On June 28, 2021, North Carolina Attorney General Josh Stein announced the state’s settlement of its lawsuit against Juul Labs over the company’s marketing to youth. The settlement is the first of many that may be reached as a result of several lawsuits against Juul filed by state attorneys general on a variety of claims.

The North Carolina settlement consists of three major components: (1) monetary payments; (2) public conduct requirements and restrictions; and (3) creation of a document depository.

The settlement both sets the stage for positive, public-health oriented outcomes, and also contains provisions that could be improved upon in later settlements and that represent missed opportunities to address public health and health equity. For instance:

  • Payments should be made in perpetuity. Under the North Carolina settlement agreement, the total $40 million payment is broken down into six separate installments. Not only are these payments paltry in comparison to the company’s multibillion dollar value (even despite recent plunges in sales), but the state has the power to waive the last two payments. In contrast, the tobacco Master Settlement Agreement requires that major cigarette companies to make monetary payments to the settling states for as long as they sell cigarettes in the U.S. The Juul payment provision is insufficient to significantly impact long-term prevention efforts.
  • Payments should be clearly earmarked with a meaningful portion dedicated to priority populations, such as American Indian/Alaska Native, African American, and LGBTQ+ communities that have been targeted by Juul. The money Juul is required to pay North Carolina is not designated for any specific use. The settlement states that the funds should be used “to the maximum extent possible” for cessation programs, research, the creation of a document depository, and to cover litigation costs (provided those programs do not “directly or indirectly disparage” the company—an alarming limitation that mirrors a provision in the tobacco MSA). While imposing specific requirements on how the funds can be used may be difficult from a legal standpoint, to the greatest extent possible, settlement funds should be directed to programs that benefit the communities that have been disproportionately harmed by Juul’s tactics.
  • Restrictions on charitable donations and sponsorships should have zero exceptions. The North Carolina settlement agreement allows Juul to provide financial support to nonprofits or charitable entities or events provided Juul itself does not display products or branding or pay others to promote its products. Any exceptions to the donation/sponsorship prohibition should be eliminated from future agreements.
  • Marketing restrictions leave too much room for Juul to exercise discretion. The restrictions on Juul’s use of promotional activities gives the company wide latitude to determine what promotional content, including marketing or advertising, is likely to appeal to people under the minimum legal sales age. Juul has long demonstrated its poor judgment on this issue; stricter guard rails on the company’s marketing practices would better protect youth. Restrictions on social media platforms are also limited to internet-based platforms, which appears to exclude more popular downloadable apps.                             
  • Purchase quantity limitations are far too large to have practical public health impacts. The agreement restricts the Juul products a customer can purchase on a Juul-owned website to two Juul devices and 60 pods per month. Further, the company is required to ensure that retail sales of more than one device and/or16 pods in a single transaction are blocked. Given that the amount of nicotine in one pod is equivalent to between one and two cigarette packs, with some variability, this limitation would need to be significantly lower to help prevent bulk purchases for illegal resale.
  • Juul should not be authorized to conduct its own compliance checks. The settlement agreement requires that Juul conduct its own compliance checks, impose penalties on retailers, and report to the state on compliance. This is a textbook example of the fox guarding the henhouse—compliance checks should be conducted by an entity with no financial incentive to misrepresent compliance data and with a public health mission.
  • Age verification procedures mirror Juul’s existing voluntary efforts. The age verification procedures in the settlement agreement have already been voluntarily adopted by Juul. Further, compliance check tracking facilitates the company’s collection of purchaser data and tracking. Age verification procedures should be governed by third parties or government entities and not handed to the company to propose and enforce.
  • Restrictions on health-based claims simply mirror what is already required at the federal level. All restrictions related to health or therapeutic claims (so-called “modified risk” claims) incorporate provisions and restrictions already imposed by the Family Smoking Prevention and Tobacco Control Act. That law requires that a company receive affirmative marketing authorization before marketing products with a claim that they are safer or less harmful than other tobacco products.
  • The document repository has potentially concerning limitations. Although the settlement draws upon the tobacco Master Settlement Agreement in its requirement that Juul disclose certain documents, the settlement language contains exemptions for categories of documents that could limit the scope of documents that the company discloses. For example, documents that “cannot be disclosed without violating the rights of third parties” or trade secret material, including documents that “could be used to create counterfeit or black market JUUL products,” may be withheld in their entirety. Further, the documents will be housed at a yet-to-be-determined North Carolina public institution, meaning the database’s functionality, searchability and ultimate utility to the public health community remain to be seen. Finally, no funding is dedicated to assist in the creation or maintenance of the document depository, potentially crippling its development and maintenance.

Some additional considerations to keep in mind:

  • The settlement has a so-called “most favored nation” clause. This is a clause in a contract that, in theory, allows the state of North Carolina to reap the benefits of better settlement provisions brokered by other states.
  • The settlement does not supplant individual claims or undercut the ongoing massive Multi-District Litigation in California. Many lawsuits have been brought against Juul by individuals, schools, Tribes, and other entities. The North Carolina settlement has no impact on those cases or their likelihood of success.

 

The upside of the settlement is that other states can go further. This is simply the first settlement out of the gate. It does not, and should not, stymie other states from going further and pursuing monetary and marketing restrictions that will have a broader impact on public health.

By Kyra Hill, Staff Attorney
July 15, 2021