Juul to Pay $438.5 Million to Settle Probe Over Underage Vaping


Deal with e-cigarette maker includes 33 states and Puerto Rico

Juul Labs Inc. agreed to pay at least $438.5 million in a settlement with more than 30 states, the latest step by the beleaguered e-cigarette maker to resolve allegations that it marketed its products to underage users.

Under the deal, which includes 33 states and Puerto Rico, Juul is barred from depicting people under 35 in its marketing, product placements in film and television, advertising on billboards and social media, selling Juul-branded merchandise and funding education programs in schools, Connecticut Attorney General William Tong said in a news conference Tuesday.

“They relentlessly marketed vaping products to underage youth,” said Mr. Tong, a Democrat. He cited the toll that underage vaping has taken on families.

Juul denied wrongdoing and said it voluntarily had stopped the marketing and sales practices that the agreement bars it from using. The agreement follows an investigation begun in 2020 by 39 states.

Since last year, Juul has agreed to pay a total of $87 million in settlements with four other states that brought lawsuits against the company, including Louisiana, Arizona, North Carolina and Washington state. Thousands of other lawsuits against Juul are pending, including cases brought by nine other attorneys general.

The e-cigarette maker’s future also hinges on an appeal it has filed with the Food and Drug Administration, which in June ordered Juul to pull its products from the U.S. market. The FDA has suspended the ban while Juul appeals the decision.

Juul in 2018 soared to the top of the e-cigarette market and drew criticism from regulators and school administrators, who blamed the company’s sleek vaporizers, fruity flavors and hip marketing for fueling a surge in underage vaping. The company since then has been trying to regain the trust of regulators and the public. It limited its marketing and in 2019 stopped selling sweet and fruity flavors.

Youth use of e-cigarettes has fallen since the U.S. raised the minimum purchase age for tobacco products to 21 and barred the sale of sweet and fruity e-cigarette refill cartridges. Last year, disposable e-cigarette brand Puff Bar overtook Juul as the most popular e-cigarette among middle- and high-school students.

Juul on Tuesday said the settlement was part of its effort to resolve issues from the past. The company said it is focused on the future and is endeavoring to provide alternatives for adult cigarette smokers while combating underage use.

Juul, which had more than $1 billion in sales last year, slipped recently to the No. 2 spot in U.S. e-cigarette market. The top spot is now held by Reynolds American Inc.’s Vuse brand, which has gained market share over the past two years with discounted devices and a marketing campaign that has included live-streamed rooftop concerts, TV spots, billboards and videos of artists designing wraps for Vuse devices. Vuse has since pulled back on some of those marketing practices.

In June, the FDA ordered Juul to halt its U.S. sales, saying the vaping company hadn’t submitted sufficient evidence that its products were safe. In court filings, Juul said the FDA had overlooked more than 6,000 pages of data the company had submitted. Juul also said the agency had failed to consider the totality of Juul’s evidence, which the company said established that the public-health benefits of Juul’s e-cigarettes as a less-harmful alternative to cigarettes significantly outweighed their potential risks.

Altria Group Inc. in July slashed the value of its investment in Juul by about 70% following the FDA’s decision to order the Juul off the U.S. market.

The maker of Marlboro cigarettes now holds its Juul stake at a price that values the vaping company at about $1.3 billion, a fraction of the startup’s $38 billion valuation when Altria bought a stake in 2018.

Juul burned $123 million in cash in the first quarter of this year and had less than $300 million in cash on hand in late June, The Wall Street Journal earlier reported. Juul has been working with its legal advisers on options that include a possible bankruptcy filing. The vaping company is also exploring financing options.

Under the agreement announced Tuesday, $438.5 million would be paid out over a period of six to 10 years, with the amounts paid increasing the longer the company takes to make the payments. If Juul chooses to extend the payment period to 10 years, the final settlement could reach $476.6 million, the Connecticut attorney general’s office said.

Some of the money has been earmarked for programs to combat underage tobacco use, officials said.

“They’re not going to target young people and children, and that’s a huge step forward,” Mr. Tong said.

Read full article here.

Jennifer Maloney – Wall Street Journal – 2022-09-06.

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