohibits cannabis processors from having a direct or indirect financial interest in a cannabis retailer. Paying a retailer to promote a processor’s product creates a financial interest between the non-retail and the retail business. Furthermore, under WAC 314–55–018, no cannabis Industry member may enter into any agreement which causes undue influence over another cannabis licensee or industry member.
Can a retailer force a processor to pay for desirable shelf space at the retail location?
This is not allowed. In reading RCW 69.50.328 you will find that it prohibits agreements that create financial interests spanning industry tiers. Moreover, WAC 314–55–018 spells out that no cannabis producer or processor shall advance and no cannabis licensee shall receive money’s worth under any agreement written or unwritten or by means of any other business practice or arrangement. This agreement would include:
- Gifts
- Discounts
- Loans of Money
- Premiums
- Rebates
- Free product of any kind (Except as allowed by WAC 314–55–096 and RCW 69.50.585)
- Treats or services of any nature
If you have more questions about “Pay-to-Play” agreements or any others education based questions, please contact your local Cannabis Compliance Consultants for assistance.
More information can be found at WAC 314–55–018 and RCW 69.50.328
