In a decision issued on Thursday, the administrative law judge overseeing the antitrust dispute between the Federal Trade Commission (FTC) and tobacco company Altria Group Inc. and electronic cigarette maker JUUL Labs Inc. disclosed the findings behind his conclusion that the companies’ accused conduct was within legal bounds. As previously reported, news of Judge D. Michael Chappell’s decision circulated in advance of the ruling about two weeks ago.
The suit dates back to April 2020 when the FTC took issue with agreements the parties entered into, including Altria’s acquisition of a 35% stake in JUUL for $12 billion. In its Sherman Act claim, the FTC accused Altria and JUUL of illegally agreeing that Altria would not compete in the domestic e-cigarette market, presently and in the future, in exchange for a share of JUUL. The second count, brought under Section 7 of the Clayton Act, alleged that the acquisition accompanied by Altria’s withdrawal of its Nu Mark e-cigarettes from the market substantially decreased competition.
This week’s 270-page decision noted that the record included testimony from 37 witnesses and more than 2,480 exhibits, as well as a 13-day evidentiary hearing.
Judge Chappell concluded that the FTC failed to demonstrate both the anticompetitive effects of the parties’ non-compete provision and a reasonable chance that Altria would have competed in the e-cigarette market in the near future. As to the FTC’s Sherman Act Section 1 claim, the court said that the evidence failed to show that there was an agreement or conspiracy pursuant to which Altria agreed to stop competing with its then-existing tobacco products.
Likewise, the court found that the FTC failed to prove undue market concentration as a result of the transaction, and was therefore not entitled to a presumption of anticompetitive effects. Specifically, the court ruled that there was no evidence showing that Altria’s removal of its Nu Mark product line from the market resulted in or would result in substantial harm to competition. Notably, and to the contrary, the court found that since the acquisition, the market for closed-system e-cigarettes has become more competitive.
Finally, Judge Chappell declined arguments that Altria’s actions would impair competition in the near future under the theory that it itself would have introduced e-cigarettes competing with JUUL’s, but for the merger. The opinion explained that the agency’s allegations were too speculative and did not even posit a time frame for Altria’s supposed entry.
The FTC has already filed a notice of appeal.
JUUL is represented by Arnold & Porter Kaye Scholer LLP and Cleary Gottlieb Steen & Hamilton LLP. Altria is represented by Wachtell, Lipton, Rosen & Katz and Wilkinson Stekloff LLP.
