The troubled American e-cigarette giant JUUL has reached a settlement with multiple states in the United States.
On September 6th, according to the Wall Street Journal, JUUL Labs Inc. has agreed to pay at least $438.5 million to settle charges in more than 30 US states over its sales practices to underage users. This is the latest step taken by the troubled e-cigarette manufacturer to resolve accusations of targeting minors.
Connecticut Attorney General William Tong announced at a press conference on the 6th that according to the agreement, JUUL is prohibited from targeting individuals under the age of 35 in marketing, product placement in film and television, billboard and social media advertising. The company is also barred from selling JUUL branded products and sponsoring educational programs in schools. This agreement covers 33 states and Puerto Rico.
According to Tong, an investigation has found that JUUL has been using tactics such as hiring young models, utilizing social media to attract teenagers, and giving out free samples to appeal to young people. The company's Twitter account has 45% of followers aged between 13 and 17 years old.
The Wall Street Journal reports that JUUL stated on Tuesday that this agreement is part of its effort to address past issues. The agreement was reached after an investigation by a coalition of 39 states beginning in 2020. William Tong noted that the total settlement amount may increase depending on when JUUL makes its payments.
According to a report by Reuters, JUUL denies any wrongdoing and has stated that the settlement is "an important part of our continued efforts to address past issues." The company also noted that their marketing restrictions have been consistent since their "full company reboot" in 2019, when they removed most flavors from the market and ceased most advertising activities under pressure from regulatory agencies.
According to Reuters, thousands of local governments and individuals have also filed lawsuits against the company, most of which have been consolidated and are being tried in federal court in San Francisco.
JUUL is headquartered in San Francisco and was originally an electronic cigarette brand under Pax Labs, a US electronic cigarette company. It was established in 2015 and became an independent company by splitting off from Pax Labs in July 2017. At the end of 2018, Altria Group, the parent company of well-known cigarette brand Marlboro, announced the acquisition of a 35% stake in JUUL for $12.8 billion, which increased JUUL's valuation to $38 billion.
After the aforementioned acquisition was completed, JUUL announced that it would distribute a year-end bonus of $2 billion to 1,500 employees, roughly equivalent to $1.3 million per person. This attention-grabbing news of the lucrative year-end bonus also brought awareness of JUUL to many Chinese investors.
At its peak, JUUL's e-cigarette sales accounted for over 70% of the US e-cigarette market, earning it the nickname "the Apple of the e-cigarette world". However, with tightening regulations on e-cigarettes in the US, JUUL's market share and revenue performance have begun to decline.
In June of this year, the US Food and Drug Administration (FDA) issued a market denial order (MDO) to JUUL Labs Inc., which applies to all products currently sold by the company in the United States. This means that the company must cease sales and distribution of these products or face enforcement risks. The announcement was made on the official FDA website.
The US Food and Drug Administration (FDA) has been investigating JUUL's marketing tactics since 2018, alleging that the e-cigarette company has been enticing young people with its distinctive flavors. After reviewing data submitted by JUUL over the course of two years, the FDA has ruled that e-cigarette pods with nicotine concentrations of 5% and 3%, as well as products with the same nicotine concentration and mint flavor, must be removed from sale.
The decline of JUUL in the market has also resulted in losses for Altria's investment. Reuters reported at the end of July that the US tobacco giant Altria has further reduced its stake in the e-cigarette company JUUL. JUUL's valuation has dropped to $450 million, compared to its previously overvalued valuation of $38 billion, marking a decline of more than 96%.
This means that the settlement amount paid by JUUL is equivalent to the entire company's valuation.
The aforementioned agreement does not resolve all of JUUL's troubles, as there are still nine similar lawsuits pending, including those filed in New York and California. JUUL continues to sell electronic cigarette products in tobacco and mint flavors, with their application for permanent sale still awaiting FDA approval. Prior to the FDA's sales ban, JUUL opposed it and received additional "breathing room.
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