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. (ftc.gov) In December 2018, Marlboro maker Altria dropped a large investment within the American electronic cigarette company JUUL. Becoming JUULs largest investor gaining a 35 percent minority stake.
“By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became JUUL’s largest investor” said the Federal Trade Commission Director of the Bureau of Competition, Ian Conner, in an announcement on Wednesday, April 1st. Altria backed out of the vaping market within the fall of 2018 in what the FTC believes was an accommodation for the deal with JUUL. At the time, Altria was going up against huge competition from Juul which was leading the market with 70% of the market share. Altria told the FDA in a letter that they believed kids shouldn’t use tobacco, as a result, they removed their vaping products MarkTen Elite and Apex from the market. They also removed all of their flavors aside from their menthol and mint flavors from their similar products. A few weeks later, Altria dropped the $12.8 billion investment.
Why did big tobacco invest in vape?
“We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes,” Howard Willard, Altria’s CEO said in a statement. Investing heavily in JUUL seemed like an excellent way for Altria to stick their foot through the door to the vaping industry. As more and more people attempt to make the switch to vaping, the amount of traditional combustible cigarette smokers has greatly gone down.” Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul's profits." said FTC Director of the Bureau of Competition, Ian Conner.
The FTC complaint
The FTC commissioners delivered an uncontested 5-0 vote to move forward with their complaint. The administrative court and trial is scheduled to begin on January 5th, 2021. However, Altria has been distancing and separating themselves from JUUL due to the ban on fruit and mint flavored pods and the “vaping related” illnesses taking a toll on sales. Altria no longer provides marketing or retail distribution for Juul but Altria says they will defend the investment.
Do you think the FTC was right to sue the investment? Leave a comment with your thoughts down below.
FTC Sues to Unwind Altria’s $12.8 Billion Investment in Competitor JUUL. (2020). Retrieved 17 April 2020, from https://www.ftc.gov/news-events/press-releases/2020/04/ftc-sues-unwind-altrias-128-billion-investment-competitor-juul
(2020). Retrieved 17 April 2020, from https://www.ftc.gov/system/files/documents/cases/d09393_administrative_part_iii_complaint-public_version.pdf
Alpert, B. (2020). Altria Group Must ‘Unwind’ Its Troubled Juul Labs Stake, FTC Says. Retrieved 17 April 2020, from https://www.barrons.com/articles/altria-group-must-unwind-its-troubled-juul-labs-stake-ftc-says-51585848654
Cox, K. (2020). $12.8 billion Juul investment broke the law, FTC suit says. Retrieved 17 April 2020, from https://arstechnica.com/tech-policy/2020/04/12-8-billion-juul-investment-broke-the-law-ftc-suit-says/