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FTC Files Antitrust Lawsuit Against Juul, Altria Group Over E-Cigarettes

The Federal Trade Commission announced Wednesday that it has filed a lawsuit to undo a multi-billion dollar investment made by tobacco and giant Altria Group and e-cigarette company JUUL Labs, citing a violation of federal antitrust laws.

(CN) — The Federal Trade Commission announced Wednesday that it has filed a lawsuit to undo a multibillion-dollar investment made by tobacco giant Altria Group and e-cigarette company Juul Labs, citing a violation of federal antitrust laws.

The FTC brought claims against two of the largest tobacco manufacturers in the world, with allegations that they entered into a number of agreements with one another that stifled competition and violated FTC regulations.

The lawsuit stems from a $12.8 billion investment Altria provided to Juul in December of 2018, an investment that gave Altria a sizable 35% stake in Juul’s company. The government claims that this investment and other agreements between the two tobacco companies were unlawful.

Ian Conner, director of the FTC's Bureau of Competition, said that while Altria and Juul were once fierce competitors in the tobacco market, the last two years saw the two companies beginning to work together to keep competition at bay.

“For several years, Altria and Juul were competitors in the market for closed-system e-cigarettes. By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became Juul's largest investor,” Conner said in a press release. “Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul's profits.”

The FTC claims that this all began when, as competitors, Altria and Juul kept a close eye on each other’s e-cigarette product prices and would consistently make attempts to out-innovate the other.

As Altria used its wide variety of controlled tobacco brands to gain strong retail shelf space and continued to fair well in the tobacco market, Juul found itself on the rise. The FTC notes that Juul saw a historic surge in sales and market influence in 2018, and it was a surge that made Juul arguably the leading e-cigarette company in the United States.

It was that this point, the FTC alleges, that Altria began to adjust its strategy. Rather than directly complete with Juul, Altria said that it would be reducing its manufacturing efforts in the e-cigarette space and, shortly afterwards, announced that Altria had entered into a new agreement with its former rival.

The agreement resulted in Altria becoming Juul's largest shareholder, as well as gave Altria the ability to appoint an observer to Juul's Board of Directors. In return, Juul received roughly $12 billion dollars and a promise that Altria would not compete with Juul for the next six years.

The government claims that it was this agreement between the two companies that has unfairly restricted trade in the marketplace and violated federal antitrust guidelines.

“The FTC alleges that Altria’s acquisition of Juul shares and the associated agreements together constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 5 of the FTC Act, and substantially lessened competition in violation of Section 7 of the Clayton Act.”

This is not the first time that one or both of these companies have been at the center of a legal battle. Juul, for its part, as been at the target of significant criticism and numerous lawsuits over its marketing practices, with some alleging that the company wrongfully advertised its tobacco products towards teenagers.

This, according to complaints, helped to spark a nationwide vaping crisis that resulted in widespread addiction problems plaguing America’s youth.

Juul, meanwhile, has long held that one of its largest goals has been to provide a means for smokers quit or reduce their usage of traditional cigarettes.

The Federal Trade Commission voted 5-0 to issue the complaint against the Altria investment, and an administrative trial over the matter is currently set for January of next year.

Representatives for Altria and Juul did not immediately respond to requests for comments after business hours Wednesday.

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Categories / Business, Consumers, Government, Health

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