AUSTIN, Texas (CN) — Electronic cigarette manufacturer Juul Labs has agreed in principle to pay $438.5 million to 33 states and Puerto Rico, settling an investigation into the company’s marketing and sales practices.
The investigation, led by attorneys general from Oregon, Connecticut and Texas, was launched in February 2020. The AGs claimed that since the company's founding in 2015, Juul's success in the e-cigarette industry was in part driven by its willingness to advertise directly to youth.
Texas Attorney General Ken Paxton said in a statement Tuesday that Juul targeted minors through advertisements featuring young models, through social media campaigns and by dispensing free samples. Connecticut Attorney General William Tong reportedly said in a news conference that 45% of Juul's Twitter followers were between the ages of 13 and 17. The AGs also claim that the company knew that its product was falling into the hands of young people, and even changed the chemical composition of the product to make the vapor inhaled by users less harsh on the throats of young people.
In addition to product marketing, the state prosecutors found that Juul's e-cigarette packaging failed to warn users that the product contains nicotine, an addictive chemical. Moreover, consumers were allegedly misled to believe that smoking a single Juul liquid pod – which contains the fluid that will be turned to vapor and inhaled – is the equivalent of smoking a single pack of regular cigarettes. The company also claimed that its product could help people quit smoking altogether, despite not having the required approval from the Food and Drug Administration to make such a claim.
In a statement, Oregon Attorney General Ellen Rosenblum said “the conduct that led to this settlement was reprehensible and demonstrates pure corporate greed at its most damaging."
"Just when we were starting to make serious progress reducing tobacco use among our young people, Juul came along and hooked another generation," she said.
For its part, Juul said in a statement posted to its website that the settlement “is a significant part of our ongoing commitment to resolve issues from the past.”
“The terms of the agreement are aligned with our current business practices which we started to implement after our company-wide reset in the fall of 2019,” it said. “With today’s announcement, we have settled with 37 states and Puerto Rico, and appreciate efforts by attorneys general to deploy resources to combat underage use.”
The agreement, which is in the process of being finalized, states that Juul will pay $438.5 million to 33 states over the next six to 10 years. The longer the company takes to make its payments, the more it will owe – meaning that if it takes the full 10 years to pay the settlement, the overall total may reach $476.6 million.
Of the three states that spearheaded the investigation, Texas will receive $42.8 million, Oregon will get $18.8 million and Connecticut will receive $16.2 million. They could get more money the longer Juul takes to make its payments.
The agreement also sets severe restrictions on the company's ability to market its product going forward. Juul must refrain from marketing to youth, featuring anyone under the age of 35 in promotional materials, advertising on billboards or through outlets where less than 85% of the audience is an adult, advertising on public transportation, using paid influencers to promote their products and giving free samples.
Additionally, the company will also be limited in how it distributes products as well. Under the agreement, Juul products will have in-store and online sales limits, with age verification on all sales. The products will also be limited on where they are displayed and accessed in stores.
The settlement comes after the FDA banned the sale of all Juul products in a June 23 order as part of an effort to curb the rise of teen vaping. A day after the order was released, a federal appeals court blocked the ban and the FDA has since issued an administrative stay on the order.
Along with the FDA’s attempts to hold e-cigarette manufacturers accountable for teen vaping, Juul has also been ordered to pay up in litigation from users.
The FDA and Center for Disease Control found that in 2020, one in five high school students and one in 20 middle school students reported having used an e-cigarette in the past 30 days. That is around 3.6 million U.S. adolescents. In 2021, the CDC also found that of the youth who reported using e-cigarette products, the most commonly used flavors were those similar to fruit or candy.
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