Juul Agrees to Pay $438.5M in Settlement Over Teen Marketing

Juul has agreed to pay $438.5 million to settle investigations into whether the electronic cigarette giant engaged in deceptive marketing and intentionally targeted its products to the most susceptible children and adolescents in 33 states and Puerto Rico.

As the company continues to fight for survival with the Food and Drug Administration (FDA), a huge solution comes with it. In June of this year, the FDA took a dramatic step, refusing marketing authorization for all Juul products, effectively forcing the e-cigarette manufacturer to exit the US market. However, Juul quickly obtained administrative approval, and in July, the FDA announced that it would review Juul's products again. Meanwhile, the company was allowed to continue selling its products.

The uncertainty surrounding legal settlements and regulation is the latest repercussion of Juul's alleged role in fueling the nationwide "epidemic" of youth vaping, which peaked in 2019. With a sharp increase in middle and high school students using e-cigarettes, Juul has gained notoriety for attracting children and teenagers.

According to a lawsuit brought by the Attorney General of Massachusetts in 2020, Juul launched marketing campaigns in 2015 and 2016 that relied on social media influencers and "cool" models targeting teenagers. The lawsuit alleges that the company even purchased banner and video ads on cartoon networks and websites such as Nick.com and NickJr.com.

In May 2019, a study published in JAMA Pediatrics estimated that 45% of Juul's Twitter followers in 2018 were between the ages of 13 and 17. In July 2019, during a congressional hearing, a high school student and their mother from New York City testified that in 2017, a Juul employee conducted a demonstration at their school without a teacher present, school administrators' knowledge, or parental consent. During the demonstration, the Juul representative reportedly claimed that Juul e-cigarettes were "completely safe" and referred to the company's device as the "iPhone of e-cigarettes.

As previously reported by Ars, analysis by Citigroup at the time revealed that Juul's US dollar sales increased by 783% from 2017 to 2018, reaching $942.6 million. Meanwhile, data from the Centers for Disease Control and Prevention showed that the proportion of middle school students who reported recent e-cigarette use increased from 0.6% in 2011 to 10.5% in 2019, while e-cigarette use among high school students increased from 1.5% to 27.5% during the same period. These numbers have since declined.

With concerns growing about the use of e-cigarettes by teenagers, there has been strong opposition to Juul. By the end of 2019, Juul had fired its CEO, stopped advertising in the US, and stopped selling some flavors that were popular with young people, including mango, fruit, creme (brulee), and cucumber. However, lawsuits and regulatory troubles have continued, and its market share has started to decline. Last year, Juul agreed to pay $40 million to settle claims against it by North Carolina related to its marketing practices aimed at young people. In June of this year, tobacco giant Altria (formerly known as Philip Morris) said that its 35% stake in Juul, purchased for $12.8 billion in 2018, was now worth only $450 million. Even with this week's large settlement, Juul still faces a significant number of legal challenges.

This settlement agreement with 34 states and territories is an important part of our effort to address past issues. The terms of this agreement are consistent with the current business practices we implemented company-wide in the fall of 2019. According to today's announcement, we have reached a settlement with 37 states and Puerto Rico, and we thank the attorneys general for deploying resources to combat underage use.

In addition to payments that will be allocated between states and used in various ways to address youth addiction, the settlement also prohibits Juul from engaging in several activities such as marketing products to young people, depicting individuals under 35 in any marketing materials, using cartoons, paying social media influencers, or advertising in venues with less than 85% adult audiences.

William Tong, the Connecticut Attorney General, stated that "Juul's advertising campaign created a new generation of nicotine addicts. They ruthlessly marketed electronic cigarettes to minors, manipulated their chemical composition to make them more appealing to inexperienced users, employed insufficient age verification procedures, and misled consumers about the nicotine content and addictiveness of their products. The full impact of this irresponsible behavior on public health remains unclear. Through this settlement, we have secured hundreds of millions of dollars to help reduce nicotine use and forced JUUL to accept a series of strict prohibitions to end teenage marketing and combat underage sales.

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