Shares of Altria (NYSE: MO) fell today after the company was sued by the Federal Trade Commission over its acquisition of a minority stake in Juul Labs in 2018. The agency wants the Marlboro maker to unwind its investment in the e-cigarette company, alleging that the deal eliminated competition and violated antitrust laws.
As a result, shares of Altria closed down 3.7% today after sinking as much as 6.2% during the session.
In a statement, Ian Conner, the FTC's director of the Bureau of Competition, said:
For several years, Altria and Juul were competitors in the market for closed-system e-cigarettes. By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became Juul's largest investor. Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul's profits.
Altria responded, saying: "We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts. We are disappointed with the FTC's decision, believe we have a strong defense, and will vigorously defend our investment."
The FTC's lawsuit is just the latest Juul-related headache that Altria has suffered. In December 2018, the cigarette maker invested $12.8 billion in Juul for a 35% stake, but has been forced to write down that investment twice in recent months as Juul has been hammered by regulators over marketing to minors and has been banned from selling most of its flavored pods. Today, Altria's investment is valued at just $4.2 billion.
If the FTC's lawsuit is successful, Altria will likely have to sell or spin off its stake in the e-cigarette company, possibly for less than it's currently worth. The agency also noted that Altria's MarkTen brand was the No. 2 e-cigarette brand in the U.S. by market share at one point in 2018 before Altria pulled it off the shelves. So the company did have its in-house e-cigarette brand, but it preferred to bet on Juul, which was the fast-growing industry leader at the time.
An administrative trial on the matter is set to begin on Jan. 5, 2021.
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