Juul to pay nearly $440M to settle states’ teen vaping probe; Oregon to get at least $18.8 million

By MATTHEW PERRONE and DAVE COLLINS
Associated Press

HARTFORD, Conn. (AP) — Electronic cigarette maker Juul Labs has agreed to pay nearly $440 million to settle a two-year investigation by 33 states, including Oregon, into the marketing of its high-nicotine vaping products, which have long been blamed for sparking a national surge in teen vaping.

Connecticut Attorney General William Tong announced the deal Tuesday on behalf of the states plus Puerto Rico, which joined together in 2020 to probe Juul's early promotions and claims about the benefits of its technology as a smoking alternative.

The settlement, which includes numerous restrictions on how Juul can market its products, resolves one of the biggest legal threats facing the beleaguered company, which still faces nine separate lawsuits from other states. Additionally, Juul faces hundreds of personal lawsuits brought on behalf of teenagers and others who say they became addicted to the company's vaping products.

The states' investigation found that Juul marketed its e-cigarettes to underage teens with launch parties, product giveaways and ads and social media posts using youthful models, according to a statement.

“We think that this will go a long way in stemming the flow of youth vaping,” Tong said at a news conference at his Hartford office.

“I’m under no illusions and cannot claim that it will stop youth vaping,” he said. “It continues to be an epidemic. It continues to be a huge problem. But we have essentially taken a big chunk out of what was once a market leader, and by their conduct, a major offender.”

The $438.5 million will be paid out over a period of six to 10 years. Tong said Connecticut's payment of at least $16 million will go toward vaping prevention and education efforts. Juul previously settled lawsuits in Arizona, Louisiana, North Carolina and Washington.

The settlement total amounts to about 25% of Juul’s U.S. sales of $1.9 billion last year. Tong said it was an “agreement in principle,” meaning the states will be finalizing the settlement documents over the next several weeks.

Most of the limits imposed by Tuesday's settlement won't immediately affect Juul, which halted use of parties, giveaways and other promotions after coming under scrutiny several years ago.

Teen use of e-cigarettes skyrocketed in the years following Juul’s 2015 launch, leading the U.S. Food and Drug Administration to declare an “epidemic” of underage vaping among young people. Health experts said the unprecedented increase risked hooking a generation of young people on nicotine.

But since 2019 Juul has mostly been in retreat, dropping all U.S. advertising and pulling its fruit and candy flavors from store shelves.

The biggest blow came earlier this summer when the FDA moved to ban all Juul e-cigarettes from the market. Juul challenged that ruling in court, and the FDA has since reopened its scientific review into the company's technology.

The FDA review is part of a sweeping effort by regulators to bring scrutiny to the multibillion-dollar vaping industry after years of delays. The agency has authorized a handful of e-cigarettes from Juul's competitors for adult smokers looking for a less harmful alternative to cigarettes.

While Juul's early marketing focused on young, urban professionals, the company has since shifted to pitching its product as an alternative nicotine source for older smokers.

“We remain focused on our future as we fulfill our mission to transition adult smokers away from cigarettes — the number one cause of preventable death — while combating underage use,” the company said in a statement.

Juul has agreed to refrain from a host of marketing practices as part of the settlement. They include not using cartoons, paying social media influencers, depicting people under 35, advertising on billboards and public transportation and placing ads in any outlets unless 85% of their audience are adults.

The deal also includes restrictions on where Juul products may be placed in stores, age verification on all sales and limits to online and retail sales.

“These are some of the toughest mandates at any point on any industry,” Tong said, “which is incredibly important because at the end of the day this is about protecting our kids and protecting all of us from a very significant public health risk.”

Juul initially sold its high-nicotine pods in flavors like mango, mint and creme. The products became a scourge in U.S. high schools, with students vaping in bathrooms and hallways between classes.

But recent federal survey data shows that teens have been shifting away from the company. Most teens now prefer disposable e-cigarettes, some of which continue to be sold in sweet, fruity flavors.

Overall, the survey showed a drop of nearly 40% in the teen vaping rate as many kids were forced to learn from home during the pandemic. Still, federal officials cautioned about interpreting the results given they were collected online for the first time, instead of in classrooms.

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Perrone reported from Washington, D.C.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.

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News release from Oregon Attorney General Ellen Rosenblum:

Oregon Leads $438 Million Agreement with JUUL Labs

Attorney General Rosenblum announced today a $438.5 million agreement between JUUL Labs and 34 states and territories resolving a two-year bipartisan investigation into the e-cigarette manufacturer’s marketing and sales practices. In addition to the financial terms, the settlement forces JUUL to comply with a series of strict injunctive terms severely limiting their marketing and sales practices. Oregon will receive $18.8 million in the settlement but could receive up to $20.5 million if JUUL extends the payment schedule. Attorney General Rosenblum co-led the investigation with the Attorneys General of Connecticut and Texas.

“The conduct that led to this settlement was reprehensible and demonstrates pure corporate greed at its most damaging,” said Attorney General Rosenblum. “Just when we were starting to make serious progress reducing tobacco use among our young people, JUUL came along and hooked another generation. They intentionally targeted kids with slick and misleading ads to get them hooked on their nicotine products. The cost to society and the public health consequences are enormous and devastating.”

Until recently JUUL was the dominant player in the vaping market. The multistate investigation revealed that JUUL willfully engaged in an advertising campaign that appealed to youth, even though its e-cigarettes are both illegal for them to purchase and unhealthy for children. The investigation found that JUUL relentlessly marketed to underage users with launch parties, advertisements using young and trendy-looking models, social media posts and free samples. It marketed a technology-focused, sleek design that could be easily concealed and sold its product in attractive flavors. JUUL also manipulated the chemical composition of its product to make the vapor less harsh on the throats of the young and inexperienced users. To preserve its young customer base, JUUL relied on age verification techniques that it knew were ineffective.

The investigation further revealed that JUUL’s original packaging was misleading and did not clearly disclose that it contained nicotine and implied that it contained a lower concentration of nicotine than it did. Consumers were also misled to believe that consuming one JUUL pod was the equivalent of smoking one pack of combustible cigarettes. The company also misrepresented that its product was a smoking cessation device without FDA approval to make such claims.

The states are in the process of finalizing and executing the settlement documents, a process that takes approximately 3-4 weeks. The $438.5 million would be paid out over a period of six to ten years, with the amounts paid increasing the longer the company takes to make the payments. If JUUL chooses to extend the payment period up to ten years, the final settlement would reach $476.6 million.

“Hopefully, this settlement will provide states with needed resources to help young people stop using e-cigarettes and will prevent future generations from being targeted with slick marketing tactics like those used to attract youth to JUUL’s products,” Rosenblum added.

As part of the settlement, 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 percent 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, and
• Free samples.

The agreement also includes sales and distribution restrictions, including where the product may be displayed/accessed in stores, online sales limits, retail sales limits, age verification on all sales, and a retail compliance check protocol.

In addition to this multi-state investigation with JUUL, Attorney General Rosenblum last year successfully championed the Oregon legislature to close an important loophole that allowed underage Oregonians to purchase vaping products over the internet.

The investigation was led by Connecticut, Texas, and Oregon, and joined by Alabama, Arkansas, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Maryland, Maine, Mississippi, Montana, North Dakota, Nebraska, New Hampshire, New Jersey, Nevada, Ohio, Oklahoma, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, Wisconsin, and Wyoming.