`Joseph J. Simons, Chairman
`Noah Joshua Phillips
`Rohit Chopra
`Rebecca Kelly Slaughter
`Christine S. Wilson
`In the Matter of
`Altria Group, Inc.
`a corporation;
`JUUL Labs, Inc.
`a corporation.
`Docket No. 9393
`Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of
`the authority vested in it by said Act, the Federal Trade Commission (“Commission”),
`having reason to believe that Altria Group, Inc. (“Altria”), a corporation, and JUUL Labs,
`Inc. (“JLI”), a corporation, hereinafter sometimes referred to as “Respondents,” have
`executed agreements in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, Section
`5 of the FTC Act, as amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as
`amended, 15 U.S.C. § 18, and it appearing to the Commission that a proceeding by it in
`respect thereof would be in the public interest, hereby issues its complaint pursuant to
`Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), Section 5(b) of the FTC Act, 15 U.S.C. §
`45(b), and Section 11(b) of the Clayton Act, 15 U.S.C. § 21(b), stating its charges as
`This action concerns a series of agreements between Altria and JLI,
`whereby Altria ceased to compete in the U.S. market for closed-system electronic
`cigarettes (“the relevant market”) in return for a substantial ownership interest in JLI, by
`far the dominant player in that market. Electronic cigarettes (“e-cigarettes”) are devices
`that deliver nicotine to a user by vaporizing a liquid nicotine solution; in the case of
`closed-system e-cigarettes, the liquid is contained in a pre-filled, sealed cartridge. Faced
`with declining sales of traditional cigarettes and a shift in consumer demand toward
`alternative nicotine products, for years Altria had viewed participation in the relevant
`market as a strategic priority essential to its long-term survival. Altria entered the


`relevant market through its subsidiru:y Nu Mark in 2013 and continued to invest heavily
`in the category. By mid-2017, its MarkTen e-cigru:·ette had achieved the second-highest
`market share.
`JLI entered the relevant market in 2015, and experienced modest growth
`until mid-2017, when it began rapidly ove1iaking its competitors, including Altria. JLI's
`meteoric rise stunned Altria and upended the entire e-cigarette market: by the end of
`2017, JLI's market share had smpassed those of all other e-cigarette manufacturers,
`including Altria.
`JLI's rise presented Altria with a new thi-eat on two fronts: it stood in the
`way of Altria's goal of leading thee-cigarette catego1y and threatened to dismpt Altria's
`lucrative traditional cigarette business. Altria reacted to this threat by pursuing a dual­
`track strategy: on the one hand it would endeavor to compete aggressively against JLI,
`including through price promotions and product innovation; at the same time, it sought to
`eliminate the threat by acquiring JLI. Altria made repeated ove1tures to JLI about a
`potential acquisition or paitnership, but negotiations dragged, and meanwhile Altria
`continued to compete aggressively. In Febm ary 2018, it introduced MarkTen Elite, a
`pod-based e-cigarette that closely resembled JLI's product in appeai·ance and strncture.
`Although JLI continued to dominate the relevant mai·ket, in mid-2018, Altria told the
`investment community that its own products were driving growth and gaining traction
`among consumers.
`Negotiations between Altria and JLI intensified in the summer of 2018,
`and the future of Altria' s e-cigarette business emerged as a key point of contention.
`During negotiations, JLI insisted, and Altria recognized, that Altria' s exit from thee­
`cigarette market was a non-negotiable condition for any deal. When Altria sought to
`weaken or remove any obligation to exit that market, JLI conveyed that any such attempt
`was completely unacceptable. After negotiations had stalled temporarily, Altria
`reaffnmed its willingness to accede to JLI's demand in early October 2018. With that
`commitment secured, negotiations resumed. At that time, JLI dominated the relevant
`market with a mai·ket share of approximately 70%, and Altria was antic.ipating an
`increasingly negative impact on both its e-cigai·ette and its traditional cigarette businesses
`due in part to JLI' s growth.
