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The US Federal Trade Commission (FTC) has dismissed the antitrust case over the now-defunct no-compete deal between Altria Group and Juul Labs, saying that pursuing the case is “no longer in the public interest”.
The FTC also vacated the February 2022 decision by its chief administrative law judge Michael Chappell that called for the case’s dismissal, which was under appeal. It did so “because the Commission’s dismissal deprived FTC staff attorneys of the ability they would otherwise have had to obtain review of the decision”, according to the new order.
Altria and Juul announced their proposed settlement in March and asked the FTC to dismiss the case, but FTC attorneys opposed and said the settlement proposal “falls woefully short”.
Issued 30th June, the 11-page FTC order rejects Juul and Altria’s argument that the case is moot and instead agrees with FTC attorneys that “there is additional relief that could be granted to remedy an illegal transaction”.
In essence, the case could still have set precedents that would have applied to other similar future situations, giving pursuing it further some worth. The order goes on to criticise both the deal and Chappell’s ruling that it was not illegal.
However, the company’s “full, voluntary unwinding” of Altria’s investment in Juul renders “the pursuit of this proceeding no longer in the public interest”.
Avoiding a major court case
According to the order from commission chair Lina Khan and commissioners Rebecca Kelly Slaughter and Alvaro Bedoya: “None of the business relationships that had triggered the filing of the Complaint remain in place. Simultaneously, the competitive landscape may be in flux, with JLI’s ability to continue marketing its e-cigarette products in the United States in question.”
The FTC contended in an April 2020 lawsuit that the December 2018 deal, which involved Altria buying a 35% stake in Juul in exchange for $12.8bn and agreeing not to compete for six years, was illegal. A finding in the FTC’s favour could have required Altria to sell its stake in Juul.
The new dismissal order rids the companies of a major case that included a multi-week trial with more than 2,480 exhibits and testimony from 37 witnesses.
But, as the order indicates, it does not quell larger problems for Juul regarding its future. The company has settled a slew of lawsuits, but more remain, and the FTC’s dismissal order cites the US Food and Drug Administration’s June 2022 denial of marketing authorisation for all Juul products.
An effort to ‘dispel any ambiguity in future cases’
The order also offers a scathing review of the companies’ former deal and Chappell’s decision, with the commissioners writing: “Agreements by horizontal competitors to divide markets, customers, or territories have long been held per se illegal.”
An alleged agreement that Altria would exit the market and cede it to Juul Labs is functionally indistinguishable from a market allocation scheme, which enforcers and courts have long treated as a per se violation of the antitrust laws.
The commissioners said the “alleged” unwritten agreement for Altria to exit the market “seems to be a naked elimination of competition of a type that warrants per se condemnation”.
The commissioners said their order aimed “to dispel any ambiguity in future cases” by emphasising the need to evaluate “inferences” when considers a claim of a conspiracy. They said Chappell erred by not treating Altria as a current competitor of Juul’s as of the date of the deal, instead of invoking a legal doctrine known as “actual potential competition”.
“We reiterate that antitrust conspiracy evidence must be evaluated in its totality,” the order says.
– Meghann Cuniff ECigIntelligence US legal correspondent
