Shenzhen Smoore Technology Co. Ltd. and its U.S. distributors are being accused of artificially inflated prices through secret distributor agreements that began in 2016 in order to monopolize the vape tech market, according to a federal lawsuit filed Tuesday by an Arizona dispensary.

Arizona cannabis retailer Earth’s Healing Inc. brought the proposed class action against Smoore and four American distributors in U.S. District Court for the Northern District of California, alleging violations of the Sherman Antitrust Act.

The complaint claims Smoore, which makes the popular CCELL vape hardware, conspired with authorized distributors Tilt Holdings‘ (OTC: TLLTF) subsidiary Jupiter Research LLC, Greenlane Holdings LLC (NASDAQ: GNLN), 3Win Corp. (soon to be Serewin Corp.), and CB Solutions LLC (doing business as Canna Brand Solutions) to maintain artificially high prices in the U.S. cannabis vape market.

The defendants “entered into written and signed agreements” to prevent competition and enforce minimum pricing, according to court documents. The arrangement allegedly included monthly sharing of confidential customer and pricing data among distributors, with violations resulting in financial penalties drawn from mandatory security deposits

“There have been no meaningful competitors to defendant Smoore and its authorized distributors in the United States, and the defendants have possessed and exercised significant market power in the wholesale distribution of Vapes sold in the United States,” the lawsuit says.

The complaint alleges Smoore rapidly dominated the U.S. cannabis vape market after entering in November 2016, capturing an 80% market share. However, that share declined to 50-60% between 2018 and 2023 as new competitors emerged, according to court documents.

Rather than compete on merit, the suit claims Smoore responded by implementing anticompetitive practices, including requiring its distributors to maintain certain price points that Smoore itself would undercut as a direct competitor.

The suit follows earlier legal battles over market gravitas on the cannabis vape hardware side of things. In 2021, Smoore launched proceedings before the International Trade Commission against more than 30 U.S. vape hardware companies. While many companies withdrew due to resource constraints, the ITC ultimately ruled in favor of the remaining defendants.

One of those companies, ACTIVE (doing business as Next Level Ventures LLC), later filed counterclaims against Smoore in 2024 alleging illegal monopolistic practices.

“The plaintiffs’ price-fixing allegations are no surprise,” said Michael Brosgart, president at ACTIVE, told Green Market Report in an email Thursday. “ACTIVE was the first party to hold Smoore legally accountable for its anti-competitive conduct and preliminary expert damages analysis suggests that ACTIVE is entitled to nearly $200 million as the direct result of Smoore’s illegal conduct in the cannabis vape market.”

“The class plaintiffs may be owed even more,” he added.

The proposed class would include any licensed U.S. cannabis business that purchased Smoore’s vapes through authorized distributors since November 2016. The plaintiffs are seeking unspecified damages, legal fees and an injunction against the alleged anticompetitive practices.

Smoore Complaint

Digicann Ventures Ltd. (CSE: DCNN) (OTCPK: AGFAF) signed a definitive agreement for a reverse takeover by 3Win Corp., finalizing a deal first proposed in early August.

3Win would emerge as the controlling entity, with its shareholders holding about 97.3% of the resulting issuer’s common shares, according to the agreement. The deal structure involves a three-cornered merger, with 3Win becoming a wholly owned subsidiary of Digicann.

3Win distributes CCELL vape products to the cannabis and hemp industries. Its Canadian subsidiary also holds licenses for cannabis cultivation and export, as well as for handling psilocybin and psilocin.

Before closing the RTO deal, Digicann plans to consolidate its shares on a 98-to-1 basis, valuing pre-consolidation shares at 5 Canadian cents each. As of early August, Digicann had 22.1 million common shares outstanding.

Nicholas Kuzyk, who currently serves as CEO of Digicann and chief strategy officer of 3Win, is set to become CEO of the combined entity, which is expected to be renamed Serewin Corp. The new entity plans to trade on the Canadian Securities Exchange under the symbol SRWN, if available. Rodney Hu, 3Win’s executive chairman, is set to serve as independent chairperson.

Digicann has scheduled a special shareholder meeting for Nov. 7 to seek approval. The Canadian Securities Exchange still needs to review the deal, as well.

“There can be no assurance that the Proposed Transaction will be completed as proposed or at all,” Digicann stated. However, the agreement includes a provision for a variable cash exit fee payable to Digicann if 3Win doesn’t complete the transaction.

The deal is expected to provide new opportunities for Digicann, which has facing strong headwinds. According to filings ending June 30, the company reported total assets of $420,000 against total liabilities of $1.08 million, resulting in a working capital deficit of $661,000. Digicann also disclosed an accumulated deficit of $216 million.

For the first half of 2024, the company reported a net loss of $125,000 and no revenue from continuing operations.