The Cannabis Industry is Ripe for Enforcement

by Anne Marie Ellis, Esq. Buchalter

There seems to be no end in sight to ongoing consumer regulations in California. Early this year, California’s Office of Environmental Health and Hazard Assessment (“OEHHA”) significantly changed the Prop. 65 warnings relating to marijuana smoke and THC. The regulators’ actions will be followed closely by the bounty hunters- which are purported environmental groups that aggressively go after businesses to enforce Prop. 65 while lining their pockets (and their attorneys’ pockets) with fees and penalties. Because of the legalization of marijuana and rise in popularity of CBD products, this is going to be a hot area of enforcement next year. The reason I suspect there will be heightened enforcement of marijuana smoke and THC is for the following reasons: (1) there is an increased societal push to understand what people are consuming/using on their bodies, (2) given the potentially controversial nature of marijuana and CBD, regulators are going to want to take a stand with this industry and make sure it is properly regulated- especially in consumer friendly California, and (3) there is no current “safe harbor limit” established by OEHHA for THC.

There are four (4) chemicals that are frequently targeted in this industry: carbaryl, myclobutanil, marijuana smoke and delta-9-tetrahydrocannabinol (“THC”).THC was placed on the Prop. 65 list for the first time on January 3, 2020 and identified as a reproductive toxin. Therefore, cannabis companies will have a one-year compliance period until January 3, 2021 to deal with Prop. 65 warnings that implicate THC. While marijuana smoke has been on the list since 2009, it was also identified as a reproductive toxicant in January 2020, meaning that by January 2021, companies will also have to identify marijuana smoke as causing cancer and a reproductive toxicant. A sample of the short-form warning required for marijuana smoke (cancer and reproductive harm) and THC (reproductive harm) that will become effective in January 2021 look like this:

California’s Prop. 65 requires companies to provide a warning on their products for cancer, birth defects or other reproductive harm if they contain one or more of the 1,000+ substances on the Prop. 65 list, in an amount that is over the safe harbor limit established by regulators. The reason that Prop. 65 compliance is so complicated is that it requires an analysis of a reasonable person’s exposure to a chemical, not just the content of the chemical in the product. For example, Prop. 65 does not set content limits for a chemical (eg. 500 parts per million), it sets an exposure limit to a given chemical (i.e. 5 micrograms per day). When analyzing a product that a consumer does not ingest or touch frequently – like a nut or a bolt that goes into a motor vehicle engine or a vinyl decoration on a purse- the analysis is a little easier. However, when dealing with products that people consume, ingest, inhale or contact through body surfaces frequently, the analysis is more nuanced. This is especially true for cannabis companies that sell anything from plants, edibles, vapes, cartridges and paraphernalia. Once you add THC to the mix, a wide range of products will be implicated since THC has never been regulated under Prop. 65 until now.

Remember that there is an exemption in Prop. 65 if your company employs nine or less people. But if your company meets this threshold, the warning requirements apply to any business in the chain of distribution, even if your company is out of state. If you are supplying product to the state of California and you determine that your product requires a warning, you must comply.

A safe harbor is a level that has been established for many chemicals listed under Prop. 65. Exposures that are below the safe harbor level do not need to comply with Prop. 65. When analyzing cancer causing chemicals, the “NSRL”- no significant risk level is used, and when analyzing chemicals causing reproductive harm, the “MADL” – maximum allowable dose level is used. THC is required to be listed as a reproductive toxicant, but again, there is no established safe harbor. What this means as a practical matter, is that companies will either need to do exposure testing for their products in order to determine if a label is required before sale, or if they choose not to test and label, they face the near certainty of receiving a 60 day notice of violation. The bounty hunters tend to focus on products that are unlabeled, inexpensive and easy to purchase online through retailers, or in brick and mortar stores. Companies can also align themselves with each other and create industry standards to help fight the notices of violation.

Marijuana

There are two chemicals that are frequently targeted in this arena: carbaryl and marijuana smoke. However, companies should be cognizant of the presence of heavy metals which are on the Prop. 65 list including arsenic, cadmium, lead and mercury. There have been multiple notices filed recently involving marijuana smoke. The various sources of exposure include a rig/bong, ice cube bubbler, water pipe, and blunt. Basically, noticing parties are alleging that these paraphernalia products, which are intended to be used with marijuana, must carry a Prop. 65 warning notifying consumers about the dangers of marijuana smoke as both a developmental toxin and a carcinogen. The only recent notice for Carbaryl in this industry involves Hemp Oil.

However, remember that companies have a one year period to list marijuana smoke as a developmental toxin (until January 3, 2021). However, companies should take action now to insure they are changing their packaging and warnings as appropriate.

THC

With respect to THC, this will be more complicated and jarring for companies since it is a new listing. It will also implicate a broader range of products because it affects any product with a detectable level of THC, including those with less than .3% THC (under federal law this is the definition of marijuana). Essentially, the federal law is irrelevant to the Prop. 65 analysis. This could involve products that are made with or infused with CBD and contain some level of THC, including edibles and vape cartridges. We have all seen over-the-counter products touting the benefits of CBD, but this could easily change come 2021. I expect that many of these products will quickly be labeled for sale with a Prop. 65 warning to avoid being the “watershed” test case for THC. For consumers, it is yet to be seen whether adding an additional warning to an already mysterious product, will turn them away or have no significant effect on their buying power of these products.

Businesses should not wait until the last minute to make packaging changes or to update their labels. They must think and act proactively to avoid costly litigation. This means reviewing your product line for the most vulnerable products and chemicals and prioritizing whether they require a label. Businesses must also analyze their contracts with their suppliers and vendors to make sure that compliance amongst the distribution chain is being enforced. Finally, businesses must insure that all outlets that are selling the product are distributing the proper warnings.

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