Altria Group has decided to compete with Juul Labs, as the e-cigarette maker faces a potential ban of its products in the United States, reports The Wall Street Journal.
According to a filing with the Securities and Exchange Commission, Altria has exercised its option to permanently terminate its non-competition obligations to Juul Labs, losing the right to the board designation and significantly reducing its voting power.
“We believe the decision to terminate our noncompete maximizes our flexibility to compete in the e-vapor space while maintaining our economic interest in Juul,” an Altria spokesman told The Wall Street Journal.
The move comes almost four years after the tobacco giant paid nearly $13 billion for a 35 percent stake in the e-cigarette manufacturer that at the time was dominating the market.
Juul’s value has declined considerably since then, as the company faced scrutiny and litigation over its marketing practices. In early September, Juul Labs agreed to pay nearly $440 million to settle a two-year investigation by 33 U.S. states into the marketing of its vaping products, which critics have blamed for sparking a surge in underage vaping.
On June 23, the U.S. Food and Drug Administration ordered Juul Labs to pull its e-cigarettes from U.S. store shelves, saying the e-cigarette manufacturer had submitted insufficient evidence that they were “appropriate for the protection of the public health.” A federal appeals court then granted Juul Labs an emergency stay of the order to give the judges time to evaluate the merits of Juul’s appeal.
In July, Altria valued its Juul stake at $450 million—below a threshold that allowed Altria to exit a noncompete agreement and bring to market its own e-cigarettes. Altria Chief Executive Billy Gifford noted at the time that the tobacco giant now had the freedom to explore acquisitions of other e-cigarette brands.
Ending its noncompete obligations to Juul Labs allows Altria to go it alone or pursue other vapor companies, such as Njoy, which has received FDA marketing authorization for several of its products. In July, The Wall Street Journal reported that Njoy had hired bankers for a possible sale of the company.