Electronic cigarette manufacturer Juul Labs has agreed to pay nearly $440 million to settle a two-year investigation by 33 states into the marketing of its high nicotine e-cigarette products. These products have long been blamed for causing a surge in e-cigarette use among young people across the country.
Connecticut Attorney General William Tong announced the settlement on behalf of several states and Puerto Rico on Tuesday. Puerto Rico joined the probe into Juul's early marketing campaigns in 2020, claiming that its technology was being marketed as a safer alternative to smoking.
The settlement agreement includes numerous restrictions on how Juul can market its products, resolving one of the company's biggest legal threats as it struggles. However, the company still faces nine separate lawsuits from other states. In addition, Juul is also facing hundreds of individual lawsuits filed on behalf of teenagers and others who claim they have become addicted to the company's e-cigarette products.
According to a statement, investigations conducted by states have found that Juul marketed its e-cigarettes to minors through events, product giveaways and advertising, as well as by using social media posts featuring young models.
We believe this will largely deter young people from using e-cigarettes," said Tong at a press conference in the Hartford office.
The packaging for Juul Labs' electronic cigarettes and mint-flavored pods was showcased on February 25, 2020 in Florida, according to the Associated Press.
I have no illusions and cannot claim it will stop young people from using electronic cigarettes," he said. "It remains an epidemic. It's still a huge problem. But we have essentially taken away a large portion of the market, which used to be the market leader, and their behavior is the main offender.
A total of $438.5 million will be paid over the course of 6 to 10 years. Tong stated that at least $16 million of the amount paid by Connecticut will be used for prevention and education efforts. Juul had previously settled lawsuits in Arizona, Louisiana, North Carolina, and Washington.
The settlement amount represents approximately 25% of Juul's US sales of $1.9 billion last year. According to Attorney General Josh Stein, this is a "principled agreement," which means that individual states will finalize settlement documents in the coming weeks.
Most of the restrictions imposed by the settlement on Tuesday will not immediately affect Juul, which stopped using parties, giveaways, and other promotional activities after scrutiny several years ago. The company currently holds about one-third of the US retail e-cigarette market, down from 75% a few years ago.
In the years following Juul's launch in 2015, the number of teenagers using e-cigarettes skyrocketed, prompting the US Food and Drug Administration to declare the use of e-cigarettes among minors an "epidemic." Health experts have warned that the unprecedented growth could result in a generation of young people addicted to nicotine.
Since 2019, Juul has mostly compromised by relinquishing all U.S. advertising and removing its fruit and candy flavors from store shelves.
The biggest blow came earlier this summer when the FDA began to prohibit all Juul e-cigarettes from entering the market. Juul challenged this ruling in court and since then, the FDA has resumed its scientific review of the company's technology.
The FDA's review is part of a comprehensive effort by regulatory agencies to review the multi-billion dollar e-cigarette industry after years of delay. The agency has authorized some electronic cigarettes from Juul's competitors for use by adult smokers in search of a less harmful alternative to cigarettes.
Although Juul's early marketing focused on young urban professionals, the company has since shifted to positioning its product as a substitute nicotine source for older smokers.
The company stated in a press release, "We will remain focused on our future as we fulfill our mission to be the number one preventable cause of death for adult smokers, while also combating underage usage.
As part of a settlement agreement, Juul has agreed to avoid a series of marketing practices. These practices include not using cartoons, paying social media influencers, depicting individuals under the age of 35, advertising on billboards and public transportation, and advertising on any channel unless 85% of the audience is comprised of adults.
The deal also includes restrictions on Juul product placement in stores, age verification for all sales, and limitations on online and retail sales.
These are the strictest requirements in any industry at any time," Tong said. "This is very important because ultimately, it is to protect our children and protect all of us from significant public health risks.
Initially, Juul sold high-nicotine pods in flavors like mango, mint, and cream. These products became a scourge in American high schools, with students vaping in school bathrooms and hallways.
Recent federal investigation data reveals that teenagers have been ditching traditional vaping companies. Many of the teenagers who used to vape are now favoring disposable e-cigarettes, some of which are still being sold in sweet and fruity flavors.
On the whole, the survey indicates that the prevalence of teenage e-cigarette use decreased by almost 40% due to many children being forced to learn from home during the pandemic. However, federal officials cautioned against interpreting the results as they were collected online rather than in a classroom setting for the first time.
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