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A Major Tobacco Company’s $13 Billion Investment In Juul Violates Antitrust Laws, The FTC Said

More than a year after Altria took a one-third stake in Juul, valuing the e-cigarette company at $38 billion, the FTC is seeking to unwind the deal.

Last updated on April 2, 2020, at 3:25 p.m. ET

Posted on April 1, 2020, at 7:57 p.m. ET

Stephanie Keith / Getty Images

SAN FRANCISCO — The Federal Trade Commission is suing to undo Altria’s nearly $13 billion investment in the popular e-cigarette maker Juul, alleging that the deal violates antitrust laws.

Altria, one of the world’s largest tobacco manufacturers, paid $12.8 billion in December 2018 for a 35% stake of Juul, becoming its largest stakeholder and valuing the San Francisco startup at $38 billion. The FTC’s complaint, filed Wednesday, alleges that the investment illegally eliminated competition between the two companies.

Altria used to make its own e-cigarettes, under the brands MarkTen and Green Smoke, until December 2018. As competitors, Altria and Juul tracked each other’s e-cigarette prices and “raced to innovate,” the FTC said in a press release.

That race effectively ended by the end of 2018, by which time Juul had become a household name and the most popular e-cigarette maker in the US. The FTC alleged that “Altria dealt with this competitive threat by agreeing not to compete in return for a substantial ownership interest in Juul.”

“Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits,” Ian Conner, director of the FTC’s Bureau of Competition, said in a statement.

As part of the investment, Altria would have been able to appoint representatives to Juul’s board of directors and convert its shares to voting securities. But those moves have been on hold as the FTC has been reviewing the investment, the Wall Street Journal reported in January.

In a memo obtained by BuzzFeed News, Juul’s chief legal officer told staff on Wednesday night that the company would be reviewing the complaint.

“We believe that our investment in JUUL does not harm competition and that the FTC misunderstood the facts,” said Murray Garnick, Altria’s general counsel, in a statement. “We are disappointed with the FTC’s decision, believe we have a strong defense and will vigorously defend our investment.” A Juul spokesperson declined to comment.

Separately, the FTC has been investigating the marketing practices of Juul and other e-cigarette companies. Juul has been widely criticized — and sued by regulators across the country — for allegedly advertising its addictive products to youth and helping start the teen vaping crisis. Juul, for its part, said its goal has always been to help adult smokers quit conventional cigarettes.

Since Altria put money in the startup, its investment has lost value as Juul has struggled to keep its footing. Late last year, Juul stopped sales of all its nontobacco flavors in the US while it’s in the process of asking the FDA to allow it to sell its products. It’s also faced a combination of regulatory restrictions and lackluster sales overseas. It laid off 650 employees in the fall, and over the last two months a series of high-profile executives, including cofounder James Monsees, have left.

Juul’s valuation is now calculated to be $12 billion.

UPDATE

This story has been updated to include a statement from Altria.


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