Juul Labs to pay $438.5mn to settle underage vaping investigation by US states

Juul Labs, the Altria-backed e-cigarette group, must pay $438.5mn under a settlement with dozens of US attorneys-general after their two-year investigation concluded it had “cynically” advertised vaping products to underage users.

The settlement with 34 states and territories will resolve one of the biggest legal threats facing Juul, in which Altria took a 35 per cent stake in 2018. The announcement on Tuesday follows earlier deals to resolve litigation with four other states.

The investigation found Juul had risen to dominate the e-cigarette market “by wilfully engaging in an advertising campaign that appealed to youth, even though its e-cigarettes are both illegal for them to purchase and are unhealthy for youth to use”.

“[Juul] relentlessly marketed vaping products to underage youth, manipulated their chemical composition to be palatable to inexperienced users, employed an inadequate age verification process, and misled consumers about the nicotine content and addictiveness of its products,” said William Tong, the Connecticut attorney-general who led the settlement.

Other legal challenges remain unresolved. Juul is still contesting litigation from another nine attorneys-general. Some states that had started investigations but had not begun litigation did not join the settlement, and the company faces class-action lawsuits from consumers.

Juul said the settlement was “a significant part of our ongoing commitment to resolve issues from the past” and that its terms were “aligned with our current business practices which we started to implement after our company-wide reset in the fall of 2019”.

Steps taken by Juul’s new management had already limited its sales, particularly to young users. In recent years, it ended television, print and digital advertising, raised the minimum purchase age to 21 and stopped selling flavoured pods, cutting its appeal to teens.

According to the National Youth Tobacco Survey, more than 11 per cent of US high school students and almost 3 per cent of middle school pupils used e-cigarettes last year, but the majority used a disposable device such as those made by Puff Bar and Stig rather than Juul’s cartridge-based system.

Juul is still fighting a “marketing denial order” issued by the US Food and Drug Administration in June that could force it to withdraw its brands from the US, which accounts for more than 90 per cent of its global sales.

Juul on Tuesday said it had submitted an appeal to the FDA, “demonstrating that its marketing denial order . . . was substantively and procedurally flawed and should be rescinded”.

The legal and regulatory uncertainty surrounding Juul has sharply cut its value since Altria paid $12.8bn for the 35 per cent stake. By June this year the cigarette company, which sells the Marlboro brand in the US, had cut the value of the investment to $450mn.