E-cigarette maker Juul will pay $14.5 million to Arizona, and will no longer market or sell its products to young people in the state, as part of a settlement for a consumer fraud lawsuit.
The settlement announced by state Attorney General Mark Brnovich (R) Tuesday ends a lawsuit filed in January 2020 against the company for allegedly illegally marketing its products to young people while misleading them on the risks.
Brnovich, who is running for Senate, alleged that Juul was "exploiting young people with tactics such as fruit flavors, social media campaigns, and free giveaways."
As part of the settlement, Juul denies the allegations and does not admit any wrongdoing. But the company agreed to change some aspects of how it does business in the state.
The company will not sell to Arizonans under 21 years of age and will not make online sales to anyone who has not been age-verified by an independent age-verification system.
Juul also agreed to implement a strict retailer monitoring program where it will do compliance checks of at least 25 stores per month across Arizona for two years and take action against those that illegally sell to underage smokers.
"Today’s settlement holds JUUL accountable for its irresponsible marketing efforts that pushed Arizona minors toward nicotine and the addiction that follows," Brnovich said in a statement.
All but $2 million of the $14.5 million will be used for programs to stop youth vaping, including cessation programs and education programs to prevent future youth e-cigarette use.
The remaining $2 million will be paid to the state for litigation reimbursement and deposited into a fund for investigating consumer fraud, Brnovich said.
In a statement, Juul said the settlement is part of an effort to "reset our company," adding it will continue working with federal and state stakeholders "to advance a fully regulated, science-based marketplace for vapor products. As part of that process, we will continue to support Tobacco 21 and enforcement against illicit and illegally marketed products, such as certain disposables, that jeopardize the harm reduction potential of alternative vapor products."
Arizona is the second state to reach a settlement with Juul over its alleged marketing practices; the company in June agreed to pay North Carolina $40 million.
Tobacco giant Altria purchased a 35 percent stake in Juul at the end of 2018 for $12.8 billion but has since significantly written down the value. The Federal Trade Commission last year sued to unwind the deal, calling it anticompetitive.
Under pressure from regulators, Juul has pulled popular flavors such as mango and cucumber from retail store shelves, and now only sells tobacco and menthol. In September 2019, Juul replaced its CEO with an Altria executive and announced a suspension of all broadcast, print and digital product advertising in the U.S.
Along with every other e-cigarette maker, Juul was required to apply for Food and Drug Administration authorization for its products under a 2016 federal rule. However, the agency missed a court-ordered deadline in September to decide which e-cigarette products can stay on the market, and is still weighing whether to ban Juul.
The agency made decisions on more than 90 percent of the new tobacco products that were submitted, but not on the largest companies like Juul, Vuse and NJOY.