Cannabis referendum: Why the proposed legislation is likely to cost taxpayers a fortune

Stuff co.nz 12 October 2020
Family First Comment: “There appears to be a rather naive expectation that the current industry will just ‘go away’ if the Cannabis Legalisation and Control Bill passes into law. The legal industry will have structurally lower costs, and should be able to undercut the high prices that are required to sustain the illegal network as a viable business… It can be argued that the impact of the proposed legislation on business behaviour will lead to considerably increased consumption of both cannabis and other illegal drugs, plus a significant increase in enforcement expense. Given this, I personally won’t be voting for it.”

OPINION: Most of the commentary about the cannabis legalisation referendum has come from a social and public health point of view. However, as the proposed legislation aims to legalise pretty much everything about the cannabis business except the commercial marketing of it, a commentary on its likely outcomes based on a commercial and marketing perspective is timely.

When the proposed legislation is looked at through the lens of a business analyst, there is considerable scope for concern about what the consequences of its introduction would be for the public good.

These concerns can be broadly separated into two groups, those that stem from the behaviour of the industry’s current extra-legal incumbents, and those that stem from the behaviour of new entrants into a legalised industry.

There appears to be a rather naive expectation that the current industry will just ‘go away’ if the Cannabis Legalisation and Control Bill passes into law. Marketing theory does indicate that the illegal cannabis industry itself may well do this over a period of time, as the distribution of illegal goods requires a pyramidal sales network based on a large number of individuals that is both very labour intensive, and usually well remunerated due to the personal risks involved.

The legal industry will have structurally lower costs, and should be able to undercut the high prices that are required to sustain the illegal network as a viable business.

However, marketing theory has another powerful concept known as ‘core competency‘. This means that you should focus on doing what you are naturally good at.

The current illegal industry employs thousands of people, and presumably pays quite well to those who are good at it. These people will not go away, but they would have to move on in some way.
Robert Hamlin is a Senior Lecturer in the Department of Marketing, University of Otago
READ MORE: https://www.stuff.co.nz/national/cannabis-referendum/123057085/cannabis-referendum-why-the-proposed-legislation-is-likely-to-cost-taxpayers-a-fortune

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