E-Cigarette Maker To Pay Over $430M To Settle Multi-State Vaping Inquiry, Cannabis Investors Need To Pay Attention

E-cigarette producer Juul Labs agreed to pay $438.5 million to 34 states and territories to sort out a two-year bipartisan investigation into its marketing and sales practices.

The multi-state inquiry, which also included Puerto Rico was led by Connecticut. It found that Juul was “willfully engaging” in advertising campaigns that targeted youth, which led to the company’s domination in the vaping market, Green Market Report reported.

What Happened

The news came on the heels of the FDA decision in June to ban the sale of Juul products in the U.S. due to an alleged lack of data on the products’ toxicological profile. The move was part of the agency’s plan to crack down on businesses that sell vaping products without FDA approval, considering that e-cigarettes and e-liquids that contain nicotine have been considered a prescription-only medicine since 2021.

However, according to the subsequent federal court ruling, Juul was approved to continue selling its product, leaving the ban challenged.

Connecticut Attorney General William Tong, who led the investigation alongside Texas and Oregon, said on Tuesday that the company deceived consumers about the product’s nicotine content and level of addictiveness.

“JUUL’s cynically calculated advertising campaigns created a new generation of nicotine addicts,” Tong said in a press release. “They relentlessly marketed vaping products to underage youth, manipulated their chemical composition to be palatable to inexperienced users, employed an inadequate age verification process, and misled consumers about the nicotine content and addictiveness of its products.”

The Settlement

Besides financial compensation, the settlement obliges the e-cigarette maker to follow a series of rules that significantly curb the company’s marketing and sales practices.

“Through this settlement, we have secured hundreds of millions of dollars to help reduce nicotine use and forced JUUL to accept a series of strict injunctive terms to end youth marketing and crack down on underage sales,” Tong continued.

Juul agreed to withhold from:

  • Youth marketing
  • Funding education programs
  • Depicting persons under age 35 in any marketing
  • Use of cartoons
  • Paid product placement
  • Sale of brand name merchandise
  • Sale of flavors not approved by the FDA
  • Allowing access to websites without age verification on a landing page
  • Representations about nicotine not approved by FDA
  • Misleading representations about the nicotine content
  • Sponsorships/naming rights
  • Advertising in outlets unless 85% of the audience is adult
  • Advertising on billboards
  • Public transportation advertising
  • Social media advertising (other than testimonials by individuals over the age of 35, with no health claims)
  • Use of paid influencers
  • Direct-to-consumer ads unless age-verified
  • Free samples

What’s Next?

It would take roughly 3-4 weeks for states to finalize the process and execute the settlement. In addition, Juul agreed to pay the total sum over the next six to ten years.

If the company opts to extend the payment period up to ten years, it would be required to pay a total of $476.6 million to the parties in the case.

Which Companies Should Take Note

Considering that vaping has become popular among cannabis users, investors in companies that produce vaping devices would be wise to take note.

Some of the companies that have expanded into the vaping market are Greenlane Holdings, Inc. GNLN and Canopy Growth Corporation WEED CGC, which partnered with Storz & Bickel in 2019 to distribute its vaporizers throughout the United States, TILT Holdings Inc. TILT TLLTF via its subsidiary Jupiter Research, and Flora Growth Corp. FLGC through the acquisition of Vessel brand, to name a few. Other vape producers that operate within the cannabis space include Puffco, DynaVap, Grenco Science Inc, Cilicon, Ardent Cannabis, CCELL, and the Canadian manufacturer of vaporization hardware Green Tank Technologies.

Photo: Courtesy of Chiara Summer on Unsplash

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