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Survey of Marijuana Law in the United States: Anti-Trust Issues related to Legal Marijuana Sale

Summary of Issue

In general, antitrust laws seek to promote fair competition on the merits and to protect consumers and competitor businesses from anti-competitive business practices — practices undertaken in effort to undermine competitive commercial behavior in a given market or line of commerce.

The antitrust laws therefore forbid the wrongful acquisition or preservation of monopoly power, the abuse of monopoly power in order to establish a new monopoly, and concerted restraints of trade (i.e., business practices undertaken by two or more firms that improperly stifle or suppress “competition on the merits” in a given market). They also govern proposed mergers and acquisitions that are sufficiently large to constitute a threat to competition, and they address commercial practices that pose an arguable danger to competition on the merits in a properly defined antitrust market.

In the case of the marijuana industry, which is currently still a controlled substance on the federal level, unique anti-trust dilemmas have arisen as states individually tackle their own business models. Some states have banned vertical integration, ie. having a single company or set of owners, operate the production, wholesaling, and retail operations of the cannabis business. While others, such as Colorado until 2014, required vertical integration. Colorado's system of "vertical integration", under which retailers must cultivate most of the stuff they sell themselves, made monitoring easier for the state. However it made entry into the industry by small "mom and pop" shops much more difficult, if not impossible.

As the regulation of marijuana changes so will the federal and state business laws and their implementation.

Vertical Integration at a Glance

Each state with legal marijuana is a crucible for economic research. The variety of regulations and licensing structures makes each program unique, and it will take years to truly understand the impacts of the different rules and regulations.

There are a few states, (Hawaii, Michigan, and Montana) that have either remained unregulated or are still in the process of formulating rules for dispensaries and grow operations.  But the vast majority of states with some form of legal marijuana have rules about vertical integration that fall into one of three categories: allowed, required, or prohibited.

Allowed: Alaska, Arizona, Colorado, Maryland, Nevada, Oregon, Washington, D.C.

Required: Connecticut, Delaware, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Vermont>

Prohibited: California, Illinois, Washington


Source.  Current as of: April 18, 2016

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