`In order to meet JLI' s demand that Altria cease to compete in the e-
`cigarette market, Altria began taking steps to withdraw its e-cigarettes from the relevant
`market, including pulling its MarkTen Elite product from the market in October 2018,
`and then, after five years of continuous operation, announcing on December 7, 2018, its
`decision to wind down the remainder of its e-ci arette business. At the same time
`On December 20, 2018, Respondents announced that they had executed a
`Purchase Agreement and a number of related agreements (together, "the Transaction").
`Under the Purchase Agreement, Altria purchased a 35% non-voting stake in JLI, which
`Altria could convert to a voting stake upon receiving HSR approval. In addition,


`Respondents executed a Relationship Agreement, which contained a non-compete
`provision ("the Non-Compete") restricting Altria from competing in the relevant market;
`a Services Agreement, whereby Altria agreed to provide a variety of suppoli services for
`JLI; an Intellectual Property License Agreement licensing Altria' s e-cigarette intellectual
`prope1iy to JLI; and a Voting Agreement providing Altria representation on JLI's board
`of directors following the conversion of its shares. Pending HSR approval, the
`Transaction provided Altria the right to appoint one of its executives to a non-voting
`"obse1ver" position on JLI's board.
`Altria' s investment in JLI and its nearly simultaneous decision to exit the
`relevant market in order to meet JLI 's demands not only eliminated its existing e­
`cigarette products from the market but also, through the Non-Compete, halted its ongoing
`innovation efforts toward developing a new and in1proved p01tfolio of products. Thus,
`consumers lost the benefit of cmTent and futme head-to-head competition between Altria
`and JLI, and between Altria and other competitors. As JLI summarized in a set of draft
`talkino oints for the announcement of the Transaction:
`By seeming Altria's exit from the relevant market, the Transaction
`eliminated a threat to JLI's market dominance. Respondents fmther ensured that
`dominance by agreeing that Altria would throw behind JLI its extensive resources,
`including its distribution capabilities and its premier shelf space at retailers.
`After executing the Transaction, Altria appointed its Chief Growth Officer
`as its obse1ver on the JLI board of directors. Following that executive's depaiture from
`Altria to become Chief Executive Officer of JLI, Altria appointed its Chief Financial
`Officer and Vice Chaiiman to fill the obse1ver position.
`Neither the entiy of new producers, nor repositioning by existing
`producers, would be timely, likely, or sufficient to counteract the anticompetitive effects
`of Alti·ia's agreement to exit the relevant market. Ent1y or repositioning would require
`extensive time and capital expenditme related to the development or acquisition of a
`product, as well as to securing the approval of a product by the U.S. Food & Drug
`Administration (FDA) through a complex, lengthy, and expensive regulat01y process.
`Respondents cannot show that the Transaction resulted in cognizable
`efficiencies sufficient to outweigh the competitive hann caused by Alti-ia's agreement to
`exit the relevant mai·ket. Nor can tl1ey point to pro-competitive benefits that could not
`have been achieved through less resti·ictive means. In fact, much of the collaboration was
`restructured in Januaiy 2020 to eliininate the marketing aspects of the collaboration,
`fuither reducing the scope of theoretical benefits from the agreements.
`Respondents' conduct has illegally resti·ained competition in the relevant
`market in violation of Section 1 of the She1man Act, 15 U.S.C. § 1, and thus constitutes
`an unfair method of competition in violation of Section 5( a) of the FTC Act, as amended,
`15 U.S.C. § 45(a).


`The Transaction has also substantially lessened competition in the relevant
`market in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act.
`At all times relevant, Respondents Altria and JLI have each been, and are
`each now, corporations as “corporation” is defined in Section 4 of the Federal Trade
`Commission Act, 15 U.S.C. § 44, and in Section 1 of the Clayton Act, 15 U.S.C. § 12.
`At all times relevant, the acts and practices of Respondents Altria and JLI,
`including the acts and practices alleged in this complaint, are in or affect commerce in the
`United States, as “commerce” is defined in Section 4 of the Federal Trade Commission
`Act, 15 U.S.C. § 44, and in Section 1 of the Clayton Act, 15 U.S.C. § 12.
