Will Marijuana Ads Make License Renewals Go Up in Smoke?

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The Poet
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Will Marijuana Ads Make License Renewals Go Up in Smoke?

Post by The Poet » Thu May 26, 2011 9:22 am

By Scott R. Flick
http://bit.ly/kfGGGO

Broadcasters don't know it yet, but recent actions by the Department of Justice
suggest that the federal government may be moving closer to raining on their
upcoming license renewals. The reason? Medical marijuana advertising. While it
seems like a recent phenomenon, the first state laws permitting medical
marijuana go back some 15 years. The movement by states to permit the use of
medical marijuana has grown steadily since then, with half the states in the
U.S. (and the District of Columbia) now having medical marijuana laws on the
books or under consideration.

Of course, when an entrepreneur sets up a medical marijuana dispensary, the next
step is to get the word out to the public. In the past few years, these
dispensaries began approaching broadcast stations in growing numbers seeking to
air advertising. In the depths of the recent recession, medical marijuana
dispensaries were one of the few growth industries, and many stations were
thrilled to have a new source of ad revenue.

However, marijuana, medical or otherwise, is still illegal under federal law.
When we first began receiving calls a few years ago from broadcast stations
asking if they could accept the ads, the federal government's position was
ambiguous. Many stations, and in some cases, their counsel, concluded that as
long as the activity was legal in the state in which the station was located,
airing medical marijuana ads was fine. In 2009, the Department of Justice gave
some comfort, if not support, to this school of thought when it internally
circulated a memo to some U.S. attorneys suggesting that the DOJ was not
interested in pursuing medical marijuana businesses as long as they operated in
compliance with state law.

In responding to clients, I noted that there were still several risks involved
in running the ads. First, if you have worked in Washington long enough, you
know that the federal government's attitude toward any activity can change
markedly over time (remember prohibition?). A station accepting medical
marijuana ads today could always be prosecuted tomorrow if attitudes toward
enforcement of federal marijuana laws shifted. Second, broadcasters are uniquely
at risk, as broadcasting has always been deemed an interstate activity subject
to federal law. Indeed, it is the interstate nature of broadcast transmissions
that is the basis for the FCC's jurisdiction over broadcast stations.

It is that last fact which raises the third, and most worrisome, risk. Unlike a
local medical marijuana dispensary, broadcast stations live and die based upon
whether the federal government renews their broadcast license. The DOJ doesn't
have to come to the station's door to prevent medical marijuana ads from airing,
as the station has to obtain permission from the FCC just to continue operating.
Not long ago, the FCC received its first complaint about a station airing
medical marijuana ads, and with the next license renewal cycle beginning on June
1 of this year, likely there will be many more. These complaints won't
necessarily come from opponents of medical marijuana use. Many will be filed by
someone that just has an axe to grind against a particular station, with the
medical marijuana issue merely being a convenient hook upon which to hang their
complaint.

But if, as the 2009 DOJ memo suggests, the feds aren't that concerned about
medical marijuana activity that complies with state law, what's the problem?
Well, there has indeed been a recent change of attitude on the part of the
federal government. The first indication came in a February 2011 DOJ letter to
the City of Oakland, California, which was soliciting applications from parties
interested in establishing "industrial cannabis cultivation and manufacturing
facilities" in Oakland. While taking care to note that the DOJ did not intend to
expend its resources pursuing "seriously ill individuals" using medical
marijuana, the DOJ otherwise reversed its 2009 position, noting in the letter
that it "will enforce the [Controlled Substances Act] vigorously against
individuals and organizations that participate in unlawful manufacturing and
distribution activity involving marijuana, even if such activities are permitted
under state law.

In April, the DOJ sent similar letters to governors or other state officials in
Washington, Montana, Colorado, and Rhode Island, all of which were considering
the adoption or implementation of medical marijuana laws. The letters, while
similar, are not identical, and they expand upon the concepts initially set
forth in the Oakland letter. For example, in the letter to Governor Gregoire of
Washington state, the DOJ noted that if if Washington adopted a pending bill to
legalize medical marijuana in the state, the DOJ would enforce the federal laws
against marijuana production and distribution regardless of whether those
activities complied with the Washington law. The DOJ also noted that it could
bring to bear a variety of federal statutes to prosecute such activities,
including "Federal money laundering and related statutes which prohibit a
variety of different types of financial activity involving the movement of drug
proceeds...." The DOJ threatened civil and criminal legal actions, even against
state employees charged with implementing the law. Not surprisingly, the
Washington governor vetoed the bill.

So how does this affect broadcasters? Well, the federal government is certainly
not feeling ambiguous about activities related to the sale of medical marijuana
any more, and the letters make clear that compliance with state law offers no
"safe harbor" from federal prosecution. In addition, the DOJ is not limiting
itself to prosecuting just those who produce and sell medical marijuana. The
Rhode Island letter, for example, notes that "Others who knowingly facilitate
those individuals and entities who set up marijuana growing facilities and
dispensaries, including property owners, landlords, and financiers, should also
know that their conduct violates federal law." Previously, in the context of ads
for Internet gambling sites, the DOJ suggested to broadcasters that running such
ads "facilitates" the illegal activity being promoted, and could lead to federal
prosecution for "aiding and abetting" such illegal activities. The DOJ is likely
to take that same position on medical marijuana ads.

Far more likely than widespread prosecutions of media organizations accepting
medical marijuana ads are headaches for stations seeking license renewal at the
FCC. In processing license renewal applications, the FCC must determine whether,
in light of the station's past performance, renewal of its license will serve
the public interest. It is an admittedly ambiguous standard, and if the federal
government, via the FCC, wants to use the license renewal process to pressure
broadcasters to reject all future medical marijuana ads, it is not a difficult
task. Fines and the threat of non-renewal can be very effective persuaders. By
severing the link that advertising offers between medical marijuana producers
and the patients who use their product, the federal government might feel that
it can suppress demand for that product. In reality, the advertising would
likely just shift from broadcast stations to other media not so dependent upon
the federal government. Regardless, broadcasters whose license renewals are
caught in the middle of this power struggle between the state and federal
governments will be the ones feeling the heat.
The Poet
"A treasonous voice of dissent"
'Demonstrating a Deliberate Disregard for the FCC's Authority and Its Rules,' Amen!

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