Attorney General William Barr is said to have directed improper antitrust investigations into multiple cannabis company mergers, based on his personal distaste for the industry.
John Elias, employee of the Department of Justice (DOJ) for 14 years, said that Barr had ordered the department’s antitrust division to review mergers in the cannabis industry because “he did not like the nature of their underlying business.”
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“Since March 2019, the Antitrust Division has conducted ten investigations of mergers in the cannabis industry. While these were nominally antitrust investigations, and used antitrust investigative authorities, they were not bona fide antitrust investigations,” Elias said in prepared testimony released on June 23, 2020 to be delivered before the House Judiciary Committee on June 24. “Nonetheless, they accounted for 29 percent of the Antitrust Division’s full-review merger investigations in fiscal year 2019.”
Meritless investigations, Elliot said.
“Regardless of whether these companies are complying with the Controlled Substances Act, the investigations I will describe are not investigations of potential violations of federal drug law. An appropriations rider restricts the Justice Department from prosecuting medical marijuana usage in states that have legalized it.”
One of the investigations involved a deal between MedMen and PharmaCann, which had already been judged as lawful by the DOJ, but was then ordered by William Barr to undergo a further extensive review.
The DOJ’s antitrust division, whose job is to demonstrate whether there is a risk of anticompetitive harm in mergers or the potential for monopolization, “negotiated subpoena compliance with the companies, obtaining 1.3 million documents from the files of 40 employees. The investigation confirmed that the markets at issue were ‘unconcentrated’ and closed in September 2019 without any enforcement action.”
In other words, there was nothing illegal about the MedMen-PharmaCann merger, though it collapsed anyhow, citing delays in obtaining regulatory approval.
Elias, who has served in the DOJ under six Attorneys General and three Presidents, said there were nine other investigations of cannabis deals driven by Barr’s political leadership at the antitrust division.
DOJ staffers, Elias said, were ordered not to interview customers or competitors, as was normal “in any bona fide antitrust investigation,” so as not to draw attention.
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“At one point, cannabis investigations accounted for five of the eight active merger investigations in the office that is responsible for the transportation, energy, and agriculture sectors of the American economy,” Elias testified.
“The investigations were so numerous that staff from other offices were pulled in to assist, including from the telecommunications, technology, and media offices.”
Elias went on to say that the head of the DOJ’s Antitrust Division, Makam Delrahim, acknowledged in an all-staff meeting in Sept. 2019 that the “investigations were motivated by the fact that the cannabis industry is unpopular ‘on the fifth floor,’ a reference to Attorney General Barr’s offices in the DOJ headquarters building. Personal dislike of the industry is not a proper basis upon which to ground an antitrust investigation.”