Metrc threatens to close accounts of Michigan cannabis firms over late payments

Track-and-trace software provider Metrc is threatening to shutter the accounts of more than 100 Michigan cannabis companies over missed monthly payments, creating turmoil in the roughly $2 billion market.

By Chris Casacchia

March 1, 2023 - Updated March 2, 2023

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The state’s top marijuana regulator interceded Tuesday, convincing Metrc to agree to a 30-day moratorium on the suspension of accounts, MJBizDaily confirmed.

A widespread shuttering of accounts would have jeopardized the operations of many plant-touching companies, which rely on Metrc software to comply with Michigan marijuana regulations.

The software is used to track the movement of marijuana products through the commercial supply chain, from cultivation to sale.

“We reached out to Metrc and asked for a 30-day extension for this, and it was granted,” said David Harns, spokesperson for Michigan’s Cannabis Regulatory Agency (CRA).

“Metrc is trying to enforce payment terms.”

The Florida-based company told MJBizDaily Wednesday afternoon that roughly 11% of its customer base had bills outstanding.

According to state data through January, regulators had licensed 1,250 cannabis businesses in Michigan, so more than 125 companies could have received payment notices.

The moratorium will be lifted on March 27, when Metrc will begin implementing account restrictions for those failing to pay reporting fees, according to a bulletin on the company’s website.

Metrc customers in Michigan are required to pay a $40 monthly service fee, as well as tag fees, for every cannabis product made and sold in the state.

The costs can amount to thousands of dollars for large production runs, industry insiders told MJBizDaily.

‘Normal business practice’

Metrc did not initially reply to MJBizDaily questions Tuesday but later provided a statement.

“This is a normal business practice – to collect outstanding payments and turn off system access if payment is not received in a timely manner,” the company said via email.

The penalties, however, extend far beyond typical license agreements and late fees, according to Michigan cannabis attorney Lance Boldrey.

“If Metrc shuts you down, you are out of business,” he said. “There is absolutely nothing you can do until your account is reopened.”

Lansing-based Boldrey leads the cannabis industry group at law firm Dykema, which represents more than 200 marijuana clients in Michigan.

Under state law, every Michigan cannabis operator is required to install and run Metrc software.

If that mandate is violated for any reason, companies are no longer in compliance with tracking requirements under the statewide monitoring system.

That can lead to a company having its license suspended or revoked.

Issue only recently came to light

The CRA became aware of the account shortfalls Monday, MJBizDaily learned, prompting staff to contact licensed companies and their legal teams.

Automated emails sent to operators warned that their “business is at risk of having its statewide monitoring system (Metrc) account suspended due to past due monthly reporting fees.”

Metrc met with state regulators Wednesday and provided some updates to MJBizDaily.

Several Dykema clients were unaware of the monthly charges and did not receive invoices, according to Boldrey.

“Most clients were not aware of this issue,” he said.

“There’s no other way you could get to that level of noncompliance without there being some breakdown in communication between Metrc and a licensee.”

Metrc told MJBizDaily that operators with outstanding payments were first notified in September 2022.

“Additionally, for anyone with outstanding payments in the Metrc system, there is a banner that is prominently displayed at the top of their account notifying of this,” the company said via email.

“The $40 monthly fee is not new. This is a cost that has been in existence since the Metrc system was implemented in Michigan in 2018.”

It remains to be seen whether Metrc will take a similar approach to try to secure overdue payments in other markets, where there are roughly 345,000 users of its software.

“Like most businesses, Metrc has a standard system of notifying customers with outstanding bills that they must make payments in a timely manner or risk losing access to services,” the company said.

“This system applies in all markets in which we operate.”

The company has won 23 contracts from governments to manage seed-to-sale accounting of legal cannabis products, including a recent deal in Missouri.

“In many ways, the industry is sort of powerless when it comes to dealing with Metrc,” Boldrey said.