Advertising in the cannabis industry is incredibly challenging. Not only are marijuana businesses limited in how they can advertise, but also where they can advertise. Unlike most other commodities, marijuana businesses generally cannot pay for things like tv and radio ads because state laws generally restrict advertisements to individuals over the age of 21. How can a company ensure that a radio or TV advertisement is not going to be heard or seen by children? They cannot. In addition, networks have no interest in potentially advertising an illicit substance due to the potential for criminal liability (e.g., aiding and abetting, conspiracy).
Online advertising presents some opportunities but social media sites like Facebook, which also owns Instagram, do not allow marijuana businesses to promote their products. If they do, Facebook or Instagram will shut down their account.
One of the few paths for marijuana businesses to advertise is through text marketing campaigns. Why? Because it allows marijuana businesses to market directly to individuals who are of age. They can do this by collecting numbers from individuals who make purchases at their retail shops. Overtime, this list becomes larger and more valuable to the marijuana company who can promote products and sales by text message.
This text messaging may seem like a perfect opportunity for marijuana businesses but there is a huge catch: The Telephone Consumer Protection Act (TCPA).
The TCPA is a strict liability statute that was passed in the early nineties to stop “robocalls” by implementing aggressive penalties. A “robocall” basically means any call made by “automatic telephone dialing system” which, in turn, means “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers.” The TCPA makes it unlawful to make unsolicited phone calls, but courts and the Federal Communications Commission have interpreted the TCPA to also apply to text messages. Further, any automated phone communication can lead to penalties under the TCPA.
The TCPA has become a cottage industry for plaintiff attorneys who sue companies for sending unsolicited text messages. That’s because the TCPA creates a private cause of action meaning that consumers can sue companies for violations of the TCPA. A single violation can come with a penalty of between $500 and $1500. That means sending one text message to one-hundred people can lead to a $50,000 lawsuit.
The marijuana industry has been ravaged by TCPA claims lately, as outlined in this recent Green Entrepreneur article. This is because text-marketing is one of the few areas where a marijuana business can market. If you are operating a text marketing campaign you need to make sure that your entire team is trained on TCPA compliance and that any customer who is opting-in to a text messaging campaign is providing express written consent. In addition, customers need to be able to opt-out of these messages which requires a system where customers can be removed from a text list after providing notice.
The TCPA is complicated, so expect to see additional posts on this blog about how the TCPA is impacting the marijuana industry. If you would like to discuss TCPA compliance or if you have received a demand letter or been sued for a TCPA violation do not hesitate to reach out.