According to media reports such as Forbes and the financial times, the U.S. Federal Trade Commission (FTC) has filed a lawsuit to cancel the $12.8 billion investment made by tobacco giant Altria to Juul in 2018.
At the end of 2018. Altria announced to acquire 35% of the shares of Juul, the e-cigarette giant, at the cost of US $12.8 billion. At that time, Juul was valued at US $38 billion, becoming the fastest-growing technology start-up company at that time.
The FTC alleges that the investment was announced in December 2018 as a violation of federal antitrust law by eliminating competition in the e-cigarette market.
This is the latest blow to deals that have been in trouble since 2018.
The deal gives Altria a 35% stake in Juul, but has yet to be finalised, pending a final antitrust law.
As part of the investment, Altria group will be able to appoint a Juul Board representative and convert its shares into voting securities. But the Wall Street Journal reported in January that these matters had been put on hold because the FTC had been reviewing the investment.
As competitors, Altria and Juul closely monitor each other’s e-cigarette products and prices and compete for innovation, FTC said in a press release announcing the lawsuit.
FTC said Altria used its position as a major tobacco seller to ensure better shelf space for Juul products in stores across the country. FTC further said that after Juul gradually occupied the dominant position in the U.S. e-cigarette market, Altria, which has been producing its own e-cigarette equipment, agreed not to participate in the e-cigarette market competition in exchange for a large number of ownership rights and interests of Juul.
In the lawsuit, FTC said Juul’s electronic cigarette products pose a major threat to Altria’s market dominance. Juul used to be a competitor of Altria’s own electronic cigarette products, mark ten and green smoke. But in 2018. Altria stopped producing e-cigarettes and became Juul’s largest investor.
In a statement, Ian Connor, director of the FTC Competition Bureau, said Altria and Juul changed from competitors to partners by eliminating competition and sharing Juul’s profits.
According to FTC, Altria leverages its leverage as a top tobacco company to gain favorable shelf space for Juul products in stores across the United States. And claims that Altria will deal with the threat of competition by agreeing not to compete in exchange for Juul’s substantial ownership rights. This relationship helped Juul become the top e-cigarette brand in the United States.
At present, Altria and Juul have not responded to this matter.