`The Transaction constitutes an acquisition subject to Section 7 of the
`Clayton Act, 15 U.S.C. § 18.
`Respondent Altria Group, Inc. is a holding company incorporated in
`Virginia and headquartered at 6601 West Broad Street, Richmond, Virginia 23230.
`Through a number of subsidiaries, Altria is engaged in the manufacture, sale and
`distribution of cigarettes, cigars, pipe tobacco, and smokeless tobacco products. Prior to
`the discontinuation of its entire product line in December 2018, Altria’s Nu Mark
`subsidiary was engaged in the manufacture and sale of “innovative tobacco” products,
`which included e-cigarettes sold under the brand names MarkTen and Green Smoke. In
`2018, Altria generated over $25 billion in net revenues.
`Respondent JUUL Labs, Inc., a Delaware corporation, is headquartered at
`560 20th Street, San Francisco, California 94107. JLI is the leading manufacturer of pod-
`based e-cigarettes, generating over $1 billion in sales in 2018.
`As referenced in Paragraph 6 herein, on December 20, 2018, Respondents
`initiated a series of transactions granting Altria a 35% non-voting equity interest in JLI in
`exchange for a $12.8 billion all-cash investment. This investment did not require a
`notification under the Hart-Scott-Rodino Act. Respondents’ Purchase Agreement
`incorporates various ancillary agreements, including a Services Agreement, a
`Relationship Agreement, a Voting Agreement, and an Intellectual Property License
`The Transaction valued JLI at roughly $38 billion, more than double JLI’s
`reported value less than seven months earlier, speaking to JLI’s commercial success. JLI
`distributed the vast majority of Altria’s cash payment to its shareholders and employees,
`including its two largest shareholders,
`and its CEO Kevin Burns.


`On February 4, 2019, Respondents filed for HSR clearance to convert
`Altria’s interest into voting securities (the “Antitrust Conversion”) and to grant Altria
`permission to appoint three (of nine) members of JLI’s board of directors as specified in
`the Voting Agreement.
`The Relationship Agreement includes the Non-Compete, which states in
`the relevant part:
`[Altria] shall not . . . directly or indirectly (1) own, manage, operate, control,
`engage in or assist others in engaging in, the e-Vapor business; (2) take actions
`with the purpose of preparing to engage in the e-Vapor Business, including
`through engaging in or sponsoring research and development activities; or (3)
`Beneficially Own any equity interest in any Person, other than an aggregate of not
`more than four and nine-tenths percent (4.9%) of the equity interests of any
`Person which is publicly listed on a national stock exchange, that engages directly
`or indirectly in the e-Vapor Business (other than (x) as a result of [Altria’s]
`Beneficial Ownership of Shares or (y) engagement in, or sponsorship of, research
`and development activities not directed toward the e-Vapor Business and not
`undertaken with the purpose of developing or commercializing technology or
`products in the e-Vapor Business) . . . . Notwithstanding the foregoing, (x) the
`[Altria] and its Subsidiaries and controlled Affiliates may engage in the business
`relating to (I) its Green Smoke, MarkTen (or Solaris, which is the non-U.S.
`equivalent brand of MarkTen) and MarkTen Elite brands, in each case, as such
`business is presently conducted, subject to Section 4.1 of the Purchase
`Agreement, and (II) for a period of sixty (60) days commencing on the date of this
`Agreement, certain research and development activities pursuant to existing
`agreements with third parties that are in the process of being discontinued . . . .
`At the time the Non-Compete was signed, Altria had, over the preceding two months,
`removed all of its e-cigarette products from the market. In effect, Altria committed to
`shut down its own e-vapor business and participate in that business exclusively through
`Though it was later amended, under the initial Services Agreement, Altria
`agreed to provide certain services to JLI, divided between Initial and Extended Services.
