Juul to pay $462 million to settle youth vaping claims from six states, D.C.

Juul will pay $462 million to settle claims by six states and Washington D.C. that the vaping company marketed its addictive e-cigarettes to underage teens, five Democratic attorneys general announced Wednesday.

The agreement is the largest multi-state settlement the company has reached to date, the attorneys general said during a press conference. It means Juul has now settled in suits with 45 states for more than $1 billion. 

The deal will impose strict limits on Juul's sales and marketing abilities, and will force Juul to secure its products behind retail store counters and verify the age of purchasers, the officials added.

The states that reached the settlement with Juul are New York, California, Massachusetts, New Mexico, Illinois and Colorado.

"There is no doubt that Juul played a central role in the vaping epidemic today," New York Attorney General Letitia James said. "Juul is paying for widespread harm caused and will undergo severe restrictions on its marketing and sales practices." 

The settlement adds to years of heavy scrutiny on Juul, the one-time Silicon Valley darling among both tobacco giants and investors. A string of payouts to both governments and consumers over allegations that it marketed addictive products to teens has hampered the company and left it seeking options to stay afloat.

The settlement brings the company closer to a "total resolution of the company's historical legal challenges and securing certainty for our future," a spokesperson for Juul said. They noted that underage use of Juul products has declined by 95% since the company dropped all U.S. advertising and discontinued most of its flavors in 2019.

"Now we are positioned to dedicate even greater focus on our path forward to maximize the value and impact of our product technology and scientific foundation," the spokesperson told CNBC.

Juul's priority is to secure Food and Drug Administration authorization of the company's Premarket Tobacco Product Applications, which it needs legally market its products in the U.S., the spokesperson said.

The FDA denied those applications last June, essentially banning Juul from selling its vaping products. But the agency placed a temporary hold on that decision a month later, and it is not in effect now.

Under the settlement announced Wednesday, California will receive $175.8 million, which will be used for e-cigarette research, education and enforcement, the state's Attorney General Rob Bonta said. New York will get $112.7 million over an eight-year period, which will support underage vaping abatement programs across the state. 

Massachusetts will receive $41.7 million, a portion of which will fund vaping addiction services. Colorado will get nearly $32 million, New Mexico will receive $17 million and D.C. will get around $15 million. 

James said Juul led consumers to believe that its vapes are safer than cigarettes. But one pod of Juul's e-cigarette contains as much nicotine as a whole pack of cigarettes, she noted.

She said the company's colorful advertisements often featured young models and flashy parties, which "downplayed the harmful effects" of its products.

"Taking a page out of big tobacco's playbook, Juul misled consumers about the health risks of their products," she said.

James highlighted the agreement's crackdown on Juul's marketing practices. She noted that the company will be barred from funding or operating youth education and prevention campaigns.

The agreement will also force Juul to stop using people under 35 years old in its marketing materials that directly or indirectly target young people, James said.

Teen vaping skyrocketed nationwide after the company launched in 2015, leading the Food and Drug Administration to declare an "epidemic" of underage e-cigarette use just three years later. Parents, school administrators and politicians largely blamed the company for hooking a generation of young people on its high-nicotine pods. 

Since then, Juul has been buffeted by lawsuits and state-led investigations over its products and allegedly deceptive marketing practices. 

Those legal and hurdles and a potential U.S. ban have hurt Juul's bottom line. 

The company in November said it secured enough new funding to stave off bankruptcy. But at the time it announced plans to lay off about 400 staff and cut its operating budget by 30% to 40%.

Juul appeared to be exploring other options in January. Company executives were in early stage talks with Philip Morris, Japan Tobacco and Altria about a potential sale, investment or alliance, the Wall Street Journal reported at the time.

More than 3 million middle and high school students used tobacco products last year, according to a report released in November by the FDA and the U.S. Centers for Disease Control and Prevention. 

E-cigarettes were the most common tobacco product among those young people, as more than 2.5 million students used them, the report said. It added that youth use of tobacco products in any form is unsafe.