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Juul, Altria must face most antitrust claims over 2018 deal

3 minute read

Juul brand vape cartridges for sale at a shop in Atlanta, Georgia, September 26, 2019. REUTERS/Elijah Nouvelage

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  • Orrick, Herrington & Sutcliffe LLP
  • Cleary Gottlieb Steen & Hamilton LLP
  • Joseph Saveri Law Firm
  • Kaplan Fox & Kilsheimer LLP

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(Reuters) - A federal judge has allowed most claims to go forward in antitrust litigation by e-cigarette purchasers accusing Juul Labs Inc and Altria Group Inc of working together to suppress competition in the e-cigarette market.

U.S. District Judge William Orrick in San Francisco ruled Thursday that the plaintiffs - representing proposed classes of direct purchasers, individual indirect purchasers and reseller indirect purchasers - had successfully alleged that they had been harmed by anticompetitive conduct related to Altria's 2018 acquisition of a 35% stake in Juul.

David Gelfand of Cleary Gottlieb Steen & Hamilton, a lawyer for Juul, declined to comment. Altria and its attorney Beth Wilkinson of Wilkinson Stekloff did not immediately respond to requests for comment.

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Joseph Saveri of the Joseph Saveri Law Firm, a lawyer for the direct purchasers, and Robert Kaplan of Kaplan Fox & Kilsheimer, a lawyer for the indirect purchasers and resellers, also did not immediately respond to requests for comment.

The direct purchasers are consumers who ordered Juul products through its website, while the indirect purchasers bought them from retailers. The resellers are businesses that bought Juul products indirectly.

The plaintiffs claim that Altria, threatened by competition from Juul's popular e-cigarettes, agreed to discontinue its own MarkTen Elite e-cigarette line in exchange for making an investment in Juul that would allow it to profit from its rival's success. They say that reduced competition in the e-cigarette market led to fewer choices and higher prices.

The allegations are similar to those in a lawsuit brought in April 2020 by the U.S. Federal Trade Commission, which is in its early stages.

The 2018 investment deal also plays a key role in a separate product liability multidistrict litigation accusing Juul and Altria of fueling an epidemic of addiction among minors. Plaintiffs in that case claim records related to the deal show that Altria knew Juul's marketing targeted teenagers.

In seeking to dismiss the antitrust case, the defendants argued that real-world data showed Juul actually lowered its prices and lost market share to other competitors following the deal, meaning the plaintiffs could not have suffered an antitrust injury.

Plaintiffs, however, said that a short-term loss of market share was caused by Juul's withdrawal of fruit-flavored products under pressure from the U.S. Food and Drug Administration.

Altria also argued that it had withdrawn MarkTen due to FDA pressure related to youth vaping. Plaintiffs countered that was merely a pretext.

Orrick wrote Thursday that, at the pleading stage, it was too early to accept the defendants' interpretation of the evidence.

Orrick did rule in favor of the defendants on several issues. He found that the three named direct purchaser plaintiffs had agreed to arbitration when they bought from Juul's website, and so could not represent the class. However, citing a ruling he had made earlier in the case, the judge said plaintiffs who made their purchases before August 9, 2018, when Juul changed its website to make the arbitration agreement more prominent, were not bound to arbitrate, and gave the plaintiffs 30 days to substitute suitable class representatives.

Orrick also dismissed claims for injunctive relief, finding that the plaintiffs had not pleaded future injury, though he gave the plaintiffs leave to amend.

The case is In re Juul Labs Inc Antitrust Litigation, U.S. District Court, Northern District of California, No. 20-cv-02345.

For direct purchaser plaintiffs: Joseph Saveri of the Joseph Saveri Law Firm

For indirect purchaser plaintiffs and reseller plaintiffs: Robert Kaplan of Kaplan Fox & Kilsheimer

For Juul: David Gelfand of Cleary Gottlieb Steen & Hamilton

For Altria: Beth Wilkinson of Wilkinson Stekloff

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Our Standards: The Thomson Reuters Trust Principles.

Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.

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