`The Initial Services included leasing convenience store shelf space to JLI, regulatory
`consulting, and distribution support; the Extended Services included direct marketing
`support and sales services. Under the terms of the Relationship Agreement, the Non-
`Compete went into effect early in 2019 when Altria began to perform Extended Services.
`The Services Agreement had an initial six-year term, subject to early termination by
`mutual consent or in case of material breach, bankruptcy, or insolvency. If the Services
`Agreement expired, Altria could discontinue the Non-Compete, at which point it would
`lose its right to appoint JLI board members and its pre-emptive right to maintain its 35%
`stake in the company, but would regain its ability to compete in the market against JLI.
`The Intellectual Property License Agreement grants JLI a broad,
`non-exclusive, irrevocable license to Altria’s e-cigarette intellectual property portfolio.


`On January 30, 2020, Respondents announced amendments to their
`agreement, including an Amended Purchase Agreement, an Amended Relationship
`Agreement, an Amended Services Agreement, and a Revised Voting Agreement.
`Under the Revised Voting Agreement, after the Antitrust Conversion,
`Altria will instead have the right to (1) appoint two (of nine) JLI directors; (2) nominate
`one (of three) JLI independent directors; (3) appoint one (of four) members of a
`Nominating Committee (who would have the right to veto independent director
`nominations); (4) appoint two (of five) members and the chair of a new Litigation
`Oversight Committee (which would have responsibility for managing litigation involving
`both Altria and JLI, i.e., “Joint Litigation Matters”); and (5) appoint one (of three)
`members of a Litigation Subcommittee (which would have authority, by unanimous vote,
`to change JLI’s senior outside counsel responsible for Joint Litigation Matters). The
`Revised Voting Agreement would further grant JLI’s CEO (1) a board seat, (2) a seat on
`the Litigation Oversight Committee, and (3) a seat on the Litigation Subcommittee.
`The Amended Relationship Agreement gives Altria the option to be
`released from the Non-Compete if JLI is prohibited by federal law from selling vaping
`products in the United States for at least a year or if Altria’s internal valuation of the
`carrying value of its investment falls below 10% of its initial value of $12.8 billion.
`The Amended Services Agreement eliminates all services except for
`regulatory support services. The amendment was effective at signing except as regards to
`Altria’s provision of retail shelf space to JLI, which service terminates after March 31,
`Altria Recognized the Need to Invest in E-cigarettes
`In the mid-2010s, there was an increased focus on alternative nicotine
`products, among which e-cigarettes became the fastest-growing category. Altria and the
`other major cigarette producers repeatedly acknowledged the need to invest and compete
`in the relevant market, and start-ups such as JLI and NJOY entered as well.
`Altria entered the market with its MarkTen e-cigarette in 2013, and over
`the next several years spent well over $100 million acquiring other existing e-cigarette
`platforms in order to augment its portfolio.
`, Altria
` a
`pod-based product and began marketing it in February 2018 as MarkTen Elite.
`Altria management emphasized the importance of the e-vapor category
`during investor presentations and through internal incentive compensation plans. For
`example, in February 2018, Altria’s then-COO (and current CEO) Howard Willard
`explained, “Nu Mark’s goal is to lead the U.S. e-vapor category with a portfolio of
`superior, potentially reduced-risk products that . . . generate cigarette-like margins at


`JLI, then a subsidiary (subsequently spun-off) of PAX Labs, Inc., entered
`the relevant market in 2015 with a closed-system e-cigarette in a discreet “pod-based”
`format, roughly the size and shape of a USB drive. JLI’s “JUUL” product quickly gained
`traction among consumers, and by the end of 2017, it had surpassed Altria and secured
`the largest share of the relevant market.
`The PMTA Process for E-cigarettes
`Under the FDA’s regulatory framework, a manufacturer of a new tobacco
`product, including an e-cigarette, must submit to the FDA a Premarket Tobacco Product
`Application (“PMTA”) and receive the FDA’s approval before marketing that product.
