The U.S. Federal Trade Commission (FTC) has filed a complaint bringing into question Marlboro maker Altria Group’s investment in Juul. The FTC has reportedly found the Altria Juul investment was meant to eliminate competition in the e-cigarette market by creating a collaboration between the top tobacco company and the top e-cigarette maker.

According to Reuters, Altira purchased a 35 percent stake in Juul in Dec. 2018 for $12.8 billion. Since the original purchase, the Altria Juul investment has lost considerable value due to litigation brought against the e-cigarette company. Increased scrutiny and regulation of e-cigarette sales have also reduced the value of the investment as the country faces a growing number of under-age vape users.

Competition and the Altria Juul Investment

Altria and Juul started as competitors in the e-cigarette industry. Altria agreed that as a part of the purchase of the Altria Juul investment they would “not to compete in return for a substantial ownership interest in Juul.” Altria and Juul have both argued that their deal does not harm competition.

“We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts,” said Altria’s executive vice president and general counsel Murray Garnick.

The FTC, on the other hand, says that Altria’s investment was a direct response to the threat Juul represented for their e-cigarette division. Before the purchase, Altria’s MarkTen was the second most popular e-cigarette manufacturer for a time, and Juul was a significant competitor. The FTC argues that Juul was able to become such a dominant force in the e-cigarette market in part because of the lack of this competition.

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

According to Altria, the decision to purchase a large stake in Juul was meant to make up for declining cigarette sales. Reuters reports that Altria estimated that cigarette sales would drop by 4 to 6 percent in 2020. The profit made from the Altria Juul Investment was intended to make up for that loss.

The Falling Value of the Altria Juul Investment

Altria’s investment in Juul has lost two-thirds of its value since the original purchase. Originally costing nearly $13 billion, the Altria Juul investment is now valued at just over $4 billion. The two primary causes of this loss of value are the large number of lawsuits being brought against Juul and the increased scrutiny on their advertising and sale practices.

The main factor behind all of these issues is underage vape use. According to the Center for Disease Control and Prevention (CDC), the majority of youth vape users use flavored varieties of vaping liquid and these flavors are a large part of what brings them to try vaping in the first place. E-cigarette companies like Juul have also been accused of using advertising specifically meant to target underage users. So far, flavored liquids such as mint and fruit have been banned, but tobacco and menthol flavors are still available for purchase.

After it became clear that Juul could potentially be banned from selling vape products in the U.S., Altria amended their agreement with the company so that they could start selling their own e-cigarettes if Juul faces a ban or if the worth of the Altria Juul investment drops below 10 percent of its original value.

“As we continue to reset the vapor category, we are committed to advancing the long-term potential for harm reduction for adult smokers while combating underage use. We are focused on building a company for the long-term by preparing high-quality, scientifically rigorous Premarket Tobacco Product Applications,” Juul CEO KC Crosthwaite said in a statement reported by the New York Post.

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This article is not legal advice. It is presented
for informational purposes only.