Consumers File Class Action Against Juul and Altria

Law.com announced that several consumers filed class actions against Juul and Altria for monopolizing the electronic cigarette market. The claims were brought to the U.S. District Court for the Northern District of California just a few weeks after the Federal Trade Commission (FTC) filed an administrative complaint against both companies for a deal that eliminated competition. 

Altria, formerly known as Philip Morris Companies Inc., is one of the world's largest producers and marketers of tobacco, cigarettes and related products. It held a small portion of the vaping market, a growing area in which it hoped to expand since sales in traditional tobacco products had been declining. Juul, on the other hand, possessed e-cigarette market share dominance. However, it faced publicity challenges about underage addiction and lung-illness outbreak linked to some THC e-cigarette products. For both companies to sustain their businesses long-term, they entered into a series of agreements. 

In their $12.8M deal in December 2018, Altria would no longer compete in the vaping market and in turn would receive 35% Juul ownership, the largest portion retained by a shareholder. The tobacco giant would give up prime store shelf space, surrender its intellectual property licenses, and stop any research and development. The FTC, however, found that "Altria’s acquisition of JUUL shares and the associated agreements together constitute an unreasonable restraint of trade in violation of...the Sherman Act..., and substantially lessened competition in violation...the Clayton Act." Ian Conner, Director of the Bureau of Competition said, “For several years, Altria and JUUL were competitors in the market for closed-system e-cigarettes. By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became JUUL’s largest investor. Altria and JUUL turned from competitors to collaborators by eliminating competition and sharing in JUUL’s profits.” The FTC complaint concluded that, "...consumers lost the benefit of current and future head-to-head competition between Altria and [Juul], and between Altria and other competitors." Because the Juul-Altria deal substantially lessened competition and tended to create a monopoly, a nationwide class of Juul purchasers is pursuing antitrust litigation.

Juul vaping products

Juul vaping products

The FTC states that "antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age. Yet for over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up." In the 1990s, Kodak, a pioneer in the film and camera industry, fell under antitrust scrutiny because it controlled the markets for the parts and servicing of photocopiers and other business equipment. Because it restricted access to the replacement parts and tied the sale of service for Kodak machines to the sale of parts, it monopolized the market for service. Monopolies drive out the competition and leave consumers with low-quality products at higher prices. Antitrust laws also motivate corporations to constantly look for new strategies and methods to make products or research alternatives to obtain a fair business advantage. Before it experienced the setback with its business machines, Kodak was the first to develop colored film. Customers could send it in and the company would process and deliver it. For a short time, it enjoyed over 90% market share until other companies devised similar products. In upholding antitrust laws, the FTC monitors mergers and acquisitions that eliminate competition and lead to price-fixing, -cutting, or -gouging. This occurred in 1900s when Standard Oil bought some of its competitors and used control over refineries and pipelines and special discounts with railroads to drive prices down, forcing smaller companies out of business and creating a monopoly. To maintain fair competition, the Supreme Court ultimately broke up the company into 34 independent companies and competitors. Despite changing markets, the FTC will continue to protect free and open markets needed for a vibrant economy.