COVID-19 Should Not Delay JUUL, Altria Hearings, Says FTC

    Tobacco manufacturer Altria and e-cigarette company JUUL recently sought to delay the April 2021 start of a virtual Federal Trade Commission (FTC) evidentiary hearing, arguing that a three-month delay might further reduce the risk of COVID-19 exposure. The trial in question will examine the legality of Altria’s $12.8 billion investment in JUUL. Staffers at the Federal FTC, however, argued that such hopes were “speculative” and that the hearing should proceed as scheduled.

    Allegations Against JUUL & Altria 

    In April 2020, the FTC filed an administrative complaint against Altria Group, Inc. and JUUL Labs, Inc. The complaint alleged that Altria had abandoned its own e-cigarette development and acquired a 35% stake in JUUL, “by far the dominant player” in the e-cigarette market. According to the FTC, Altria’s investment constituted a violation of federal antitrust laws.

    In its complaint, the FTC also explains that prior to this deal, Altria and JUUL were direct competitors in the e-cigarette market. The two companies monitored each other’s progress and sought to outdo the other in innovation and marketing. Although Altria was able to leverage its already-existing presence in the tobacco market to maintain an edge for some time, JUUL had become the top-selling e-cigarette nationwide by late 2018.

    Rather than innovate further, the FTC claims, Altria dealt with JUUL’s newfound market dominance by seeking to make a deal with JUUL. As part of this deal, Altria shut down its e-cigarette business. A few weeks later, JUUL and Altria announced that Altria had become JUUL’s single largest shareholder, acquiring approximately 35% of JUUL’s stock at a cost of over $12 billion.

    The agreement also included opportunities for Altria to appoint members to JUUL’s Board of Directors, an agreement by Altria not to compete with JUUL for six years, and access to various support services. The FTC alleges that this agreement, however, violates several federal antitrust laws. This includes violations of Section 1 of the Sherman Act, Section 5 of the FTC Act, and Section 7 of the Clayton Act.

    Developments in the Case

    At one point, the evidentiary hearing was scheduled for January 5, 2021. This date was moved to mid-April 2021 in response to spiking coronavirus case numbers. Meanwhile, several aspects of discovery continued to move forward, with the parties availing themselves of electronic options when necessary. For example, a November 23, 2020 stipulation determined that depositions conducted in the case would be done remotely. On January 21, 2021, the parties filed a joint motion to extend certain discovery deadlines, with the understanding that an evidentiary hearing was still scheduled for April 13, 2021.

    The Office of Administrative Law Judges informed the parties by email that they should expect the April evidentiary hearing to be conducted via videoconference. In response, the FTC’s complaint counsel focused on preparing for virtual proceedings.

    Arguments Surrounding Postponement

    On January 15, 2021, JUUL and Altria asked for another postponement to July 2021. JUUL and Altria sought a further delay in part because they argue that the vaccine rollout, plus the increase in cases in many states, indicate that it would be prudent to wait. The parties also raised concerns that a virtual hearing would make it too difficult for the administrative law judge to evaluate witness testimony.

    The FTC’s complaint counsel, however, argued that neither of these conditions justifies pushing back the date of the April evidentiary hearing. Rather, they noted that the appropriate response was to hold virtual proceedings, rather than postpone the hearing yet again.

    The FTC noted that even an in-person hearing held in July might not be completely safe from COVID-19, given that vaccine rollout might not be complete at that time. Counsel dismissed JUUL and Altria’s concerns about virtual proceedings as “baseless,” noting that they have worked remotely since March 2020 and could continue to do so effectively in this case. “It defies reason for respondents to argue that although the entire legal profession has adapted to remote proceedings and preparations for proceedings, the five law firms representing Altria and JUUL are unable to do so,” stated the FTC’s complaint counsel.

    The Latest for Altria & JUUL

    On February 11, 2021, the FTC filed another motion protesting the defendants’ pretrial actions. This time, the FTC is seeking to block Altria from clawing back nearly 10,000 pages in documents procured during the FTC’s initial investigation. According to the FTC, Altria has waived privileges to these documents since “Respondent did not take even minimally reasonable steps to prevent disclosure of the purportedly privileged documents that it produced.” With an already contentious pretrial period, this FTC matter will likely continue to have an eventful path to resolution.