Juul Labs, which is struggling to survive in the United States, on Tuesday tentatively agreed to pay $438.5 million to settle an investigation by nearly three dozen states into marketing and sales practices they allege they started the teenage e-cigarette crisis.
The company said it did not acknowledge any wrongdoing in the settlement but was trying to “resolve past issues” while awaiting a decision from the Food and Drug Administration on whether it can continue to sell its products. Juul has attempted to reposition itself as a seller of vaping products that could help adults quit smoking traditional cigarettes to restore its tarnished reputation and improve its diminished market value.
The preliminary agreement prohibits the company from marketing to youth, funding education in schools and misrepresenting the nicotine content of its products. But Juul had already halted several marketing practices and withdrawn many of its flavored pods, which appealed to teenagers, several years ago, under public pressure from lawmakers, parents, and health experts when the vaping crisis was at its height.
“We believe this will go a long way in stemming the influx of vaping among youth,” Connecticut Attorney General William Tong said at a news conference Tuesday. “We are under no illusions and cannot claim that it will discourage the youth from vaping. It remains an epidemic. It’s still a big problem. But we essentially took away a large chunk of the former leader.”
The cross-country investigation found the company was targeting young people by hiring young models, using social media to woo teenagers and giving out free samples, he said. And, he added, the research found that the company had a “weak” age verification system for its products and that 45 percent of its Twitter followers were between the ages of 13 and 17.
Virginia Attorney General Jason Miyares pointed out in a statement that the company’s previous strategy of selling flavors like mango and crème brûlée appealed to the youth, as did its device’s sleek design, which was easy to conceal. A condition of the settlement prohibited the company from depicting anyone under the age of 35 in its marketing images, Mr Miyares’ statement said.
Juul said Tuesday that the settlement agreement was “aligned with our current business practices, which we began implementing following our company-wide reset in the fall of 2019.”
“We remain focused on the future as we work to fulfill our mission to move adult smokers away from cigarettes – the leading cause of preventable deaths – while tackling underage smoking,” the company’s statement said.
The agreement does not resolve all of the Company’s litigation. While Juul previously reached settlements in lawsuits filed by attorneys general in North Carolina, Washington, Louisiana and Arizona, nine similar cases remain. Major lawsuits filed by New York and California, among others, remain pending. And about 3,600 lawsuits from individuals, school districts and local governments were consolidated in a lawsuit that is still moving through a California court.
Juul is still selling tobacco- and menthol-flavored capsules and vaping products while its application for permanent sale is under FDA review. The agency originally denied the company’s application in June, saying Juul failed to provide sufficient evidence that its products would benefit public health, citing “inadequate and conflicting” data from the company.
Juul received a temporary pardon in court. It has since argued that it has helped two million adult smokers quit traditional cigarettes and has taken issue with the agency’s conclusions on chemicals in its products. The FDA then relented its rejection and announced that it would conduct an additional review of “scientific issues” in the application.
States differ in how they use settlement funds, which must be paid over six to 10 years. A spokeswoman for the Connecticut Attorney General said her share (more than $16 million) would go towards vaping and nicotine cessation and addiction treatment. Texas estimated it would receive nearly $43 million, and Virginia put its share at $16.6 million.
Meredith Berkman, co-founder of Parents Against Vaping E-Cigarettes, said she was pleased to learn of the settlement. She became involved with the group after Juul sent a representative to her son’s ninth-grade high school to speak at a gathering in 2018. Her son passed on that the rep had called the product “perfectly safe,” a conversation Ms. Berkman told a congressional hearing in 2019.
Since then, she said, the group has heard from hundreds of families who claim their teens have become addicted to vaping Juul and other nicotine and marijuana devices. Some young people became seriously ill from vaping and others had to go to drug rehabilitation to get rid of nicotine addiction.
“It was Juul who showed up and opened this horrible Pandora’s box,” Ms. Berkman said. “No amount of money can undo the damage caused by Juul’s targeting and marketing to teenagers, whose use of the company’s stealth-by-design flavored products caused many children to experience severe nicotine addiction and physical harm.”
E-cigarette use among teens appears to have declined in recent years, although the coronavirus pandemic had brought new momentum to the leading monitor of teenage tobacco use, a survey conducted in schools by the Centers for Disease Control and Prevention. In March, that survey showed that nearly 8 percent, or about two million college students, said they had used e-cigarettes in the past 30 days.
While Juul was once the youth favorite, the survey showed that the candy and fruit flavored Puff Bar vapes were the most popular among youth, with Juul ranking fourth among college students. Data from IRI, a market research firm, suggests the brand was attracting more adult customers by closely competing for market leadership with another brand, Vuse Vapes, with about 30 percent of recent sales.
Altria, which bought a 35% stake in Juul for $12.8 billion in December 2018, said in a recent filing with investors that the company’s stake is now worth about $450 million — almost the same amount that Juul had just agreed to settle investigations from nearly three dozen states and Puerto Rico.
After Juul received a thorough scrutiny of its seal of approval among youngsters, it lost significant market share and value when it gave in to public pressure and stopped selling the flavors that appealed most to youngsters.
Although the vaping market still accounts for a small percentage of overall cigarette and other inhalation product sales, the FDA has repeatedly fallen short in its efforts to curb youth-friendly e-cigarettes, which continue to emerge in new candy colors and flavors. After the agency tried to crack down on existing brands, companies and the market turned to synthetic nicotine to evade regulation.
In March, Congress gave the FDA authority to take synthetic nicotine off the market. But the agency is methodical, reviewing about a million applications it received this spring from manufacturers of non-tobacco nicotine products. She has to exercise a degree of caution in order for her judgments to stand up in court.
The agency also continues to review and approve some marketing authorization applications that were submitted years ago for leading vapes, typically sold in gas stations and convenience stores. However, she recently said she does not expect to complete the review of the applications already submitted before next year.
Involved in the settlement: Alabama, Arkansas, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Maryland, Maine, Mississippi, Montana, Nevada, North Dakota, Nebraska, New Hampshire, New Jersey, Nevada, Ohio, Oklahoma, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, Wisconsin and Wyoming.