Juul Labs, Inc. Agrees to Settle
Juuls are a popular variety of e-cigarette: sleek, battery-powered devices that contain nicotine and are inhaled like regular cigarettes. Using a Juul is also known as vaping, because a user heats the contents and then puffs a cloud of vapor. At launch, Juuls carried a high amount of nicotine per vape, compared to other types of e-cigarettes and cigarettes (since then, competitors have increased their nicotine).
The concept for Juul was created at Stanford University in 2005 by James Monsees and Adam Bowen. Their thesis presentation in graduate design school described a sleek, discreet, portable vape pen. Inspired by Nespresso coffee pods and hookahs, their pen heated small pods of flavored tobacco to create inhalable nicotine-laced clouds, without combustion. They referred to the project as a “luxury good” and “the rational future of smoking.”
In 2007, they founded Ploom, in San Francisco. They soon raised money from investors and released the Ploom ModelOne in 2010. By 2011, Ploom had raised $10 million from Japan Tobacco Inc. (JTI) and was selling a $75 device that heated but did not burn “Ploom Pods” within.
After raising almost $5 million, from both venture investors and tobacco companies, Ploom launched its Pax device in August 2013. In February 2015, Monsees and Bowen sold the Ploom brand and vaporizer line to Japan Tobacco Inc (JTI). They rebranded the company as Pax Labs.
How Did Juul Grow So Rapidly?
On June 1, 2015, Pax Labs launched the Juul electronic cigarette (“e-cigarette”) in New York City, with a trendy campaign, driven by influencers and aimed at a young audience. Flavors including mango, mint and creme brulee immediately become popular among teenagers. The company built aggressive ad campaigns, relying heavily on marketing through young celebrities and influencers to get the message out.
Juul caught on in 2016, with sales growing 700%. On July 1, 2017, Monsees and Bowen spun out Juul Labs as an independent company and hired former Pax Labs CEO Tyler Goldman as the CEO of Juul Labs. Sales continued to grow rapidly, reaching a million units in 2017. By 2018, Juul was a teen status symbol and controlled 70% of the e-cigarette market. In December 2018, Altria paid $12.8 billion for a 35% share of Juul.
In 2018, Juul funded school participation in their Education and Youth Prevention Program, whose stated purpose was “to educate youth on the dangers of nicotine addiction” – and claimed the product was “totally safe.” Many teenagers became hooked on the high-nicotine pods. Vape usage by teens grew 78% from 2015 launch to 2018.
The company hired K.C. Crosthwaite, a longtime Altria marketing executive, to take over as CEO in September 2019. James Monsees stepped down from the company in 2020.
Does Juul Cause Health Issues?
In 2019, users began to complain of pneumonia-like symptoms. In August 2019, the U.S. Center for Disease Control (CDC) reported 1,479 cases of vaping-associated lung injury. Congress called the founders to testify about youth vaping. A 2019 Los Angeles Times investigation revealed that Juul’s key ingredient, nicotine salt, contained up to triple the nicotine contained in previous e-cigarettes.
The U.S. Surgeon General has warned about vaping since December 2016. A 2021 study by the American Thoracic Society concluded that a single vaping session can deliver more nicotine than one cigarette to the airways. Studies have now linked e-cigarettes to nicotine addiction, lung damage, heart damage, asthma and mental health problems.
Juul was forced to shut down its social media presence and discontinue most of its flavors in 2019., while the U.S. Food and Drug Administration (FDA) investigated its marketing practices. In June 2022, the FDA rejected Juul’s application to keep its product on the market as a smoking alternative for adults, saying that the company had failed to submit sufficient evidence that the product was safe. The accompanying order to halt sales pushed the company to the verge of bankruptcy.
What Happened With the Juul Lawsuits?
Parents, school administrators and politicians largely blamed the company for a surge in vaping by teenagers. The American Lung Association describes e-cigarette use levels as “epidemic” among youth. Lawsuits followed. Thousands of individuals, as well as multiple government entities, brough suit, challenging the safety of the products, claiming that Juul’s e-cigarettes were no safer than other tobacco products. Numerous investigations were launched into the safety and marketing of Juul products, by agencies including the Federal Trade Commission, the Centers for Disease Control and Prevention, and the Food and Drug Administration.
Though the company has denied it, many of the lawsuits claimed Juul marketed to children, with the goal of addicting customers. New York, for example, brought multiple state claims against Juul, claiming that the company’s advertising campaigns targeted teenagers and its flavors were intended to appeal to underage New Yorkers.
In 2019, the United States Judicial Panel on Multidistrict Litigation (JPMDL) consolidated the 10 actions then pending in the Northern District of California. By 2022, the number of lawsuits in the MDL reached 4,200.
On June 28, 2021, Juul agreed to settle with the state of North Carolina, avoiding a pending jury trial. On September 6, 2022, Connecticut Attorney General William Tong announced that Juul agreed to settle a two-year, bipartisan marketing investigation backed by 33 states and Puerto Rico. As part of that September settlement, Juul agreed to restrict its marketing to young consumers.
On December 5, 2022, Juul agreed to resolve about 5,000 cases, covering two pending bellwether trials and all claims before a San Francisco judge in a federal Multidistrict Litigation. Financial terms of the settlement, which impacts about 10,000 plaintiffs including school districts, local governments and individuals, were not disclosed publicly. Juul reported that settlements included claims from individuals, a consumer class, Native American tribes and local entities including school districts. According to Juul, schools and governments will receive funds to fight nicotine addiction and other health problems. Juul said that it has secured an equity investment to fund a claims process.
On December 12, 2022, Pennsylvania’s Attorney General reported a settlement with Juul for violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.
What Is The Future of E-Cigarettes?
Total e-cigarette unit sales increased by 57.3% between February 23, 2020 and July 10, 2022, according to the CDC Foundation. Disposable e-cigarette sales increased by 161.0% during the period, to almost half of e-cigarette sales.
Though the FDA has tried to crack down on sweet flavored e-cigaettes, disposable sales were dominated by fruit and candy flavors; less than 20% were tobacco, mint and menthol. 85% of young e-cigarette users smoke flavored products. According to Reuters, at least 20 brands sell disposable devices with candy flavors, including “peach blueberry” and “pineapple strawnana.”
As Juul’s brand struggled, R.J. Reynolds’ Vuse brand took significant e-cigarette market share , to a 39.7% share in September 2022, according to Nielsen. Juul fell to 28.1% share. No other brand has a meaningful presence, but Altria is returning to the market. Notably, settlements have not covered claims against Altria, a 35% owner of Juul. In September 2022, after writing down 96% of the value of its Juul investment, Altria announced plans to exit its non-compete agreement and resume production of its own e-cigarettes. Altria marketing emphasizes “that the e-vapor category” “holds promise for harm reduction” for adult vapers.
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