Altria-Juul Deal Goes to Trial -- Update
By Jennifer Maloney
Altria Group Inc. and the Federal Trade Commission are squaring
off over allegations that the Marlboro maker engaged in
anticompetitive practices ahead of its 2018 investment in
e-cigarette startup Juul Labs Inc.
In opening remarks at an antitrust trial Wednesday, the FTC
argued that Altria pulled its e-cigarettes off the U.S. market
illegally at the insistence of Juul as the two companies were
discussing a deal. Altria argued that its e-cigarettes were
failures, and it jettisoned them amid regulatory pressure and an
internal reckoning about the company's inability to develop a
vaping product that consumers liked.
If the FTC prevails, it could unwind Altria's 35% interest in
Juul, which the cigarette maker bought in December 2018 for $12.8
billion. The agency is seeking to force Altria to divest its stake
and terminate the companies' noncompete agreement. The case is
being heard by an administrative law judge, who will make an
initial decision; the agency's commissioners will then vote on the
Altria made a big bet on Juul because its sleek vaporizers were
fueling a surge in the e-cigarette market and hastening the decline
of traditional cigarettes. Its investment made Juul one of the
highest-valued startups in the U.S.
But the e-cigarette maker's sales have tumbled, dimming its
growth prospects. Blamed for an increase in underage vaping, Juul
has faced regulatory crackdowns, lawsuits and investigations into
its marketing practices. Altria valued its stake in Juul at $1.5
billion as of March. Altria's losses led to the departure last year
of Chief Executive Howard Willard, who spearheaded the deal.
The FTC in April of last year sued to unwind the deal. The trial
is taking place via teleconference at the agency's office of
administrative law judges. Mr. Willard and Juul board members Riaz
Valani and Nick Pritzker, two of Juul's lead negotiators, are among
the witnesses expected to be called by the FTC.
A key question at trial is why Altria, when it was in talks with
Juul, stopped selling its own e-cigarettes.
Altria's explanations for exiting the e-cigarette market were
pretexts, FTC attorney Stephen Rodger said in his opening remarks
Wednesday. "But for the transaction, Altria would still be
competing with [Juul] today."
Altria in October 2018 announced it was halting the sale of its
pod-based and fruity-flavored e-cigarettes in response to a call by
the Food and Drug Administration for e-cigarette makers to help
stem a surge in vaping among children and teens. Then in December
of that year, two weeks before the Juul agreement was signed,
Altria pulled its remaining e-cigarettes off the market.
Altria and Juul in pretrial legal filings said Altria's
e-cigarettes were "absolutely terrible," didn't deliver nicotine
successfully enough to convert cigarette smokers and probably
weren't going to pass an impending FDA review.
"We ended up at the very, very bottom of the market after
spending years and years and millions and billions of dollars,"
Altria attorney Beth Wilkinson said in her opening remarks.
"Did you mean billions?" Chief Administrative Law Judge Michael
"I did, your honor," she said.
Altria and Juul negotiated a noncompete agreement that would
allow Altria's existing e-cigarettes to remain on the market, which
Juul didn't see as a threat, according to the companies' legal
filings. Juul did insist in negotiations that Altria couldn't
develop new e-cigarette products while Altria had access to
detailed information on Juul's products and research, the filings
said. Both of Altria's announcements about halting e-cigarette
sales took Juul by surprise, the filings said.
Juul and Altria argue that since the deal was struck,
competition in the e-cigarette market has increased, not decreased:
Juul's market share has fallen, as have e-cigarette prices.
Write to Jennifer Maloney at firstname.lastname@example.org
(END) Dow Jones Newswires
June 02, 2021 15:26 ET (19:26 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Historical Stock Chart
Von Dez 2021 bis Jan 2022
Historical Stock Chart
Von Jan 2021 bis Jan 2022