Vaping firm agrees $462m settlement over marketing to children

California, New York and several other states announced a $462 million (€419 million) settlement with Juul Labs, resolving lawsuits claiming that the company aggressively marketed its e-cigarettes to young people and fueled the nation’s vaping crisis.

The agreement brings much of the company’s legal woes to a conclusion, with settlements reached with 47 states and territories as well as 5,000 individuals and local governments. Juul is in the middle of a trial in Minnesota, an unusual case in which a settlement was not reached. But the company’s efforts to broker deals over the lawsuits have cost it nearly $3 billion so far, a massive sum for a company still seeking official regulatory approval to keep selling its products.

The latest settlement resolved the claims of California, Colorado, the District of Columbia, Illinois, Massachusetts, New Mexico and New York. It follows others that took the company to task for failing to warn young users that the high levels of nicotine in their e-cigarettes would prove addictive.

California contended in its lawsuit that for months, Juul did not disclose in its advertising that its devices contained nicotine. It detailed the company’s early marketing efforts, which included handing out free samples of the e-cigarettes in 2015 at trendy events, including one called Nocturnal Wonderland in San Bernardino and a “Movies All Night Slumber Party” in Los Angeles. The New York lawsuit noted that the company embraced the use of social media hashtags like #LightsCameraVapor.

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Attorneys general in those states conducted investigations that they said had found that Juul executives were aware that their initial marketing lured teenage users into buying its sleek vaping pens, but did little to address the problem as the adolescent vaping rate exploded.

A spokesman for Juul, Austin Finan, said that underage use of its products had declined by about 95 per cent, citing federal data, since a companywide reset in the fall of 2019. The settlement, Finan said, represents a near “total resolution of the company’s historical legal challenges and securing certainty for our future.”

“The terms of the agreement, like prior settlements, provide financial resources to further combat underage use and develop cessation programs and reflect our current business practices,” Finan said.

Letitia James, New York’s attorney general, said in a statement: “Too many young New Yorkers are struggling to quit vaping and there is no doubt that Juul played a central role in the nationwide vaping epidemic.”

Juul has repeatedly denied marketing directly to minors. In other rounds of settlements, the company has not admitted wrongdoing. In those agreements, the payments to plaintiffs are to provide financial resources to combat underage use and develop cessation programs. Juul has framed the deals as part of its effort to “resolve issues from the company’s past.”

Selling products with flavors like mango and crème brûlée, Juul sales were soaring in 2019 when federal data showed that 27.5 per cent of high school students reported using e-cigarettes, with more than half naming Juul as their brand of choice. As the pressure on Juul mounted, the company began to market itself less as a trend maker and more as a company helping adults make the transition away from traditional cigarettes.

Although the vaping crisis among teenagers has appeared to decline from its peak in 2019, public health experts have expressed concerns that about 2.5 million adolescents continue to report using e-cigarettes at rates far higher than adults.

Overall, about 4.5 per cent of adults use e-cigarettes, according to the Centers for Disease Control and Prevention. An annual survey typically given in middle and high schools found that in 2022, 2.5 million middle and high school students, or about 9 per cent, reported using e-cigarettes in the last 30 days. In that survey, about 14 per cent of high school students reported vaping — about half the rate in the survey taken at the peak of the crisis in 2019.

While the recent decline has been viewed as a victory, some who oppose e-cigarette use have been troubled by data showing the frequency of use among nearly half the high school students who reported vaping, who said they did so on 20 to 30 days in a month.

Last year, Juul resolved thousands of lawsuits by individuals and other plaintiffs.

In December, the company agreed to pay $1.7 billion over lawsuits by more than 5,000 individuals, school districts and local governments. In September, the company settled lawsuits filed by more than 30 states for $438.5 million.

This month, Juul settled claims filed by West Virginia for $7.9 million.

In the Minnesota trial that began a few weeks ago, Keith Ellison, the state attorney general, opened the proceedings by accusing the company of getting teenagers hooked on e-cigarettes “so they could make money.”

“They baited, deceived, and addicted a whole new generation of kids after Minnesotans slashed youth smoking rates down to the lowest level in a generation,” Ellison said.

Like other settlements, the latest requires Juul to refrain from marketing to youths. The agreement also requires Juul to stop offering free or “nominally priced” products to consumers, and from using the marketing technique of “product placement” in virtual reality systems.

Meanwhile, Juul’s business continues to struggle to find its footing. In 2018, the company dominated the vaping space, with revenues of nearly $1 billion that year. These days, Juul has fallen behind in market share to Vuse, its competitor, which is owned by British American Tobacco. Juul does not disclose its revenues, but BAT said its vapor category in the United States, which includes its popular Vuse Alto product, had about $1 billion in revenues last year, up more than 60 per cent from the year earlier.

Tobacco giant Altria had pinned its smokeless future on Juul. In 2018, it paid nearly $13 billion for a 35 per cent stake in the vaping company only to watch as Juul became the target of blame for teenage nicotine addiction, and the defendant in myriad investigations and thousands of lawsuits. At the end of last year, Altria valued that stake at $250 million and earlier this year, it swapped its stake in exchange for Juul’s intellectual property around heated tobacco.

For months last year, speculation swirled around Juul that it would be forced into bankruptcy proceedings. But in late November, The Wall Street Journal reported two of its directors and earliest investors had provided a cash infusion and that it would lay off about a third of its employees, or 400 people.

Meanwhile, Juul is still waiting for the Food and Drug Administration to decide whether it should authorize sales of the company’s products to be allowed a permanent market. The agency is in the process of reviewing many applications of e-cigarettes. (Juul’s products are on store shelves now, because the FDA is not enforcing its requirement for premarket clearance.)

The FDA initially denied the company’s request to continue selling its products in June, saying that Juul had submitted “insufficient and conflicting” data. But the agency later decided to conduct additional reviews of the “scientific issues” in the application. -- This article originally appeared in The New York Times.