Juul agrees to pay $438.5 million settlement over marketing to teens

Juul agreed to pay nearly half a billion dollars Tuesday as part of a settlement with 34 states over the way it marketed its vaping products.

The $438.5 million agreement in principle with Juul Labs resolves a two-year investigation into the e-cigarette manufacturer's marketing and sales practices. In addition to the financial terms, the settlement would force Juul to comply with a series of strict injunctive terms severely limiting its marketing and sales practices.

The company also misrepresented that its product was a smoking cessation device without U.S. Food and Drug Administration approval to make such claims, according to the investigation.

"This settlement with 34 states and territories is a significant part of our ongoing commitment to resolve issues from the past," Juul said in a statement. "The terms of the agreement are aligned with our current business practices which we started to implement after our company-wide reset in the Fall of 2019."

While traditional cigarette use has plummeted among youth, vaping is skyrocketing, undermining national progress toward reducing tobacco use. The National Youth Tobacco Survey conducted by the U.S. Food and Drug Administration and Centers for Disease Control and Prevention found in 2019 that more than 5 million youth reported having used e-cigarettes within the past 30 days, up from 3.6 million just one year prior.

The FDA announced it was removing Juul products from the U.S. market earlier this year, but the company won a temporary reprieve to continue sales. The stay will remain in place while the FDA reviews whether Juul devices should be approved as a smoking cessation product.

Connecticut Attorney General William Tong, one of those states in the settlement, said Juul became the dominant player in the vape market "by willfully engaging in an advertising campaign that appealed to youth, even though its e-cigarettes are both illegal for them to purchase and are unhealthy for youth to use."

The investigation found that Juul relentlessly marketed to underage users with launch parties, advertisements using young and trendy-looking models, social media posts and free samples. It marketed a technology-focused, sleek design that could be easily concealed and sold its product in flavors known to be attractive to underage users. Juul also manipulated the chemical composition of its product to make the vapor less harsh on the throats of the young and inexperienced users, according to the investigators.

To preserve its young customer base, Juul relied on age-verification techniques that it knew were ineffective, Tong said.

The investigation further revealed that Juul's original packaging was misleading in that it did not clearly disclose that it contained nicotine and implied that it contained a lower concentration of nicotine than it actually did. Consumers were also led to believe that consuming one Juul pod was the equivalent of smoking one pack of combustible cigarettes.

ABC's Aaron Katersky reports: