Altria, Juul accused of secret deal

Altria Group Inc. pulled out of the e-cigarette market in the fall of 2018 because of a secret deal with rival Juul Labs Inc. -- not because of the public-health concerns it cited publicly at the time, according to U.S. antitrust officials.

The Federal Trade Commission revealed the agreement between the two companies in an antitrust complaint made public Friday. The complaint cites new evidence about the negotiations between the two companies that resulted in Altria's $12.8 billion investment in Juul in December 2018.

The complaint from the FTC, which sued on Wednesday to block the deal and ordered Altria and Juul to unwind the investment, states that Altria pulled its MarkTen product from the market as a condition of investing in Juul.

Juul's "executives made clear their position that Altria could not remain a competitor in the relevant market if there was to be a deal," according to the complaint. During negotiations, Juul insisted, "and Altria recognized, that Altria's exit from the e-cigarette market was a non-negotiable condition for any deal."

Altria had told the Food and Drug Administration in an Oct. 25, 2018, letter that it believed children shouldn't use tobacco and it would remove its e-cigarette products MarkTen Elite and Apex by MarkTen from the market, and remove all flavors except for menthol and mint from its other, similar products. On Dec. 7 of that year, the maker of Marlboro cigarettes announced it was winding down the rest of the e-cigarette business. Less than two weeks later, Altria had a deal to take a 35% stake in Juul.

Altria was facing intense competition at the time from Juul, which was the market leader with 70% of the market at the time, according to the FTC. The $12.8 billion investment, which Altria has since written down, eliminated competition between the two companies, leaving consumers with reduced choice, according to the FTC.

Juul spokesman Austin Finan said in a statement that the company disagrees with the "factual and legal allegations" in the FTC's complaint and "will respond through the appropriate administrative process."

"We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts," said Murray Garnick, Altria's executive vice president and general counsel. He said he's disappointed with the FTC's decision and "believe we have a strong defense and will vigorously defend our investment."

Business on 04/04/2020

Upcoming Events