The Food and Drug Administration drops the hammer on Juul Labs. It accuses the leading e-cigarette maker of illegally marketing its vaping device as safer than traditional cigarettes without permission to make such a claim, and it has threatened fines and seizure of its products if it does not stop. not immediately.

In a press release announcing the warning sent to Juul, Acting FDA Commissioner Ned Sharpless said that claiming that a product reduces the risk of harm from smoking can only be supported by evidence. scientists, which the company has not yet provided. “Juul has ignored the law and, with great concern, made some of these statements in school to our nation’s youth,” Sharpless said.

He gave Juul Labs 15 days to respond to the letter explaining what corrective action it is taking and how it plans to stay in compliance with the law.

Juul flavored pods are popular with adults and teens, but will be banned under the new regulations. Image source: Juul Labs.

Stand on the brakes to curb teenage use

The government is attacking the electronic cigarette industry. In the days following the FDA’s wake-up call to Juul, the Trump administration announced that it was also considering banning the sale of all flavors of e-cigs; the only one that would be allowed would be the aroma of tobacco. Even mint and menthol, which are still allowed for regular cigarettes, would be banned.

The agency has determined that there is an “epidemic” of e-cigarette use by teenagers, especially from Juul devices, the sleek design of which has made them a favorite among young people. It studies all aspects of their design, manufacture and marketing.

In a separate letter sent to Juul Labs, the FDA questioned the company’s use of the word “switch” in its “Make the Switch” promotional campaign, suggesting that this implied there were health benefits. to do it. The Federal Trade Commission is investigate a separate advertising campaign called “vaporized,” which he says prompted teens to use his e-cigs using young models in their twenties and early thirties. Various social media campaigns using paid influencers are also coming under scrutiny.

The FDA also wants to know why Juul uses nicotine salts in his device, why he chose the concentration of nicotine salts he did, and all the scientific data surrounding the effectiveness of the compound. The agency also accused Juul of withholding information about its previous document requests, claiming that Juul gave Congress more information than it gave the agency.

An investment in controversy

It looks like Juul is having an uphill battle. While the FDA has long been suspicious of the e-cig maker due to the device’s popularity among teens, the problem really arose afterwards. Altria (NYSE: MO) invested $ 12.8 billion in the company and then commissioner Scott Gottlieb accused the two companies of reneging on commitments to limit teenagers’ access to its products.

Gottlieb later said he saw no way for Juul to have its e-cig approved by the FDA when it submits its application next year, although Juul has taken numerous actions to comply with the requests. of the government.

In addition to telling teens not to use its products, supporting raising the minimum vaping age to 21, and limiting the age of its website like other cigarette manufacturers, Juul has withdrawn its products. stores open to the general public. It also introduced an identity scanning system that locks a Juul device until a retailer verifies a customer’s age; created an online portal to track where a Juul was purchased; canceled his social media accounts; and launched a “3 Strikes and You’re Out” program for retailers, which revokes their license to sell Juul products for one year if they are caught selling three times to minors or selling too many devices to a customer.

No Exit

These actions, however, would seem unimportant if the FDA determines that Juul Labs has violated regulations on the illegal marketing of its devices as reduced risk. The threat of fines and confiscation of proceeds seems very real.

Even though some of the claims seem specious, while others are based on anecdotes, the future of Juul’s marketing in the United States is very uncertain. It’s hard to see how the growing tension between the agency and the company isn’t leading Juul and Altria to pursue international markets as the only viable path for growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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