Most comment about the cannabis legalisation referendum has come from a social and public health point of view. However, as the proposed legislation aims to legalise pretty much everything about the cannabis business except the commercial marketing of it, a commentary on its likely outcomes based on a commercial and marketing perspective might be timely.
When the proposed legislation is looked at through the lens of a business analyst, there is considerable scope for concern about what the consequences of its introduction would be for the public good.
These concerns can be broadly separated into two groups: those that stem from the behaviour of the industry’s current extralegal incumbents, and those that stem from the behaviour of new entrants into a legalised industry.
There appears to be a rather naive expectation that the current industry will just "go away" if this Act passes into law. Marketing theory does indicate that the illegal cannabis industry itself may well do this over a period of time, as the distribution of illegal goods requires a pyramidal sales network based on a large number of individuals that is both very labour intensive and usually well remunerated due to the personal risks involved.
The legal industry will have structurally lower costs, and should be able to undercut the high prices that are required to sustain the illegal network as a viable business.
However, marketing theory has another powerful concept known as "core competency". This means that you should focus on doing what you are naturally good at.
The current illegal industry employs thousands of people, and presumably pays quite well to those who are good at it. These people will not go away, but they would have to "move on" in some way.
As media articles, dramas and documentaries consistently suggest that the core competencies of the illegal drugs trade include a range of unusual and interesting business "martial arts", its incumbents may struggle to apply these skills to the legal cannabis industry — or any other legal industry for that matter.
So they will quite sensibly look to replace this lost income by doing what they are good at — distributing illegal materials. They can take their pick: synthetic cannabinoids, methamphetamine and so on.
These sectors are likely to experience an influx of capital along with highly capable and motivated personnel, which will drive an increase in activity and revenue as a result of cannabis legalisation.
Given the nature of these alternatives, the net negative social impact of this is likely to be significant. It is perhaps an unpleasant notion, but the illegal cannabis industry keeps a large sector of the criminal community happily and gainfully employed in peddling what supporters of this legalisation claim to be an innocuous and readily available substance. Is it such a bad idea to keep it that way?
One unfortunate feature of the proposed Act virtually also guarantees the misbehaviour of any legal participant. This is the requirement that cannabis retailers sell only cannabis.
Within a capitalist society, companies seek and strive to grow — it’s how our economy works. The Act’s requirements dictate that legal cannabis retailers can only grow by stimulating cannabis demand, which means promoting and marketing it. However, that same Act also devotes nearly all of its content to the objective of preventing that very activity!
Therefore, legal cannabis retailers can only grow "through" the Act’s anti-marketing provisions, and this they will surely try to do.
Pressure may be applied at several levels, all of which would cost the taxpayer a fortune:
■ Pressure on the Act. While it is a complex document that seeks to cover all angles, clever and well-funded lawyers will look for loopholes within its massive fabric. These will surely be found, and cannabis promotion will leak through them.
■ Pressure on the authority. The Act is to be enforced by an independent "authority". Such bodies have a miserable track record worldwide for being captured by the industries that they are supposed to control. There is a lot of money at stake here, and it’s only a small authority, so capture is a very plausible scenario. A captured authority would have no will to enforce the Act, which would be widely flouted as an outcome.
■ Pressure on the judiciary. Even if the authority seeks enforcement, it is still necessary for the judiciary to impose penalties for infringements that could not be treated simply as a "cost of doing business". This would require a reset of the current judicial cannabis mindset that may not be forthcoming.
It can be argued that the impact of the proposed legislation on business behaviour will lead to considerably increased consumption of both cannabis and other illegal drugs, plus a significant increase in enforcement expense. Given this, I personally won’t be voting for it.
Robert Hamlin is a senior lecturer in the department of marketing at the University of Otago.
