FTC sues to undo Altria’s $12.8 billion deal with Juul

Federal officials have sued to undo tobacco giant Altria’s $12.8 billion investment in Juul over concerns that the two companies illegally quashed competition in the e-cigarette industry. The Federal Trade Commission filed an administrative complaint Wednesday to unwind the Marlboro maker’s December 2018 purchase of a 35 percent stake in Juul. Rather than battle with …

Federal officials have sued to undo tobacco giant Altria’s $12.8 billion investment in Juul over concerns that the two companies illegally quashed competition in the e-cigarette industry.

The Federal Trade Commission filed an administrative complaint Wednesday to unwind the Marlboro maker’s December 2018 purchase of a 35 percent stake in Juul. Rather than battle with the nation’s leading vape brand, federal officials alleged, Altria agreed not to compete with Juul in exchange for a “substantial” stake in the company.

“Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits,” Ian Conner, director of the FTC’s Bureau of Competition, said in a statement.

The complaint came after a lengthy federal review of Altria’s investment in Juul, the value of which plummeted as the San Francisco-based vaping giant faced lawsuits and regulatory scrutiny over its alleged marketing to young people.

Virginia-based Altria plans to “vigorously defend” the tie-up, company general counsel Murray Garnick said. An administrative trial in the case has been scheduled to start on Jan. 5, 2021, according to the FTC.

“We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts,” Garnick said in a statement.

A Juul spokesman did not immediately respond to a request for comment.

Juul and Altria kept close tabs on each other as competitors as the latter company’s MarkTen e-cigarette became the second-most popular brand by market share, the FTC said. But Altria got out of Juul’s way as it claimed the top spot in the market with its slick vaping device and fruity flavors, according to federal officials.

Altria folded its own e-cigarette business and made a deal with Juul in which it agreed not to compete with the company for six years, according to the FTC. The conglomerate also agreed to give Juul support services such as prime shelf space it had secured in retail stores, federal officials noted.

But Altria has since written down the value of its stake in Juul by more than $8 billion as a spike in youth vaping led to a flurry of scrutiny for the company and a federal ban on flavored cartridge-based e-cigarettes. Juul has stopped offering all flavors except tobacco and menthol in the US response to the concerns.

The FTC lawsuit will likely further delay Altria from appointing representatives to Juul’s board and converting its non-voting shares into voting shares. Those milestones were contingent on antitrust clearance of the deal, according to Garnick’s statement.

The FTC has also said it is reviewing the marketing practices of Juul and other vaping companies amid concerns about the firm appealing to young people.