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FTC Sues Altria to Force Unwinding of Its $12.8 Billion Juul Investment

By Rich Duprey – Apr 2, 2020 at 9:42AM

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The regulatory agency says the deal violated antitrust laws.

Altria (MO -3.67%) is being sued by the Federal Trade Commission for its $12.8 billion investment in Juul Labs in 2018 because it supposedly violates antitrust laws.

The regulatory agency wants the tobacco giant to sell its 35% stake in the leading e-cig manufacturer because its actions amounted to a "restraint of trade" in a violation of the Sherman Act and FTC Act, and reduced competition under the Clayton Act.

Altria disputes the charge saying "the FTC misunderstood the facts" and that it is prepared to vigorously defend itself against the suit.

Older couple with Juul electronic cigarette

Image source: Juul Labs. 

Under scrutiny from all sides

The FTC complaint alleges that prior to Altria's investment in Juul, the two were competitors that actively innovated their products and kept track of prices. It charges that after Juul surged to the forefront of popularity, at one point owning 80% or more of the e-cig market, Altria chose to no longer compete against it and wound down its MarkTen e-cig business.

Weeks later, the tobacco giant invested in Juul, was able to appoint an observer to Juul's board, and agreed not to compete against Juul for six years.

Because Juul is far and away the industry leader with both adults and teens, it has been the subject of regulatory ire. The Food & Drug Administration targeted the company for enforcement actions, the FTC began investigating Juul's marketing practices, and the SEC began looking into Altria's investment

The simultaneous attacks on the e-cig maker led Altria to eventually write down over $8 billion worth of its investment in the company.

Rich Duprey owns shares of Altria Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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