Altria Can Keep Its Stake in Juul, Judge Rules. What Are the Implications?

February 17, 2022

On February 15, an administrative law judge dismissed a complaint issued from the Federal Trade Commission (FTC) against Juul and Altria, which alleged the companies had violated antitrust laws. As a result, Altria, the maker of Marlboro cigarettes, can keep its 35 percent stake in the e-cigarette company. The decision is preliminary, however, and the FTC can appeal through a vote by its commissioners.

The news, perhaps overshadowed by the Senate’s confirmation of Dr. Robert Califf as the next head of the Food and Drug Administration (FDA) on the same day, has major implications for vaping in the United States, even if experts are divided over what those are.

It arrives at a time when Juul awaits decisions from the agency that’ll determine its future: The e-cigarette producer, like all vapor companies, had to file premarket tobacco product applications (PMTAs) in September 2020, and the FDA has yet to rule on its submissions.

A years-long saga has seen Juul’s value plummet as it came under fire from lawmakers and media for allegedly stoking a youth vaping “epidemic.” But removing Altria’s stake could have brought more problems for Juul, one of the country’s biggest manufacturers of these harm reduction products.

Some harm reduction proponents, like former ASH (UK) director Clive Bates, have broadly applauded Juuls disruptive impact on the US cigarette market. Advocates have pointed out that the issue of youth vaping, which has declined steeply in recent years, has always been both grossly exaggerated and less important than the imperative of helping adults switch from deadly cigarettes.

“The greatest risk is that Altria could try to use its interest in Juul to limit competition from vaping products and thus protect its ultra-lucrative cigarette business. But the FDA and many mainstream anti-tobacco groups are already doing that for them.”

Others, however, have viewed the emergence of this giant as an unsettling departure from vapings grassroots origins and culture. And Altrias buy-in was a messaging setback for those who have long fought against the anti-vaping lobbys assertion that e-cigarettes are a Big Tobacco ruse.” There have been fears, too, of market dominance being used to shut out harm reduction innovators, reducing options for those who want to quit smoking.

“The greatest risk is that Altria could try to use its 35 percent interest in Juul to limit competition from vaping products and thus protect its ultra-lucrative cigarette business,” David Sweanor, an industry expert and chair of the advisory board for the Centre for Health Law, Policy and Ethics at the University of Ottawa, told Filter. “But the FDA and many mainstream anti-tobacco groups are already doing that for them by prohibiting the products of independent vaping companies and misleading consumers to the point that they see little reason to switch away from cigarettes.”

Altria purchased its minority stake at the tail end of 2018—35 percent of Juul for $12.8 billion, in an investment that then valued the e-cigarette manufacturer at $38 billion. Scott Gottlieb, then the commissioner of the FDA, had seen the Juul and Altria partnership as something of a betrayal: In his view, the two companies had pledged to help stop youth vaping but then organized their financial deal without his knowledge. By September 2019, Altria executives had taken over top Juul positions, likely to help guide the company through forthcoming regulations; a few months later, Juul preemptively stopped selling its flavors, except menthol and tobacco, as the Trump administration soon moved to ban pod-based, flavored e-cigarettes from the market. Some industry observers saw Altria’s hand in this decision.

Juul has since diminished in popularity among teenagers, who are vaping less in general and now seem to prefer disposable, single-use vapes, according to federal data. Juul’s overall market share has also fallen significantly. As of December 31, according to The Wall Street Journal, “Altria has since slashed the value of its Juul investment, estimating its worth at $1.7 billion.”

“We are pleased with this decision and have said all along that our minority investment in Juul does not harm competition and does not violate the antitrust laws,” Murray Garnick, the executive vice president general counsel of Altria, said in a press statement. Through a spokesperson, Juul declined to comment.

As the Journal noted, a key question of the FTC suit revolved around Altria ceasing production of its own e-cigarettes not long before the Juul investment. The FTC insisted that Altria ditched its line of vaping products because the tobacco company had agreed to do so with Juul behind closed doors, in an illegal side deal. Both Juul and Altria have denied this happened. Altria has contended that it tried to make e-cigarettes that smokers would like but could not succeed even after spending millions of dollars in development.

 


 

Photograph by Joe Gratz via Flickr/Creative Commons 2.0

The Influence Foundation, which operates Filter, has received unrestricted grants from both Altria and Juul. Filter’s Editorial Independence Policy applies.

Alex Norcia

Alex is Filter’s news editor. He previously worked as a reporter and copy editor at VICE, and has been published in The New York Times MagazineThe Columbia Journalism Review, The Los Angeles Times and The New Republic, among other outlets. He was also previously a freelance editorial consultant for the Foundation for a Smoke-Free World; The Influence Foundation, which operates Filter, has received grants from the Foundation for a Smoke-Free World. He is currently based in Los Angeles.

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