Ohio AG Claims Multi-State Cannabis Companies Conspired to Crowd Out Competitors
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Nearly half of U.S. states have legalized recreational cannabis. As larger corporations try to elbow out smaller homegrown competitors (no pun intended), states have a unique responsibility to set and enforce rules that will determine who profits from the $38.5 billion green rush.
Ohio Attorney General Dave Yost recently alleged that nine cannabis corporations colluded to claim shelf space and stifle competition in Ohio’s growing cannabis market. The Ohio AG’s antitrust suit claims that these large cannabis providers shared competitively sensitive information, offered each other sweetheart deals, and made tit for tat agreements to buy each other’s products or allot each other shelf space. Altogether, the case claims that these tactics inflated cannabis prices and hurt smaller, Ohio-based businesses trying to break into this new market.
At just over a decade old, the U.S. recreational cannabis industry is still relatively deconcentrated compared to other U.S. agricultural sectors. Cannabis companies must navigate a patchwork of different state regulations without access to traditional banking or financing. As the industry grows, some drug policy advocates worry that without careful regulation, large corporations will control cannabis as they do alcohol or tobacco, leading to economic inequality and risks to public health. Early cannabis antitrust enforcement can level the playing field for small businesses.
There is not a single cannabis company that operates in every U.S. state where recreational cannabis is legal, but there are a handful that do business across several states, and these multi-state operators are aggressively taking market share and acquiring competitors. In 2018, the seven largest multi-state cannabis companies represented just over 3% of all U.S. cannabis sales, but by 2022, they had claimed nearly 18% of all sales. In Florida, just one multi-state cannabis corporation, Trulieve, controls 50% of the state’s massive medical marijuana market (after lawmakers wrote Florida’s medical marijuana law to favor Trulieve). Most of these corporations have headquarters in Canada, where cannabis is federally legal, making it easier to raise capital.
The nine multi-state cannabis corporations at the center of Ohio’s lawsuit are all vertically integrated, meaning they own businesses and licenses to grow cannabis, manufacture cannabis products, and operate retail cannabis dispensaries. Controlling the entire supply chain, including the critical retail level, allows these dominant players to push their products and disadvantage competitors.
The Ohio Attorney General’s office started investigating multi-state cannabis companies based on a tip from an Ohio cannabis industry employee in October 2024. The resulting lawsuit alleges that multi-state cannabis companies lock up segments of the market through reciprocal buying agreements. So Company A may agree to buy $10,000 worth of Company B’s product in Massachusetts if Company B buys $10,000 worth of Company A’s product in Ohio. Cannabis competitors also allegedly entered into agreements to allocate a fixed portion of their shelves to co-conspirators. For instance, the case claims that one of the largest multi-state cannabis corporations, Green Thumb Industries (GTI), made a deal with its competitor Ascend Wellness to stock 25% of their Ohio dispensary shelves with each other’s products.
Communications in the complaint suggest that reciprocal purchasing agreements skewed stocking choices. An executive from one multi-state cannabis business, Cannabist, said in an e-mail that they eliminated some vendors from their stores based on “the fact that those vendors were not buying any product from our wholesale business.” At times, participants appeared to knowingly stock products that didn’t sell well to adhere to the reciprocity agreement. For instance, a GTI buyer told an Ascend VP over e-mail that “in an effort to maintain our spend goal, we have accumulated a large amount of inventory that does not perform at the same rate as more popular brands.”
The complaint argues that reciprocal buying and shelf space agreements between multi-state operators blocked Ohio producers from reaching more consumers. Non-vertically integrated Ohio cannabis producers rely on multi-state retailers for market access. Of the 60 Ohio counties that have cannabis dispensaries, 13 of them, or 20%, only have dispensaries operated by the alleged multi-state operators.
The suit also claims that conspiring cannabis companies offered each other special perks to increase sales. For example, a Verano account executive offered an Ascend purchasing manager discounts to “pad your margins” if Ascend bought $40,000 of Verano product that month. These types of deals gave co-conspirators advantageous access to lower-priced products. To be sure, offering bulk discounts doesn’t necessarily violate antitrust law, but when discounts are tied to exclusive purchasing or offered to some buyers and not others without an economic justification, they can create unfair advantages and shut out competitors.
Finally, the Ohio AG alleges that the nine multi-state cannabis companies shared competitively sensitive information with each other, including their wholesale and retail prices, market share calculations, sales, discounts, and promotion plans. In one instance, an Ascend employee shared a spreadsheet with a GTI employee that included information on one Ascend Ohio store’s sales, retail prices, and discounts received from non-GTI vendors. The AG argues that this non-public information allowed competitors to raise prices and monitor potential cheating on the scheme.
Multi-state cannabis companies deny wrongdoing. Ascend Wellness says it “is prepared to vigorously defend against the allegations” and asserts that local single-state operators account for roughly two-thirds of the third-party inventory in its retail stores.
Defendant Curaleaf says “the current trajectory of this inquiry is both novel and premature” and that “we will continue to defend our business practices as legitimate, necessary, and pro-competitive.” Curaleaf also emphasized its relationships with small Ohio companies and expressed dismay that the attorney general decided to sue rather than work to resolve their concerns.
Green Thumb Industries and Cresco Labs said that they do not comment on active litigation. Verano, Trulieve, Jushi, Ayr Wellness, and Cannabist did not respond to a request for comment.
In addition to vigorous antitrust enforcement, drug policy advocates urge states to ban vertical integration between cannabis growers, distributors, and retailers to prevent self-preferencing and exclusion. Lawmakers banned vertical integration in the post-Prohibition alcohol industry for this very reason. States can also institute market share caps or size caps rather than licensing caps to prevent oligopolies and lower barriers to entry, as licensing caps tend to favor well connected and capitalized firms.
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