Juul reaches $462 million settlement with New York, California and other states

New York, California and several other states on Wednesday announced a $462 million settlement with Juul Labs, resolving lawsuits alleging the company was aggressively marketing its e-cigarettes to young people and fueling a vaping crisis.

The agreement ends many of the company’s legal problems, with agreements reached with 47 states and territories, and 5,000 individuals and local governments. Juul is in the middle of a trial in Minnesota, an unusual case in which a settlement has not been reached.

But the company’s efforts to negotiate lawsuit settlements have cost it nearly $3 billion so far, a huge sum for a company still seeking formal regulatory approval to continue selling its products.

The latest settlement resolved claims from New York, California, Colorado, the District of Columbia, Illinois, Massachusetts and New Mexico. This follows other lawsuit settlements that criticized Juul for failing to warn young users that the high levels of nicotine in their e-cigarettes would be addictive.

California argued in its lawsuit that for months Juul did not disclose in its advertising that its devices contained nicotine. It detailed the company’s early marketing efforts, including giving out free e-cigarette samples in 2015 at trending events including a “Nocturnal Wonderland” in San Bernardino and a “Movies All Night Slumber Party.” in Los Angeles. The New York lawsuit noted that the company has embraced the use of social media hashtags like #LightsCameraVapor.

Attorneys general in those states conducted investigations which they said found Juul executives were aware that their initial marketing had enticed teenage users to buy its sleek vape pens, but did little. to solve the problem as teen vaping rates skyrocketed.

In New York and the Hamptons, the company hosted glamorous parties and “falsely led consumers to believe that its vapes were safer than cigarettes and contained less nicotine,” New York Attorney General Letitia James said Wednesday. York, during a press event.

“Juul’s lies led to a nationwide public health crisis and put addictive products in the hands of minors who thought they were doing something harmless,” said Ms. James, who noted that the State would get nearly $113 million from the deal.

California will receive the largest share of the settlement, estimated at nearly $176 million. At Wednesday’s press conference, Rob Bonta, the state’s attorney general, said Juul used the Big Tobacco tactic to reignite a youth nicotine epidemic, after years of declining smoking among young people. young Americans.

“I’m proud to stand here today with the message to e-cigarette and vaping companies: if you focus on young people, we won’t sit idly by and let e-cigarette companies put their profits on the health and well-being of our children,” Mr. Bonta said.

A Juul spokesman, Austin Finan, said the company did not admit wrongdoing in the deal. Citing federal data, he said use of his products by minors has dropped by about 95%. The settlement, Mr. Finan said, represents a “near-total resolution of the company’s historic legal challenges and the provision of certainty for our future.”

“The terms of the agreement, like previous settlements, provide financial resources to further address underage use and develop cessation programs and reflect our current business practices,” Finan said.

Selling products in flavors like mango and creme brulee, Juul’s sales skyrocketed in 2019 and the company had an enviable and sky-high valuation of around $38 billion. But that bubble began to deflate when federal data showed that 27.5% of high school students said they use e-cigarettes, with more than half citing Juul as their favorite brand. As public pressure on Juul grew, the company began to portray itself less as a trendsetter, and more as a company helping adults move away from traditional cigarettes.

The teen vaping crisis has appeared to be abating since its peak in 2019, but public health experts are still raising concerns that around 2.5 million teens report using e-cigarettes, at far higher rates. higher than adults.

Overall, about 4.5% of adults use e-cigarettes, according to the Centers for Disease Control and Prevention. An annual survey typically conducted in middle and high schools found that in 2022, about 9% of students said they had used e-cigarettes in the past 30 days. In this survey, about 14% of high school students said they vaped, about half the rate reported in the survey conducted at the height of the crisis in 2019.

While the recent drop was seen as a victory, some opponents of e-cigarette use have been troubled by data indicating frequency of use; nearly half of high school students who said they vaped said they did so 20 to 30 days a month.

Under considerable public and regulatory pressure, Juul agreed to pull many of its flavored products from the market, which significantly reduced its dominant marketing prowess and paved the way for competitor intervention.

A plethora of other e-cigarette companies have filled the gap left by Juul, offering vapes in rainbow colors and flavors like lime cookie, apple juice, and strawberry ice cream. The surge has posed an enforcement dilemma for the Food and Drug Administration, which has authorized fewer than two dozen vaping products. At a recent conference audienceDr. Robert Califf, the agency’s commissioner, said he would consult with the Justice Department to consider options for removing illegal products, including flavored vapes, from the market.

This new settlement with some of the nation’s largest states covers several actions Juul has taken to resolve thousands of lawsuits filed by individuals and other plaintiffs over the past few years.

The company this month settled the West Virginia claims for $7.9 million.

In December, the the company accepted to pay $1.7 billion for lawsuits filed by more than 5,000 individuals, school districts and local governments. In September, the company settled lawsuits filed by more than 30 states, for $438.5 million.

In the Minnesota lawsuit that began a few weeks ago, Keith Ellison, the state’s attorney general, opened the case by accusing the company of getting teenagers hooked on e-cigarettes “so that they can make money”.

“They baited, tricked and hooked a whole new generation of kids after Minnesotans cut youth smoking rates to the lowest level in a generation,” Ellison said.

Like other settlements, the latest requires Juul to refrain from marketing to young people. The agreement also requires Juul to stop offering free or “nominal price” products to consumers, and to use “product placement” in virtual reality, as it had done for programming viewed on the Oculus system.

Meanwhile, Juul’s business continues to struggle to find its footing. In 2018, the company dominated the vaping market, with revenues of nearly $1 billion. These days, Juul has lost its market share to Vuse, which is owned by British American Tobacco. Juul doesn’t disclose its revenue, but BAT said its US Steam category, which includes its popular Vuse Alto product, generated around $1 billion in revenue last year, up more than 60% compared to the previous year.

Tobacco giant Altria had pinned its smoke-free future on Juul. In 2018, he paid nearly $13 billion for a 35% of capital in the vaping business, only to see Juul become the target of blame for rising teenage nicotine addiction, and the accused in a myriad of investigations and thousands of lawsuits. Late last year, Altria valued that stake at $250 million and earlier this year it swapped that stake for Juul’s intellectual property involving heated tobacco devices, which heat the leaves of the plant in a vaporizer-like device.

For months last year, speculation swirled that Juul would be forced into bankruptcy proceedings. But at the end of November The Wall Street Journal reported that two of its directors and early investors had provided a cash injection and that it would lay off about a third of its employees, or about 400 people.

Meanwhile, Juul is still waiting for the Food and Drug Administration to decide whether to allow the company’s products to be sold in a permanent market. The agency has the power to require e-cigarette companies to seek authorization; in recent reviews, the agency rejected millions of products, authorizing about two dozen vaping devices and materials. (Juul’s products are now on store shelves because the FDA is not enforcing its premarket clearance requirement.)

The FDA initially denied the company’s request to continue selling its products in June, saying Juul had submitted “insufficient and contradictory” data. But the agency then decided to conduct additional reviews of the scientific issues with the application.