Tuesday, March 5, 2024

Altria and Juul respond to FTC antitrust allegation: merger is conducive to market competition


Altria group and Juul recently claimed that FTC’s antitrust complaint was wrong. Both sides said that the investment and merger activities were conducive to market competition and to consumers.

Altria Group Inc. and Juul labs, Inc. responded to FTC’s April complaint by saying the above.

FTC accused Altria of acquiring 35% of Juul and the corresponding agreement violated the Sherman Antitrust Act and Clayton Act.

The Committee believes that the transaction illegally reduces competition and consolidates the e-cigarette market, and will allow the two companies to split the resulting monopoly profits.

Altria’s response began with a list of business reasons for its recent e-cigarette market trends.

The measures include withdrawing their e-cigarette products after claiming that consumer interest is low, licensing the Chinese company’s bomb e-cigarettes, suspending all its e-cigarette businesses, and agreeing to invest $12.8 billion in Juul in exchange for a 35% stake in December 2018.

Altria argued that the FTC complaint was based on a flawed premise that consumer welfare would be improved if it continued to sell products that it concluded would not ultimately pass FDA review.

The response also accused the Commission of failing to recognize the economic and legal limitations unique to the highly regulated market for nicotine products.

Althea said the fingertips were completely wrong.

Juul made a similar response, pointing out that the core of the Commission’s case was the allegation that Altria had suspended its struggling electronic vaporization products because of its investment in Juul and the relevant agreements between the two parties.

However, it claims that these decisions were made by Altria alone, before the parties even reached an agreement.

The company also said that the problematic Altria product had a small market position and was a factor in Juul’s competitive decision-making.

FTC’s view is different.

According to the complaint and statement on the case, FTC considers Altria and Juul as important competitors in the e-cigarette market, and their competition has brought lower prices and higher quality / more innovative products to consumers. However, when Juul could not be prevented from becoming a leader in the e-cigarette market, Altria group (formerly Phillip Morris) used its large resources to join Juul and withdraw from the e-cigarette market at the same time.

FTC argues that this process reduces competition in the e-cigarette market and leads to illegal monopolies and mergers.

Perhaps stimulated by the FTC challenge, a group of private litigants have made it a task for defendants to commit similar violations of the so-called Sherman Act and the Clayton Act. The defendant has not responded to the class action, which is still before Judge William H. Orrick of the Northern District of California.

Both actions could determine whether Altria can persuade fact finding investigators that its e-cigarette business has actually failed, not just behind its competitors. If it works, then Altria’s business can be solved.

Trading doesn’t reduce competition because it will stop competing in this market anyway. If not, Altria and Juul will try to explain how the deal does not illegally harm competition or consolidate an already highly concentrated market.

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