California Legislature Weighing Law to Regulate Websites that Allow Online Advertising of Unlicensed Cannabis Businesses (AB 1417)
Last week, a California legislative committee advanced a bill that would require websites that primarily publish content about cannabis products to ensure advertisements on their sites include a license number and all websites to prominently publish disclosures if their users might be presented with cannabis ads. If ultimately passed, the legislation is likely to be subject to challenge under Section 230 of the Communications Decency Act and the federal Constitution.
The bill, AB 1417, would prohibit operators of “an internet website, online service, online application, or mobile application that is operated primarily for the purpose of promoting, or disseminating information about, the sale of cannabis products in the State of California from displaying an advertisement for the sale of cannabis products unless the advertisement displays the license number of the licensee to which the advertisement pertains.” In addition, it would require any website to “prominently” “display a clear and reasonable statement” containing specified warnings to visitors presented with any advertising for cannabis goods.
Those who violate the law could face a penalty of up to $2,500 per day for each violation, and the bill permits any “person in the public interest” to bring a lawsuit for enforcement.
AB 1417 is likely preempted by Section 230, which provides that“[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Courts have broadly interpreted this as providing immunity to websites and other online providers from any state-law claims based on content provided by third parties. See, e.g., Barrett v. Rosenthal, 40 Cal. 4th 33, 56 (2006) (“The provisions of section 230(c)(1), conferring broad immunity on Internet intermediaries, are  a strong demonstration of legislative commitment to the value of maintaining a free market for online expression.”). By imposing liability on websites for the content of third-party ads and requiring disclosures because of such content, AB 1417 runs afoul of Section 230.
Indeed, both the Committee on the Judiciary and the Business & Professions Committee acknowledged as much, with the latter warning there is “doubt as to whether the state has authority to enforce its requirements against websites” because Section 230 “has been traditionally interpreted by courts as providing broad immunity for internet service providers and internet websites against responsibility for content posted by third parties.” For its part, the Committee on the Judiciary amended the legislation to remove additional, similar restrictions to Section 1 of the bill, though it left intact problematic portions of Section 3.
The First Amendment may also bar enforcement of these provisions. The law would be a restriction based on the content of speech and thus subject to strict constitutional scrutiny. In addition, the First Amendment disfavors compelled speech.
Whether the legislature ultimately passes AB 1417 remains to be seen. The legislation has been re-referred to the Assembly Appropriations Committee, which will likely hold a hearing before May 17, 2019. Even if the Committee passes AB 1417, it will not become law unless passed by two thirds of both the Assembly and Senate under Proposition 64, the Adult Use Marijuana Act.
This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. Manufacturing, cultivation, distribution and possession of cannabis remains illegal under federal law and under certain state laws, and is strictly regulated in those states which have legalized medical or recreational cannabis.