Reviewing the New Oregon Cannabis Rules

17 Jan Reviewing the New Oregon Cannabis Rules

In November 2022, the OLCC adopted and amended a suite of cannabis rules that became effective January 1, 2023. You can download the changes here and read our previous coverage of many of these changes here, here, here, and here. Now that Oregon’s new cannabis rules are effective, let’s take a look at some of the important changes to the rules governing the Oregon industry.

Change in business structure

Oregon cannabis M&A continues at a decent pace despite a relatively sluggish 2022 in terms of sales to consumers. Our M&A practitioners remain heavily involved in several major deals. The OLCC’s new rule changes impact how marijuana businesses may be bought and sold.

1. The rules governing filing notice and receiving approval for changes moved from OAR 845-025-1160 to 845-025-1165.
2. Until March 31, 2023, the notification requirements for the addition or person who would be an “applicant” remain the same. Licensees must submit a notification form to the Commission prior to making any business structure change.
3. Beginning April 1, 2023, licensees must receive approval before the addition or removal of a person meeting the qualification of an applicant. A licensee automatically receives conditional approval after five days if a determination is still pending. This amendment is a significant change to the way buyers and sellers of marijuana businesses have proceeded for the past few years. Our thoughts (good and bad) are here. (Note: that link concerns the draft rule before the OLCC added the conditional approval “after five days” language to the proposed rule; but several other issues we identified remain in the rule as adopted).

Violation classifications

Violations of the rules governing the Oregon marijuana industry are determined by the “category” of the violation ranging from Category I to V. For several years, many of the rules did not identify the specific category for a rule violation. The OLCC has now assigned a violation category to each rule to increase transparency.

The OLCC has also amended a rule (OAR 845-025-8590) identifying factors that may aggravate or mitigate the default sanction for a particular rule violation. These changes are important to be aware of in any situation where a licensee has, or may have, violated a rule that could lead the OLCC to issue a charging document.

Product recalls

The OLCC made several modifications to OAR 845-025-57690 to more specifically direct licensees on the reporting, execution, and managing of a cannabis product recall. As the OLCC explained in a recent bulletin:

A licensee may conduct a recall for cannabis products that may present a threat to public health and safety, that are in violation of administrative rules, or for quality assurance purposes. Licensees should report a recall to the OLCC within 24 hours of initiating a recall. During a recall, the licensee undertaking the recall is required to notify the licensees that have effected product(s) in their inventory about the concern; the recalling licensee should also provide to impacted licensees information on next steps for isolating the product from further distribution or retail sale, whether that is returning it to the manufacturer, destroying it, or something else.

The new rules clarifies several things including, but not limited to:

• What information should be included in recall notices to help impacted licensees collect data and details when reporting a recall;

• What information should be reported on the licensee’s distribution list to businesses in possession of the recalled product;

• No later than 48 hours after a recall notice has been issued, impacted retail licensees should notify consumers of the recall; and

• A licensee recalling products should be continuously checking with licensees in possession of the recalled product to ensure receipt of the recall notification and that the appropriate recall response is being followed.

En fin

Stay tuned for further discussions on Oregon’s new cannabis rules and their impact on the local industry. And in the meantime, here’s a link to a redlined document showing each of the changes to the rules and regulations governing marijuana in Oregon. Finally, for an overview of many of the changes that occurred, take a look at: Oregon Proposed Cannabis Rules: Mixed Bag