What's the 411 on 420 and "Undue Concentration?"

Posted by Margolin & Lawrence on July 3, 2019

Recently, rumors and misinformation have circulated surrounding LA’s “undue concentration” rules for commercial cannabis licensing. The undue concentration rules have not been eliminated, as some have falsely claimed. LA has recently changed details about the policy, in a way that will allow more retail dispensary licenses to be issued sooner. Some have feared, however, that the latest changes may introduce an element of unfairness to the licensing process.


On July 3, 2019, the LA City Council unanimously passed a new ordinance that will allow applicants located in areas of “undue concentration” to apply for storefront retail dispensary licenses this year, instead of having to wait until 2020 as the prior law required. See https://cityclerk.lacity.org/lacityclerkconnect/index.cfm?fa=ccfi.viewrecord&cfnumber=14-0366-S5.


The new ordinance regarding undue concentration is available at: http://clkrep.lacity.org/onlinedocs/2014/14-0366-S5_ord_draft_06-25-2019.pdf).


Notably, the new ordinance does not require applicants in undue concentration areas to apply as part of the first round of 100 dispensary licenses or the second round of 150 licenses. Those 250 storefront licenses will all go to applicants in areas that have not yet met the undue concentration limits, and those licenses will be awarded pursuant to objective criteria. The undue concentration applicants, under the new ordinance, may now apply for storefront retail licenses in a separate process, which may begin on or after September 3, when the City is opening up the first round of 100 Social Equity dispensary licenses in areas that have not already met the undue concentration cap.


There are 37 community plan areas in the City of Los Angeles, which encompass all 15 Council Districts. Each community plan area, per Los Angeles Municipal Code, has a specific number of recommended retail licenses available depending on its population size. The recommended numbers for each plan area, or the number until each area reaches “undue concentration,” was defined prior to Phases 1 and 2 of cannabis licensing. Therefore, some areas have already reached undue concentration and have 0 licenses left of the recommended number previously defined.


Under the new undue concentration policy, applicants in areas that have already met the undue concentration cap (including Venice, Sherman Oaks, and the Central City) will need to get approval from the City Council, which in practice is achieved by getting approval of their local council member. Specifically, such applicants need to obtain a finding from the City Council that placing a new storefront at the proposed location “would serve public convenience or necessity” - an undoubtedly vague and malleable standard. Council members will apparently review requests on a case-by-case basis. The map showing undue concentration areas is available on the DCR website.


It is unclear whether any objective criteria will be established to determine which applicants are granted the ability to operate in areas of undue concentration. For now, it appears to be completely subject to the discretion of individual council members. Without any standards, some have feared that the City’s process could become unfair or corrupt, awarding licenses to those who provide requested favors to City officials in back room deals. The cannabis business community is hopeful that the City will conduct the process fairly and transparently, applying criteria that prevent even the perception of corruption.


For more regarding the City of Los Angeles’ undue concentration policy, contact one of our experts at Margolin & Lawrence.


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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.