Arkansas marijuana monopolies?

Hot Springs dispensary owner Dragan Vicentic, who has tangled with cultivators on a variety of issues, minced no words in a 2019 letter to the state Alcoholic Beverage Control Division. Vicentic said a potential sale of another Hot Springs dispensary to an owner of the BOLD Team cultivation facility would “place a monopoly and an unjust hold on the market by a cultivator that could tilt competition unfairly.” Vicentic argued the cultivator could offer cheaper prices to the affiliated dispensary than to nonaffiliated dispensaries and could offer their outlet superior products and newer products.

Today, Vicentic says his fears have been proven true.

“I think my letter to the ABC backs up my fears that have been brought to fruition!”  Vicentic said in an email.

Vicentic isn’t the only one with concerns. Matthew Wilbers, who manages a Pine Bluff dispensary a few miles from a cultivator-affiliated dispensary, said his store is at a disadvantage when it comes to pricing and the availability of new products.

“There does seem to be a distinct line of competitive advantage whenever you have such a close affiliation between a dispensary storefront and a cultivation facility,” Wilbers said.

 Ownership

The individuals who have ownership stakes in both a cultivation facility and a dispensary have violated no laws.

The amendment voters passed in 2016 to legalize medical marijuana allows for eligible individuals to have an ownership stake in one cultivation facility and one dispensary. Even a fraction of a percentage of ownership would be enough to disqualify someone from purchasing an interest in another similar facility, according to state Medical Marijuana Commission spokesman Scott Hardin.

The amendment also allows for licenses awarded by the commission to be transferred to other eligible individuals.

The Medical Marijuana Commission frequently grants these transfers at its regular monthly meetings. Sometimes, the changes are minimal and mostly amount to changing the percentage of ownership the current owners have in the company to allow for new owners to come aboard.

In other cases, the ownership changes are significant. In March, the commission approved a change of ownership for Good Day Farm’s dispensary in Little Rock (now known as Berner’s by Good Day Farm). Before the change, four individuals — attorneys Alex Gray and Nate Steel, who also have an ownership stake in Good Day Farm Arkansas cultivation, and their wives, owned 100% of the dispensary. After the change, those four individuals own less than 2% of the dispensary and 15 other individuals own the remaining amount. Louisiana Republican donor Boysie Bollinger became the biggest stakeholder in the dispensary, with a 25.51% ownership stake.

While the individuals who own both a cultivator and a dispensary have not violated the Medical Marijuana Commission rules or the state amendment, Vicentic has asked the office of Attorney General Leslie Rutledge to look into what he calls a monopoly that creates an unfair marketplace. Rutledge’s office declined to pursue the matter, Vicentic said, leaving him few options.

“You would think, because it’s a monopoly, that the state attorney general would jump on that thing because it’s against the people,” Vicentic said, noting that he would likely need to file a civil lawsuit to pursue the matter further.

Along with Good Day Farm Arkansas, individuals who have a stake in ownership of the BOLD Team and Osage Creek also own four dispensaries in Hot Springs, Pine Bluff, Fayetteville and Little Rock. (A soon-to-open dispensary in Van Buren will be known as Good Day Farm Van Buren but the dispensary will not be owned by any of the owners of Good Day Farm Cultivation, according to Hardin).

Dispensary Differences

Online cannabis menus show dispensaries affiliated with cultivators do have some cheaper products than nearby nonaffiliated dispensaries.

According to Weedmaps, Suite 443 in Hot Springs is selling edible gummies from BOLD for as little as $7 a package, while nearby Green Springs Medical Dispensary’s least expensive gummies are $25. The Green Springs menu does not list any products made by BOLD.

According to Vicentic, the retail prices for some items at Suite 443 are even lower than he can obtain at wholesale prices.

Suite 443 is wholly owned by Mark Drennan who also owns a 24.5% stake in BOLD cultivation. Green Springs is 100% owned by Vicentic.

Vicentic’s dispensary isn’t the only one that has found itself across town from a dispensary affiliated with a cultivator. In Pine Bluff, Hash and Co. is less than 5 miles from High Bank dispensary, which is wholly owned by Kyndall Lercher, who also owns a 25.5% stake in BOLD.

According to Weedmaps, High Bank has gummies from BOLD available for $7.60 and, on St. Patrick’s Day, offered a special deal of $5 for some gummies.

Wilbers said his store simply can’t match some of those prices.

“You notice that you can’t sell some of your products for the prices that you see, the products being offered at some of these other locations,” Wilbers said.

Price isn’t the only issue, Wilbers said. High Bank tends to receive new products earlier, although Wilbers’ dispensary eventually receives them as well. But, as long as High Bank receives products first, it creates an impression in customers’ minds that one dispensary is the place to find new products, according to Wilbers.

“You’re already kind of setting it into the subconscious of the customer base that [the affiliated dispensary] is the location to come for for these products because you know, if we had it first this time, then we’ll have something new first next time, and so it goes,” Wilbers said.

In Little Rock, online menus showed Good Day Farm had less expensive flower from its homegrown strains than nearby Curaleaf, while in Fayetteville, Osage Creek Dispensary did not have much difference in price from other Fayetteville dispensaries.

Wilbers said what the affiliated dispensaries are doing is a slap in the face to patients who must drive greater distances to get these deals if they don’t have such a dispensary near them. He also thinks it creates an unfair marketplace.

“Trying to create more of a distinction based strictly on exclusivity or pricing that can’t be outcompeted really is a bit too monopolistic for my tastes,” Wilbers said.