Weedmaps Dodges Class-Action Lawsuit by Implementing New Advertising Policy
Uncategorized August 28, 2019 MJ Shareholders
Weedmaps, a major online pot shop directory and cannabis marketplace, announced last week that it will finally no longer allow black-market businesses to advertise on its site. Weedmaps’ announcement follows months of complaints from licensed cannabis businesses of harm caused by Weedmaps’ inclusion of ads for unlicensed companies – namely, that allowing such companies’ product on the site really served to undercut the legal cannabis market. Now, following the lead of its competitors, Leafly, who said in early 2018 that it would bar unlicensed operators, Weedmaps also says it will end its practice.
Weedmaps, founded in 2008 and based in Irvine, California, is a well-known website for those in search of a local marijuana dispensary. Similar to Yelp, dispensaries can put up menus, photos, and other information on their products, and their customers can write comments and provide ratings. Where the marijuana market is more saturated, Weedmaps changes for higher placements in listings. Weedmaps has proven to be a user-friendly and favorite way to find any type of cannabis product. Some consumers can also order product online or even have it delivered to them via the platform.
California’s cannabis regulatory agencies have also attempted to regulate Weedmaps in the past, but they have had little success. In February 2018, the Bureau of Cannabis Control sent Weedmaps a cease and desist letter telling the company it was breaking state law by including advertisements for unlicensed businesses. Weedmaps refused to change its policy at the time, citing Section 230 of the 1996 Communications Decency Act, which gives platforms like Facebook and YouTube safe harbor from being held liable for the content their users post. Notably, Section 230 has enabled the rapid growth of some of the biggest tech companies. Spokesperson for the Bureau, Alex Traverso, previously stated that after Weedmaps invoked Section 230, the Bureau instead chose to focus on regulating the illegal businesses directly.
The policy change was likely influenced by an impending class-action lawsuit that was in the works by the law firm of Zuber Lawler. The lawsuit, which would have been filed on behalf of the licensed cannabis businesses unhappy with Weedmaps’ policy, reportedly would have sought injunctive relief against Weedmaps under California’s Unfair Competition Law. California’s Unfair Competition Law prohibits false advertising and illegal business practices so, here, it likely would’ve alleged that Weedmaps’ advertising of unlicensed cannabis products constituted either or both.
For its own part, Weedmaps issued a news release and framed its announcement as part of a social justice initiative. It said that “later this year” it would begin requiring U.S. advertisers to provide a state license number on their listing, and that it would restrict the use of its point-of-sale system, online orders, delivery logistics and other services to licensed businesses exclusively. “These enhancements to existing safeguards on our platform will help patients and adult-use consumers find cannabis retailers that have provided evidence of state licensure,” Weedmaps Chief Executive, Chris Beals, said in the news release.
Weedmaps also indicated it would launch an initiative to support unlicensed, minority-owned marijuana businesses as they become licensed. “The company will provide a variety of free services and in-kind offerings to ensure that social equity entrepreneurs have the opportunity to compete in the industry.” The services and benefits Weedmaps will offer include professional development, ongoing coaching and professional support, resources such as compliance materials and standard operating procedures, and free software. “One of the most important and impactful promises of cannabis legalization is that it will give minority entrepreneurs the ability to enter the new industry and help reverse the damages inflicted on those disproportionately affected by the failed ‘War on Drugs,’” it said. “Unfortunately, as a result of limited access to capital and limited license opportunities provided by local governments, these entrepreneurs are actually finding it nearly impossible to participate in the legal market.”
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