Cigarette maker Altria, the company that produces Marlboro, has made an investment in electronic cigarette company Juul Labs, but certain aspects of the deal are frozen due to anongoing probe by the Federal Trade Commission (FTC), according to a report by The Wall Street Journal.
Altria shelled out $12.8 billion for a 35 percent stake in Juul in December of 2018. Altria also closed its own eCig business, MarkTen, about two weeks before the tie-up was announced. Altria said it would give some of its shelf space to Juul, which so far has happened to a small degree.
Since the deal happened, Juul has been blamed for a spike in underage vaping, and it was forced to stop selling certain flavors of its product. Both companies said they would wait until early January to complete certain parts of the deal to allow the FTC to finish its review, but that date has come and gone.
As for the probe, the FTC is currently still holding depositions. Altria has to wait for complete approval of the deal before it can convert its nonvoting shares into voting ones, add representatives to Juuls board or consider Juuls earnings as its own.
The FTC is looking into Altrias move to acquire more retail space on store shelves, even as it was winding down its own eCigarette business before the Juul stake purchase.
In 2013, Reynolds American started paying for shelf space in retail stores for its Vuse eCigarette product, a practice that wasnt common at that time. When the market for eCigarettes exploded, Altria followed suit, as competition for shelf space became more intense. Altria spent around $100 million on shelf space in 2018, and offered cash and display fixtures in exchange for good shelf space.
The probe is also looking into the resignation of Juul Chief Executive Kevin Burns and how Altria executive K.C. Crosthwaite came to be his successor.