Juul will pay $462 million to settle claims by six states and Washington DC that the vaping company marketed its addictive e-cigarettes to underage teenagers, five Democratic attorneys general announced Wednesday.
The agreement is the largest multi-state settlement the company has reached to date, attorneys general said during a news conference. That means Juul has now negotiated more than $1 billion with 45 states.
The deal will impose strict limits on Juul’s sales and marketing abilities, and will force Juul to secure its products behind store counters and verify the age of shoppers, officials added.
The states that have reached the comparison with Juul are New York, California, Massachusetts, New Mexico, Illinois and Colorado.
“There is no doubt that Juul has played a central role in the email epidemic today,” said New York Attorney General Letitia James. “Juul is paying for the widespread harm and will place severe restrictions on its marketing and sales practices.”
The settlement adds to years of rigorous scrutiny of Juul, the one-time Silicon Valley darling among tobacco giants and investors. A string of payouts to governments and consumers over allegations that it marketed addictive products to teenagers has hampered the company as it sought options to stay afloat.
Juul did not immediately respond to CNBC’s request for comment.
As part of the settlement announced Wednesday, California will receive $175.8 million that will be used for e-cigarette research, education and enforcement, Attorney General Rob Bonta said. New York will receive $112.7 million over eight years that will support underage vaping mitigation programs statewide.
Massachusetts will receive $41.7 million, a portion of which will go to fund vaping addiction services. Colorado will get nearly $32 million, New Mexico $17 million, and DC around $15 million.
James said Juul led consumers to believe its vapes were safer than cigarettes. But a pod of Juul’s e-cigarette contains as much nicotine as a whole pack of cigarettes, she noted.
She said the company’s colorful ads often feature young models and flashy parties that “downplay” the harmful effects of its products.
“Juul took a page out of the great tobacco’s playbook and misled consumers about the health risks of their products,” she said.
James highlighted the agreement’s crackdown on Juul’s marketing practices. She noted that the company will be barred from funding or running youth education and prevention campaigns.
The agreement will also force Juul to stop using anyone under the age of 35 in its marketing materials that directly or indirectly target young people, James said.
Teen vaping skyrocketed nationwide after the company’s founding in 2015, leading to the Food and Drug Administration declaring an “epidemic” of underage e-cigarette use just three years later. Parents, school administrators and politicians largely blamed the company for accustoming a generation of young people to its nicotine-rich capsules.
Since then, Juul has been plagued by lawsuits and government-led investigations into its products and alleged deceptive marketing practices.
The San Francisco-based company stopped all US advertising in 2019 and discontinued most of its flavors.
The FDA also ordered Juul to stop selling its vaping products last June. But it temporarily suspended the order a month later, and it is not in effect now.
These legal and regulatory hurdles hurt Juul’s bottom line.
The company said in November it had secured enough new funds to stave off bankruptcy. But at the time, it announced plans to lay off about 400 employees and cut its operating budget by 30% to 40%.
Juul appeared to be exploring other options in January. As The Wall Street Journal reported at the time, the company’s executives were in early discussions with Philip Morris, Japan Tobacco, and Altria about a possible sale, investment, or alliance.
More than 3 million middle and high school students have used tobacco products, according to a report released in November by the FDA and the US Centers for Disease Control and Prevention.
E-cigarettes were the most common tobacco product among these young people, with more than 2.5 million students using them, the report said. It added that youth use of tobacco products in any form is unsafe.
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