Whistleblower, DOJ spar over claim that DOJ’s investigations of cannabis industry mergers were politically motivated

July 01, 2020

Antitrust & Cannabis Alert

Author(s): Gordon L. Lang, Alycia A. Ziarno

On June 24, 2020, John Elias, a long-time prosecutor in the U.S. Department of Justice’s (DOJ’s) Antitrust Division, testified before the House Judiciary Committee that, at the direction of Attorney General William P. Barr, the DOJ investigated ten mergers in the cannabis industry despite the lack of any competitive issue and over the objections of the Antitrust Division’s career staff. The reason, Elias says, was that Mr. Barr does not like the product. According to Elias,

  • DOJ issued Second Requests—normally issued by DOJ when it believes a detailed investigation is necessary to determine if a merger may pose significant competitive harm and should be challenged—in nine of the mergers, and issued civil investigative demands in the tenth. Those Second Requests, he says, accounted for 29% of all of DOJ’s Second Requests over the relevant time, which is an unusually high percentage for an industry.
  • DOJ political leadership refused the staff’s attempts to narrow the Second Requests, leading to the production of almost six million documents over six of the investigations.
  • Another DOJ attorney also complained about DOJ’s cannabis merger investigations.
  • None of the investigations led to any DOJ cases.

You can read Elias’s prepared remarks here: (Testimony of John W. Elias, U.S. House Committee on the Judiciary, June 24, 2020.

For its part, the DOJ has strongly disputed Elias’s account. Spokeswoman Brianna Herlihy said the Department “strongly disagrees with (his) claim that the Antitrust Division acted inappropriately in any investigation.” The Antitrust Division contended that the cannabis industry presented “unique challenges” because the Division “lacked experience with the cannabis industry, that industry was rapidly expanding and consolidating, many cannabis companies are unsophisticated,” and it had only limited ability to collect information “because cannabis is illegal under federal law.” The two whistleblower complaints were reviewed by the DOJ’s Office of Professional Responsibility (OPR), and the night before Elias’s testimony, OPR issued a memo absolving the Antitrust Division of any wrongdoing.  

After the House Judiciary Committee hearing, Senator Amy Klobuchar, Ranking Member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, and other Senate democrats [1] called for an immediate hearing on political interference in antitrust enforcement decisions at the DOJ. According to the letter, “Mr. Elias’s testimony before the House Judiciary Committee [wa]s damning. It eviscerate[d] the notion that investigations and enforcement decisions at today’s Antitrust Division are based on impartial assessments of law and fact.” The Senators have requested testimony from Elias and Antitrust Division head Makan Delrahim. Attorney General William P. Barr has agreed to appear before the House Judiciary Committee on July 28, 2020.

  1. Klobuchar was joined by Senators Patrick Leahy (D-VT), Sheldon Whitehouse (D-RI), Chris Coons (D-DE), Richard Blumenthal (D-CT), Cory Booker (D-NJ), and Kamala Harris (D-CA). [Back to reference]

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