Health and Science

Altria confirms FTC investigation of Juul as agency scrutinizes role in executive shake-up at vaping company

Key Points
  • The FTC is scrutinizing Altria's role in the departure of Juul's CEO, Altria disclosed Thursday in a regulatory filing.
  • Longtime Altria executive K.C. Crosthwaite succeeded Kevin Burns as Juul CEO last month.
  • Altria also confirmed the FTC's investigation of Juul.
Juul Labs signage is seen in the window of a store in San Francisco, June 25, 2019.
David Paul Morris | Bloomberg | Getty Images

The Federal Trade Commission is scrutinizing Marlboro maker Altria's role in the resignation and replacement last month of the CEO of embattled e-cigarette maker Juul, the tobacco giant said Thursday in a regulatory filing.

Altria's $12.8 billion deal with Juul, which gave Altria a 35% stake in the vaping company, still needs antitrust approval from the agency.

Altria on Oct. 1 received a civil investigative demand "seeking information regarding, among other things, Altria's role in the resignation of JUUL's former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee," the company said Thursday in a quarterly filing with the Securities and Exchange Commission.

Juul on Sept. 25 announced it was replacing its CEO Kevin Burns with longtime Altria executive K.C. Crosthwaite. Altria made a "special recognition" payment of $2.5 million upon his departure, according to a separate filing with the SEC that detailed Crosthwaite's severance package.

Within days, Crosthwaite hired Altria colleague Joe Murillo as Juul's chief regulatory officer. The companies have said the decision was Juul's. Crosthwaite served as an observer on Juul's board of directors after Altria's investment in Juul.

"The FTC issued a Civil Investigative Demand to Altria while it was conducting its antitrust review of Altria's investment in JUUL seeking information regarding, among other things, Altria's role in the resignation of JUUL's former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee," Altria disclosed in the filing.

The civil investigative demand could be another headache for Altria related to its stake in Juul. Altria on Thursday wrote down more than a third of its investment as regulators prepare to remove e-cigarette flavors from the market and an outbreak of a vaping-related lung disease spooks consumers.

Altria has yet to reap any financial benefit from its investment in Juul. The FTC requested more information in April. Altria now expects the agency to make its decision on the deal in the first quarter of next year, Altria said Thursday.

Altria in the regulatory filing also confirmed that the FTC is investigating Juul, along with the Food and Drug Administration and "various federal and state agencies." The Wall Street Journal first reported the FTC probe in August.

"Such investigations vary in scope but at least some appear to include JUUL's marketing practices, particularly as such practices relate to youth," Altria said in the filing.

The FDA has disclosed it is investigating Juul's marketing practices. The agency conducted a surprise inspection of the company's San Francisco headquarters last year.

Altria, Juul and the FTC declined to comment.

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