FTC Sues to Undo Altria's $12.8 Billion Investment in Juul

The Federal Trade Commission cites violations of federal antitrust laws in seeking to unwind Altria's investment in e-cigarette maker Juul.
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The Federal Trade Commission filed a lawsuit to undo Altria's  (MO) - Get Report $12.8 billion investment in e-cigarette maker Juul Labs, citing violations of federal antitrust laws.

“Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul’s profits,” said Ian Conner, director of the agency’s Bureau of Competition, in a statement.

The FTC argued in its complaint that Altria shut down its own e-cigarette brands, MarkTen and Green Smoke, before acquiring its stake in Juul.

The lawsuit stems from a $12.8 billion investment Altria made in Juul in December 2018. The investment gave Altria, the maker of Marlboro cigarettes, a stake of 35% in Juul.

The FTC’s five commissioners voted unanimously to file a complaint in its administrative court and a trial has been scheduled to begin on Jan. 5, 2021, Bloomberg reported.

“We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts,” said Altria’s general counsel, Murray Garnick. “We are disappointed with the FTC’s decision, believe we have a strong defense and will vigorously defend our investment.”

Altria in January said it was taking a second multi-billion-dollar charge on its investment in Juul and was scaling back the services it provided the company amid ongoing regulatory and medical scrutiny of the e-cigarette market.

In its results for the fourth quarter, Altria revealed that the value of its stake in Juul fell by $4.1 billion, and it was now valuing the e-cigarette maker at about $12 billion, down from its $38 billion valuation when it first invested in Juul.

In October, Altria wrote down its Juul stake by $4.5 billion.

Shares of Altria declined 0.56% to $37.40 in premarket trading Thursday. The stock closed at $37.61 in the previous session, down 2.74% as the broader market swooned.