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$40 million settlement reached between Juul Labs and NC
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$40 million settlement reached between Juul Labs and NC

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JUUL

A Juul Labs Inc. e-cigarette, USB charger and flavored pods. North Carolina is the first state to sue Juul over accusations that it targets underage youths with its products.

Top-selling electronic cigarette manufacturer Juul Labs Inc. has agreed to pay $40 million over six years to settle a legal complaint by state Attorney General Josh Stein.

Stein announced Monday a consent order that will require Juul “to make drastic changes to the way it conducts business.” Another round of pre-trial motions was scheduled for Monday.

Stein said North Carolina is the first state “to successfully hold Juul accountable for its role in spiking teen use and dependence on e-cigarettes.”

Juul said in a statement that the settlement “is consistent with our on-going effort to reset our company and its relationship with our stakeholders as we continue to combat underage usage and advance the opportunity for harm reduction for adult smokers.”

Stein filed in May 2019 a lawsuit targeting Juul’s business and marketing practices, most notably accusing Juul of violating the state’s Unfair and Deceptive Trade Practices Act.

In May, a Durham County Superior Court judge ruled Juul had violated court orders by destroying documents and deleting social media posts.

“For years, Juul targeted young people, including teens, with its highly addictive e-cigarette,” Stein said.

“It lit the spark and fanned the flames of a vaping epidemic among our children — one that you can see in any high school in North Carolina. I want kids not only protected from COVID when they go back to school, but also vaping.

“This win will go a long way in keeping Juul products out of kids’ hands, keeping its chemical vapor out of their lungs, and keeping its nicotine from poisoning and addicting their brains,” Stein said.

Stein said his office will continue to work “to turn the tide on a teen vaping epidemic that was borne of Juul’s greed.”

The $40 million settlement will be dedicated to funding programs to help people quit e-cigarettes, prevent e-cigarette addiction, and research e-cigarettes.

Stein said Juul has agreed to settlement terms that are enforceable in N.C. courts.

Juul said it will work with Stein and other manufacturers “on the development of potential industry-wide marketing practices based on science and evidence.”

“In addition, we support the attorney general’s desire to deploy funds to generate appropriate science to support North Carolina’s public health interventions to reduce underage use.”

Juul said the settlement also reflects recent internal initiatives that include ceasing the distribution of non-tobacco, non-menthol flavored products in advance of Food and Drug Administration guidance, and halted all mass market product advertising.

“This settlement is another step in that direction,” Juul said.

The attorney general’s office said that most of its documents in the Juul legal complaint will be made public Thursday and housed in a depository maintained by a North Carolina public university.

“These documents will increase transparency around Juul’s marketing and research and will help prevent this kind of epidemic from happening again,” according to the attorney general’s news release.

Pre-trial hearing

The Durham Superior judge ruled May 19 in favor of several pre-trial motions by the attorney general’s office regarding Juul’s actions. He said the company should face sanctions that could run into the millions of dollars.

According to The News & Observer in Raleigh, the judge determined Juul had violated the Unfair or Deceptive Trade Practices Act — which can carry an up to $5,000 fine for each violation — thousands of times.

North Carolina was the first state to sue Juul over accusations that it targets underage youths with its products.

Juul said in May that it has only sold tobacco and menthol flavors in North Carolina since 2019, that the social media posts in question were deleted before there was a trial, and that it also stopped all marketing of its products in 2019.

The N.C. lawsuit is similar in approach to the avalanche of county- and state-level lawsuits filed against opioid manufacturers to thwart product usage.

“Overall, the agreement does not look onerous as the financial penalty is comparatively small and stretched out over several years,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.

“The restrictions on marketing also seem to be nothing beyond what is already in place via FDA and other rules.”

Scott Ballin, past chairman of the anti-smoking alliance Coalition of Science or Health, said this settlement “could have a domino effect with other AG’s moving to settle with or go after Juul, possibly adding additional more onerous requirements.”

“I do understand that FDA’s authority is acknowledged in a number of areas.

“But, at the same time, this consent order encourages (anti-tobacco) organizations to continue to push for regulatory policy changes at the state and local levels.”

Juul background

Juul entered the mainstream retail marketplace in 2015. It has shown that a startup manufacturer can compete with the Big Three manufacturers: Philip Morris USA, R.J. Reynolds Tobacco Co. and ITG Brands LLC.

The Juul e-cigarette is sold in the form of a pen or a USB flash drive that’s easy to use — and hide — because the vapor typically does not have a smell and quickly dissipates.

Juul held a 74.6% U.S. e-cig market share at the time of Stein’s lawsuit.

However, e-cigarettes sales have slumped since the Food and Drug Administration implemented in February 2020 its latest round of heightened regulations on the products.

Those restrictions foremost required manufacturers of cartridge-based e-cigarettes, such as Juul Labs, R.J. Reynolds Vapor Co., NJoy and Fontem Ventures, to stop making, distributing and selling “unauthorized flavorings” or risk enforcement actions.

As of the Nielson convenience store survey as of June 5, Juul had a 49.7% market share, followed by R.J. Reynolds Vapor Co.’s Vuse at 33.3%.

Youth e-cigarette use dropped slightly in 2020, according to the latest version of a national report on alcohol, drugs and tobacco.

The 2020 Monitoring the Future study, released in December by the University of Michigan, found that 28.2% of 12th-graders said they vaped at least once during the 30-day period. That’s down from a record high of 30.9% in 2019.

Researchers began reviewing vaping in 2015 when the rate was 16.3%.

In the 2020 National Youth Tobacco Survey report by the FDA and federal Centers for Disease Control and Prevention, 19.6% of high schoolers said they had used an e-cigarette, down from 27.5% in 2019.

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@rcraverWSJ

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