Juul Labs agreed to pay $438.5 million to nearly three dozen states to resolve a two-year probe into the e-cigarette manufacturer’s marketing and sales practices.
The charges stemmed from claims that the company misrepresented the health risks associated with its vapes and promoted them to children who are not of legal age to purchase tobacco products.
The multistate investigation, which also included Puerto Rico, showed that Juul rose to dominance in the vaping market by “willfully engaging” in advertising campaigns that appealed to youth.
The news comes after the Food and Drug Administration in June moved to effectively ban Juul products from being sold in the U.S., citing a lack of data regarding the toxicological profile of the products. The agency also pointed to the company’s “disproportionate role in the rise in youth vaping.”
Shortly after, a federal court ruled that Juul could continue selling its product while the ban is challenged. People close to the company but who were not authorized to speak about the issue told Bloomberg bankruptcy would be a consideration if the ban is upheld.
While the states are in the process of finalizing and executing the settlement documents, the $438.5 million will be paid out by Juul over a period of six to 10 years, with the payment amounts the longer the company takes to pay. The final settlement could reach $476.6 million if Juul chooses to extend the payment period up to the maximum 10 years.
The agreement would also force Juul to comply with “a series of strict injunctive terms severely limiting their marketing and sales practices,” Connecticut Attorney General William Tong, who led the effort alongside Texas and Oregon, said Tuesday in a statement.
“Juul’s cynically calculated advertising campaigns created a new generation of nicotine addicts,” Tong said. “They relentlessly marketed vaping products to underage youth, manipulated their chemical composition to be palatable to inexperienced users, employed an inadequate age verification process, and misled consumers about the nicotine content and addictiveness of its products.”
Under the accord, Juul has agreed to refrain from:
• Youth marketing
• Funding education programs
• Depicting persons under age 35 in any marketing
• Use of cartoons
• Paid product placement
• Sale of brand name merchandise
• Sale of flavors not approved by FDA
• Allowing access to websites without age verification on landing page
• Representations about nicotine not approved by FDA
• Misleading representations about nicotine content
• Sponsorships/naming rights
• Advertising in outlets unless 85% of the audience is adult
• Advertising on billboards
• Public transportation advertising
• Social media advertising (other than testimonials by individuals over the age of 35, with no health claims)
• Use of paid influencers
• Direct-to-consumer ads unless age-verified
• Free samples
The investigation further revealed that JUUL’s early packaging was misleading because it did not clearly disclose that the product contained nicotine and also implied that its products contained a lower concentration of nicotine.
Texas Attorney General Ken Paxton, who initially jumpstarted the probe in 2020 with a coalition of state attorneys general, said that the state will receive $42.8 million from the pool.
Juul doesn’t sell cannabis products, though the decision could be a harbinger for the cannabis industry because of the popularity of vapes. At a minimum, it could change how cannabis vape companies can market their products.