Juul Labs has agreed to pay a US$462mln settlement to seven US states for its role in creating an underage e-cigarette "epidemic".
Under a deal struck with attorney generals in the states, the e-cigarette manufacturer will be required to ensure its products are secured behind retail store counters with cigarettes and that the age of online customers is verified.
The case had been led by New York attorney general Letitia James and California's Rob Bonta, with multiple lawsuits alleging that the company violated state laws by targeting young people through its advertising and promotional campaigns.
In November 2019, James, Bonta and others sued the company for deceptive and misleading marketing, saying it "glamorized vaping" with adverts featuring young models using "fruity, sweet, and minty flavors that appealed to youth", and "misled consumers about the nicotine content of its products, misrepresented the safety and therapeutic value of its products by stating that they were safer than cigarettes, and failed to prevent minors from purchasing its products in stores across the country".
Studies cited by the New York attorney general showed that after Juul launched in 2015, e-cigarette use in high school students increased three-fold, from 8.1% in 2014 to 23.5% by 2018.
Bonta's team noted that many Juul users continue to smoke cigarettes and that children who were not likely at risk to start smoking cigarettes have done so as a result of their use of nicotine-containing e-cigarettes.
Research of the company’s sales between 2017 and 2019, when it was hit by a crackdown by the US Food and Drug Administration, found that its growth was primarily driven by users under the age of 21.
Juul is required to make its first payment to the states within 90 days, followed by seven annual payments, with the settlement also negotiated by the states of Colorado, Illinois, Massachusetts and New Mexico and the District of Columbia.
Juul, which was part-owned by Altria Group, Inc. (NYSE:MO) before trading its equity for nonexclusive rights to some intellectual property related to heated tobacco devices, came close to filing for bankruptcy in November last year but arranged an equity raise in December.