Ohio Attorney General Dave Yost (R) is suing 9 large Multi-State Operators (MSOs) for creating a Trust to reduce competition to keep cannabis prices high and reduce choice, which harms consumers and small businesses.
The lawsuit details how this is likely happening across the state-legal cannabis markets, including New Jersey.
When corporations work closely together to control a market, it is known as a Trust or Cartel.
The lawsuit defendants are:
- Ascend Wellness
- Ayr Wellness
- The Cannabist Company
- Cresco Labs
- Curaleaf
- Green Thumb Industries
- Jushi
- Trulieve
- Verano
A couple of the MSOs denied involved when asked by the Cannabis Business Times.
Ohio’s Large Cannabis MSO Anti-Trust Lawsuit
According to a tip, MSOs entered into reciprocal purchasing agreements at a national level to prioritize one another’s products in Ohio dispensaries while reducing or eliminating purchases from independent Ohio cultivators and processors.
“Our investigation uncovered allegations of an industry-wide scheme designed to push small Ohio businesses out of the market,” Yost said. “Ohio’s anti-trust laws protect competition and consumers. Not backroom deals that rig the system for a select few.”
According to the tip, senior representatives from the MSOs met in late 2022 and agreed to reduce purchases from independent businesses to preserve shelf space for one another.
The tip also alleged that some companies established explicit internal quotas to reserve shelf space for products from other MSOs.
The lawsuit alleges they violated Ohio’s Valentine Act by:
- Engaging in discriminatory distribution practices that disadvantaged independent Ohio cannabis operators.
- Entering into reciprocal trade agreements with competitors.
- Sharing competitively sensitive information.
According to the complaint, this reduced product choice and quality for Ohio consumers and stifled innovation. It also allowed the MSOs to maintain or increase cannabis prices.
Yost is seeking injunctive relief to halt the alleged unlawful conduct.
MSO Cannabis Trust Deals Nationwide
According to the suit, the MSOs use their size and assets to make deals to control the legal cannabis markets in New Jersey, Arizona, Connecticut, Illinois, Maryland, Massachusetts, Michigan, Nevada, New York, Pennsylvania, Virginia, and West Virginia.
“At the national level, the reciprocal supply and dispensary shelf space agreements are entered into with minimal or no discussion regarding product quality or consumer preferences,” the suit says.
“…Reciprocal supply and dispensary shelf space agreements restrain trade between the Defendants. But they are also intended to choke off retail channels for competing cannabis products. The inevitable effect of these reciprocal agreements is that independent Ohio cultivators and processors face artificially and anti-competitively constructed barriers to winning shelf space in Defendants’ Ohio dispensaries,” it adds.
“The national cannabis supply meetings and arrangements also provide regular
opportunities for Defendants to engage in a second anti-competitive activity: sharing competitively sensitive non-public information,” the lawsuit also states.
“Once the national supply agreements are reached, the individual state supply
amounts are communicated to and executed by the Defendants’ local sales and purchasing teams.”
Many MSO Curaleaf, Ascend, Verano, Anti-Trust Lawsuit Details
The lawsuit specifically accuses Curaleaf of “agreeing to national reciprocal cannabis product supply quotas and/or to allocate dispensary shelf space percentages for competing cannabis products.”
It also says, “Ascend and Verano representatives meet in person or virtually before or at the start of a fiscal reporting quarter to discuss their competing national cannabis operations.”
Notably, Ascend is headquartered in Jersey, according to the suit.
“April 2022 emails between Verano Vice President of Procurement and Curaleaf
Senior Director of Assortment Planning details, by state, reciprocal targets, and actual purchases for the first two quarters of 2022.”
Large Cannabis MSOs and New Jersey
Most of the large cannabis MSOs are very active in New Jersey. Some have been here for years, beginning in the medical cannabis market. Heady NJ hears a lot of bad rumors about them. Others only got into the adult-use market, which has been more competitive.
Notably missing from the list are the MSOs TerrAscend, Justice/Bloc, and MPX/iAnthus. They are among the dominant MSOs in Jersey.
Jushi and Trulieve only entered the NJ cannabis market after it became more competitive. Cresco Labs doesn’t operate in Jersey since it didn’t merge with Columbia Care. which is owned by the Cannabist.
Heady NJ heard MSO lobbyists were against legalizing cannabis home gardening.
Unlike New Jersey, Ohio is a conservative, Republican red state that usually loves Big Business. So, it’s interesting they brought this up. On the other hand, a lawsuit against cannabis companies might please anti-marijuana conservatives.
