Lawsuits Claim Juul Labs and Altria Illegally Monopolized the E-Cigarette Market
More than half a dozen class actions allege that Altria, as part of its 2018 agreement to acquire 35% of Juul, agreed to drop out of the closed system e-cigarette market in violation of federal antitrust laws. The lawsuits follow a similar administrative complaint brought by the Federal Trade Commission's filing April 1.
April 22, 2020 at 04:44 PM
4 minute read
The original version of this story was published on The Recorder
Class actions filed this month accuse Juul Labs Inc. and Altria Group Inc. of illegally monopolizing the market for electronic cigarettes in violation of federal antitrust laws.
More than half a dozen lawsuits allege that Altria, as part of its 2018 agreement to acquire 35% of Juul, dropped out of the closed system e-cigarette market. The class actions, filed in the U.S. District Court for the Northern District of California on behalf of a nationwide class of Juul purchasers, come after the Federal Trade Commission on April 1 filed an administrative complaint against both companies for violating federal antitrust laws through two agreements in 2018 and an amended agreement in 2020.
"We view those as three distinct violations that operate to allocate the market between Juul and Altria, and we would regard those as per se violations of Sherman Act that don't require any extensive market analysis," said Hausfeld's Michael Lehmann, in San Francisco, who brought a lawsuit Tuesday.
Residents in New Jersey, New York, Pennsylvania and California, filed the lawsuits behalf of a class of consumers who bought Juul e-cigarettes since either October or December 2018.
Plaintiffs attorney Todd Seaver of Berman Tabacco in San Francisco, who brought a case April 13, declined to comment. Joseph Saveri of San Francisco's Joseph Saveri Law Firm, who filed cases April 14 and April 20, did not respond to a request for comment. Barrett Beasley of Salim Beasley in Natchitoches, Louisiana, who filed a case with Motley Rice on April 7, and Terry Gross of San Francisco's Gross & Belsky, who filed a case Tuesday with Bernstein Liebhard, did not respond to requests for comment.
"We believe this lawsuit is flawed as a matter of fact and law and plan to defend ourselves vigorously," Altria spokesman Steven Callahan wrote in an email.
Juul attorney Gregory Stone, of Los Angeles-based Munger, Tolles & Olson, did not respond to a request for comment.
The antitrust claims add another legal headache to Juul, which faces 440 lawsuits in multidistrict litigation before U.S. District Judge William Orrick of the Northern District of California. Those lawsuits focus on Juul's marketing claims to a class of customers, particularly to youth, and alleged personal injuries such as addiction, seizures and lung problems.
On April 6, lead plaintiffs attorneys in the multidistrict litigation amended their consolidated complaints in the case, adding antitrust allegations to the class action against both Juul and Altria. They also sought to include the new antitrust lawsuits into the multidistrict litigation—a move that both Juul and several of the lawyers who brought this month's class actions have opposed.
"We think the antitrust claims are distinct from the consumer fraud claims that are the subject of the MDL and deserve a separate track of their own, and separate leadership," Lehmann said.
The new lawsuits focus on two agreements in 2018 between Juul and Altria: one in October in which Altria agreed to drop out of the market, and another in December in which Altria bought 35% share of Juul for $12.8 billion. The agreements included a noncompete provision, support services and licensing.
The two companies at first competed in the e-cigarette market, with Altria introducing the MarkTen in 2013. But, by 2018, Juul had 75% of the market, the suits say. Their agreements allowed Altria to appoint an "observer" to its board of directors.
In January, the suits say, the companies amended the agreement to allow Altria to appoint two of the five members of a new Litigation Oversight Committee and one of three members of a litigation subcommittee, which, by unanimous vote, could change Juul's outside counsel.
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