Two Missouri cannabis wholesalers have sued Little Rock-based Good Day Farm, claiming the company illegally controls 25% of Missouri’s dispensary licenses, and effectively 40% of the wholesale market in the state.
The antitrust lawsuit was filed in circuit court in Jackson County, Mo., on Wednesday. The complaint alleges that Good Day Farm controls an illegal percentage of Missouri’s $1.52 billion cannabis industry.
“In short, the GDF Cartel was designed to dominate Missouri’s cannabis market and exploit Missouri’s licensing structure to suppress competition for wholesale cannabis purchases, extract anti-competitive legal profits from the Missouri economy and wield a collective level of market power that cannot be maintained by the Missouri Constitution,” the suit said.
A company spokesperson said Friday that the claims in the lawsuit are “baseless and without merit.”
“Our company operates in full compliance with all applicable Missouri state laws and regulations, and we will vigorously defend that record,” the spokesperson said.
Missouri legalized recreational marijuana in 2022 after Missouri voters approved a constitutional amendment measure. All cannabis operations in the state are overseen by the Missouri Department of Health and Senior Services.
Cannabis cultivators and processors are not allowed to sell directly to consumers under Missouri law. Instead, consumers have to purchase cannabis products from licensed, regulated dispensaries. Missouri law doesn’t prohibit companies’ vertically owning all aspects of production and distribution, though.
A business entity is not allowed to own more than 10% of the total dispensary facility licenses under Missouri law. According to the lawsuit, that means no more than 22 dispensaries of the 224 retail dispensaries in the state may be under “substantially common control, ownership or management by one business entity.”
The two plaintiffs, CPC of Missouri-Smithville LLC — doing business as Local Cannabis Company — and GF Saint Mary LLC — say that Good Day Farm recruited other cannabis license holders to form an illegal cartel, comprising independently owned dispensaries and their affiliated wholesalers who agreed to turn over control of their businesses to common management personnel within Good Day Farm.
As a result, according to the suit, all competitors operated according to the “commercial decisions of their ringleader, Good Day Farm.”
“Plaintiffs and other non-cartel wholesalers have had little recourse to combat Defendants’ anti-competitive conduct,” the suit said, pointing to Missouri’s prohibition on cultivators and processors selling directly to consumers. “Plaintiffs and other independent wholesalers, therefore, have no viable alternative but to submit to the cartel’s unlawful pricing and allocation demands or be shut out of a significant portion of the market.”
According to the suit, to avoid Missouri’s licensing cap, Good Day Farm arranges for third parties to invest in LLCS, which Good Day refers to as “verticals” that then acquire additional dispensary, cultivation and processing facilities.
All-in-all, there are four different verticals that are managed by Good Day Farm, according to the suit, consisting of at least 61 dispensaries that operated under at least five brand names, according to the suit. This constitutes a “buy-side monopoly.”
Good Day Farm worked to purchase products from wholesalers at artificially depressed prices and otherwise “act in an anti-competitive manner,” according to the suit.
Combined, Good Day Farm’s 61 dispensaries make up more than 25% of the total Missouri dispensary licenses, based on license count, the suit says. Good Day Farm collectively accounts for upwards of 40% of the total wholesale cannabis purchased in Missouri, according to the suit.
Investors in the “verticals” are told in advance that the LLC will be managed by Good Day Farm or an entity affiliated with Good Day Farm, according to the suit. It points to a confidential private placement memorandum for Bon Vert Ventures, LLC, which says that “no investor should invest … unless such investor is willing to entrust all aspects of the management of the Company to the manager.”
The suit points to other connections.
For example, nearly all the licenses issued to a Good Day Farm “vertical” — identified as Codes dispensary — lists Paul Rockers, the compliance director for Good Day Farm, as the business’ contact person, according to the suit.
Alex Gray, Good Day’s chief strategy officer, is identified as manager “in connection with” 24 different entities that hold at least 33 dispensary licences — almost 15% of the total number of dispensary licenses in the state, operating under the Good Day Farm and Codes brand names, according to the suit.
The law firm representing the plaintiffs, St. Louis-based Bryan, Cave, Leighton and Paisner LLP, couldn’t be reached for comment.
The plaintiffs are seeking a court-ordered declaration that Good Day’s arrangements are unlawful. They also seek a monetary judgment against the defendants. A case management conference is set for Aug. 17.
Lucas Dufalla is a Report for America Corps member. Financial support for this coverage came from the Community Journalism Project.
Lucas Dufalla covers the Mississippi River Basin for the Arkansas Democrat-Gazette. A 2024 graduate of Bowdoin College in Brunswick, Maine, he has worked for news organizations in Pennsylvania and New England. He is also a Report for America Corps member.
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