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FTC files complaint against Altria’s investment in JUUL

The Federal Trade Commission filed a complaint against Altria Group and JUUL labs for violating federal antitrust laws. Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Alexis Keenan break down the details.

Video Transcript

ALEXIS CHRISTOFOROUS: Want to get to Alexis Keenan now. Because, Alexis, outside of the COVID-19 news, we're hearing that the FTC is suing to unwind Altria's $12.8 billion investment in JUUL.

What's happening there?

ALEXIS KEENAN: Yeah, a lot at stake here, Alexis. Yesterday, the FTC they filed an administrative complaint against Altria. And it's over the 35% stake that Altria took in JUUL back when they acquired it in 2018. That was in December of 2018.

Now, the FTC, they claim that this deal is a violation of antitrust law. And the reason they say this is because they say that in exchange for that 35% in JUUL, that Altria gave an agreement that it would not compete with JUUL for a period of six years.

They say that right after that agreement was reached, that weeks later, Altria then started to wind down its own e-cigarettes business. And so it wasn't necessarily competing in the same way that it would have been without this deal.

The FTC says it eliminated competition in the e-cigarettes market, that it caused JUUL to really leap way past its major competitors, which were Altria itself, along with Reynolds, and some others. They say that it also stifled price competition. And a little bit oddly, they say that the race to innovate, which is one of those key things that is examined in an antitrust case, that that is at stake as well.

Now in a statement, Altria's general counsel said this, "we believe that our investment in JUUL does not harm competition and that the FTC misunderstood the facts. We are disappointed with the FTC's decision and believe that we have a strong defense."

They say that they'll vigorously defend its investment. And they do emphasize in their statement that they've now published to their website, saying that it's a minority interest and they're going to fight this action.

Now, as you mentioned, Altria paid $12.8 billion dollars for that stake. But back in January of this year, it was slashed to $4 billion. That was largely in reaction to the troubles that all of the cigarette companies have with the FDA over the last couple years.

If you remember, the agency came down on the manufacturers of these e-cigarettes and vapes for marketing to teens, for marketing to children. Also, a lot of reports and investigation by the FDA after there were reports that people were suffering from seizures and other health problems after using vape products. Now the stock is at about $36 a share today, down from its 52-week high of about $57 per share. It has really been sliding ever since October of 2018, when it started to struggle with all of these problems Alexis?

ALEXIS CHRISTOFOROUS: All right, Alexis. Thank you very much for that.

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