New Jersey is warning cannabis companies about offering free cannabis products with purchases of snacks, baked goods, and other products.
The letters informed businesses that the state will enforce limits of its adult-use cannabis law to “protect the integrity of the regulated market from competition by unlicensed businesses.”
Early Phases of Legalization
On February 22, 2021, Governor Phil Murphy (D) signed legislation to legalize and regulate cannabis possession and use and reform civil penalties.
One piece of legislation, the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act, regulates cannabis use, possession, and sales by businesses with licenses from the Cannabis Regulatory Commission (CRC).
The CRC has yet to implement rules for adult-use cannabis businesses or issue any licenses.
State Attorney General Gurbir Grewal (D) says that when the New Jersey Legislature legalized adult-use cannabis, they made it clear that they created a regulated market that operates under a set of rules.
“Instead of waiting for those regulations to be established, some vendors have decided to move forward on their own, in ways that the law does not allow,” says AG Grewal. “Today we’re making it clear that we will not permit these entities to undermine the regulated cannabis marketplace the Legislature created or to compete unfairly with properly licensed cannabis businesses.”
Possible Penalties Pending
The letters informed the companies that they are under investigation for violating the Consumer Fraud Act.
The Consumer Fraud Act prohibits “unconscionable business practices, misrepresentation, and deception in the marketplace.”
According to the letters, despite the vendors’ portrayals of their business models, their gifts appear central to sales and are not really gifts.
By inaccurately claiming to offer free cannabis products with the purchase of other items at exorbitant prices, companies may violate the Consumer Fraud Act, DCA’s advertising regulations, and other rules.
The Consumer Fraud Act treats each misrepresentation in sales and advertising as a separate violation.
Violators may face a $10,000 penalty for the first violation and a $20,000 fine for each additional one.