Altria’s $12.8 Billion JUUL Investment Receives Lawsuit from FTC

The Federal Trade Commission filed an administrative complaint against tobacco giant Altria’s investment in JUUL Labs, alleging that the investment eliminates competition and violates federal antitrust laws. Altria, formerly a competitor in e-cigarettes, exited the e-cigarette market and acquired a 35% stake in JUUL, becoming their biggest investor.

“For several years, Altria and JUUL were competitors in the market for closed-system e-cigarettes. By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became JUUL’s largest investor,” said Ian Conner, Director of the Bureau of Competition according to an FTC press release. “Altria and JUUL turned from competitors to collaborators by eliminating competition and sharing in JUUL’s profits.”

In late 2018, JUUL became the leading e-cigarette company, passing Altria and Reynolds. The FTC claims that Altria dealt with the “competitive threat” by leaving the competition. Altria and JUUL announced their agreement weeks after Altria said they planned to slow their e-cigarette business. Altria received a seat on JUUL’s Board of Directors, and the possibility of three seats after converting shares. JUUL received $12.8 billion, support services, and a pledge from Altria to not compete for six years. 

The FTC’s vote to issue the complaint was 5-0, with Commissioner Rohit Chopra filing a statement in the case, joined by Commissioner Rebecca Kelly Slaughter, saying the agreement allows Altria to share monopoly profits in an illegal conspiracy. The statement discusses JUUL’s swift growth and says although it claims to provide customers with a “less risky way to enjoy tobacco products” that it undermines public health, rather than promote it. Although JUUL presented itself as a safe alternative to smoking, the many state lawsuits it has received show they misled customers about the nicotine potency and safety of their products, the statement claims.

They allege that aggressive youth targeting and deceptive marketing helped JUUL boost sales, which led to Altria’s investment. “Based on the evidence I have reviewed, I am concerned that JUUL is involved in a pattern of behavior that poses a danger to the public. The impact of reduced competition on products with health and safety risks raises broader concerns. Intense competition between JUUL, Altria, and other players could have set the stage for a less deadly form of tobacco use,” Chopra said in the statement. The administrative trial is scheduled for January 5, 2021.