DOJ’s Antitrust Division Accused of Opening Investigations Based on Political Influence

On June 24, John Elias, a former Acting Chief of Staff to the United States Assistant Attorney General for the Antitrust Division, testified in front of the U.S. House of Representative’s Judiciary Committee that last year the Antitrust Division had investigated ten cannabis mergers and the California/automakers emissions agreements based on political pressure from Attorney General Bill Barr and not based on any concerns about harm to competition.

In his testimony, based on a whistleblower report he filed with the Office of the Inspector General for the Department of Justice (OIG), Mr. Elias claimed that Antitrust Division staff did not believe that there were any competition concerns with any of the cannabis mergers or the emissions agreements, but the political leadership of the Antitrust Division opened and pursued the investigations any way. All of the investigations were ultimately closed without any enforcement actions, but the burdens and costs of the investigations caused several of the cannabis mergers to collapse or require restructuring.

The Department of Justice’s Office of Professional Responsibility (OPR)[1] has reviewed the allegations and found that the investigations did not violate any departmental rules, regulations or policies.

In response to Mr. Elias’s testimony, Assistant Attorney General for the Antitrust Division Makan Delrahim sent letters to the House Judiciary Committee as well as the Chairman and the Ranking Member of the Senate Judiciary Antitrust Subcommittee refuting the allegations and describing Mr. Elias’s testimony as “misleading and lack[ing] critical facts.”

In particular, AAG Delrahim said that cannabis mergers raised significant matters of first impression regarding the role of antitrust in the industry. For example, according to AAG Delrahim the Antitrust Division was confronted with the question of whether the policy aims of effective antitrust enforcement, which are the preservation of market conditions that will lead to lower prices and higher output, quality, and innovation, are inconsistent with the DOJ’s other obligations to enforce the Controlled Substances Act and other federal regulations of cannabis. AAG Delrahim noted that the Antitrust Division ultimately determined that it should analyze proposed transactions in the cannabis industry to determine whether “the effect of such acquisition may be substantially to lessen competition,” thereby protecting consumers’ access to cannabis products and that the Antitrust Division does not have any animosity toward the industry.

In addition, AAG Delrahim asserted that the cannabis merger reviews and the investigation of the automakers’ emissions agreements were all initiated by the Antitrust Division leadership and not as the result of any influence or pressure from AG Barr.

There may be further developments on this controversy as U.S. Senator Amy Klobuchar (D-MN), Ranking Member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, sent a letter to Senate Judiciary Chairman Lindsey Graham (R-SC) and Chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights Mike Lee (R-UT) to request that the Senate Antitrust Subcommittee convene a hearing to examine whether political considerations are playing substantial and inappropriate role in guiding decisions at the Department of Justice. Senator Klobuchar also requested that AAG Delrahim and Mr. Elias testify in front of the Senate Subcommittee. As of now, no further hearings have been scheduled.

[1] The OIG’s investigative jurisdiction includes all allegations of criminal wrongdoing or administrative misconduct by DOJ employees, except for allegations of misconduct that relate to the exercise of the authority of an attorney to investigate, litigate, or provide legal advice, which are referred to the OPR unless the allegation concerns attorneys who work for OPR.

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