OKLAHOMA CITY — Oklahoma is one of 33 states that accepted a $438.5 million agreement “in principle” with Juul Labs to settle a two-year investigation of the electronic cigarette manufacturer’s “relentless” marketing to underage users.
Launched in 2015, Juul once controlled more than 75% of the U.S. e-cigarette market.
The multistate investigation revealed that Juul “rose to this position by willfully engaging in an advertising campaign that appealed to youth, even though its e-cigarettes are both illegal for youth to purchase and unhealthy for youth to use,” state Attorney General John O’Connor said.
The states are finalizing and executing the settlement documents, a process that takes approximately three to four weeks. The $438.5 million would be paid out over a period of six to ten years, with the amounts paid increasing the longer the company takes to make the payments. If Juul chooses to extend the payment period up to a decade, the final settlement would reach $476.6 million.
Both the financial and injunctive terms exceed any prior agreement Juul has reached with states to date. Juul previously settled lawsuits in Arizona, Louisiana, North Carolina and Washington.
The settlement total amounts to approximately 23% of Juul’s U.S. sales of $1.9 billion last year.
Oklahoma will receive approximately $8.9 million from the settlement, but that could grow to almost $9.7 million if the payout term is extended, according to Rachel Roberts, director of communications for the attorney general.
How those funds will be used has not been decided yet, she told Southwest Chronicle. “As of now, this is only an agreement in principle. In the coming months we will have more information.”
The investigation found that Juul “relentlessly marketed” to underage users with launch parties, advertisements using young and trendy-looking models, social media posts and free samples, O’Connor wrote. “It marketed a technology-focused, sleek design that could be easily concealed and sold its product in flavors known to be attractive to underage users.” Juul also “manipulated the chemical composition of its product to make the vapor less harsh on the throats of the young and inexperienced users,” the attorney general said. To preserve its young customer base, Juul “relied on age verification techniques that it knew were ineffective,” he added.
The investigation further revealed that Juul’s original packaging was misleading in that it did not clearly disclose that it contained nicotine and implied that it contained a lower concentration of nicotine than it did. Consumers were also misled to believe that consuming one Juul pod was the equivalent of smoking one pack of combustible cigarettes.
The company also misrepresented that its product was a smoking cessation device without FDA approval to make such claims.
The multistate settlement will compel Juul to comply with a series of strict terms that “severely limit” their marketing and sales practices, O’Connor said.
In the settlement Juul has agreed to refrain from:
• Youth marketing.
• Free samples.
• Sale of flavors not approved by the federal Food and Drug Administration.
• Misleading representations about nicotine content.
• Depicting persons under age 35 in any marketing.
• Use of cartoons.
• Allowing access to websites without age verification on landing page.
• Advertising in outlets unless 85% of the audience is adult.
• Advertising on billboards or public transportation.
• Social media advertising (other than testimonials by individuals over the age of 35, with no health claims).
• Direct-to-consumer ads unless age-verified.
The agreement also includes sales and distribution restrictions, including where the product can be displayed/accessed in stores, online and retail sales limits, age verification on all sales, and a retail compliance check protocol.
“These are some of the toughest mandates at any point on any industry,” Connecticut Attorney General William Tong said.
Since 2019, Juul has ceased all U.S. advertising and removed its fruit and candy flavors from store shelves. And while Juul’s early marketing program focused on young consumers, the company now pitches its product as an alternative source of nicotine for older smokers.
Oklahoma joined Alabama, Arkansas, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Kentucky, Maryland, Maine, Mississippi, Montana, North Dakota, Nebraska, New Hampshire, New Jersey, Nevada, Ohio, Oregon, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, Wisconsin and Wyoming in the settlement agreement. The investigation was led by Connecticut, Texas and Oregon.
Although the settlement concludes one of Juul’s biggest legal battles; the company still faces nine other state challenges and a consolidated class action lawsuit from individuals, school districts, and local governments.
Juul also is still locked in a battle with the FDA. Earlier this year the FDA moved to ban all Juul e-cigarettes from the market, and Juul challenged that effort in court.