`An e-cigarette that was on the market prior to August 8, 2016 may remain on the market,
`but the manufacturer of that product must file a PMTA by May 12, 2020 in order to
`continue marketing it, and must remove the product in the event the PMTA is denied. An
`e-cigarette that was not on the market prior to August 8, 2016 cannot be marketed until it
`receives PMTA approval. At the time Respondents executed the Transaction, the
`deadline for an in-market applicant to file its PMTA was August 8, 2022.
`Preparing a PMTA requires a significant amount of resources—time,
`personnel, and money, which can range from several hundreds of thousands to multiple
`millions of dollars per product.
`The FDA announced on January 2, 2020 that it had finalized a new
`enforcement policy prohibiting all non-tobacco/non-menthol flavors for cartridge-based
`e-cigarettes until a PMTA authorization, which went into effect on February 6, 2020. In
`a related but separate action, Congress raised the federal minimum age to purchase all
`tobacco products (including e-cigarettes) from 18 to 21 in December 2019.
`The relevant product market for the purposes of this action is closed-
`system e-cigarettes. A hypothetical monopolist in this relevant market would find it
`profitable to impose at least a small but significant and non-transitory increase in price
`E-cigarettes are battery-powered devices that vaporize a liquid solution
`containing nicotine (an “e-liquid”). There are two broad categories of e-cigarette: closed-
`system and open-tank. Closed-system e-cigarettes consist of a device housing a battery
`and a heating mechanism, and sealed cartridges or pods that are pre-filled with e-liquid.
`Examples of closed-system devices include cigalikes, which are similar to traditional
`cigarettes in size and shape, and pod-based products, such as JUUL or MarkTen Elite,
`which look like USB drives. Subsequent to the FDA flavor ban that went into effect
`February 2020, closed-system pods and cartridges are available only in tobacco and
`menthol flavors.
`By contrast, open-tank e-cigarettes incorporate refillable tanks that
`customers manually fill with e-liquid. Because customers are able to select from (and
`mix together) a wide assortment of e-liquids, open-tank e-cigarettes allow a more


`customizable experience whereby users can experiment with different flavors and
`nicotine strengths. In addition, unlike with closed systems, users can customize the
`individual components of an open-tank system, such as the battery, heating coil, and
`atomizer (which houses the heating coil).
`Closed-system e-cigarettes are largely sold in different channels than
`open-tank products, and open-tank customers tend to seek a different experience than
`closed-system customers. The vast majority of closed-system e-cigarettes are sold
`through the multi-outlet channel, which consists primarily of convenience stores.
`Convenience stores offer a limited range of e-cigarette products, focusing on the highest-
`velocity brands. In contrast, open-tank e-cigarettes are sold almost exclusively at
`dedicated vape shops, retail outlets that typically carry an extensive selection of e-liquids
`and parts for open-tank products and offer a high level of customer service.
`Respondents considered their respective JLI and MarkTen product lines to
`be direct competitors with each other and with other closed-system e-cigarette products
`and set prices based on competition with each other and with other closed-system
`products. Respondents further acknowledged that their closed-system e-cigarette
`products did not compete as closely with open-tank products.
`There are no reasonable substitutes for closed-system e-cigarettes.
`Closed-system e-cigarettes appeal to consumers because they are discreet due to their
`small size, and convenient due to their self-contained, ready-to-use format. Open-tank e-
`cigarettes are not an adequate substitute for closed-system e-cigarettes because they are
`larger, more complex, and require more manual operation by the user. Open-tank e-
`cigarettes generally appeal to a different customer type, one that appreciates their
`complexity and customizable nature.
`The relevant geographic market is no broader than the United States.
`Because of the FDA’s PMTA requirements, foreign firms cannot import e-cigarettes into
`the United States without prior FDA approval.
`At the time of Altria’s exit, the relevant market was already highly
`concentrated. Following Altria’s exit, it became even more concentrated.
`The federal antitrust agencies, consistent with the Merger Guidelines and
`federal court decisions, measure concentration using the Herfindahl-Hirschman Index
`(“HHI”). The HHI is calculated by totaling the squares of the market shares of each firm
`in the relevant market. Under the Merger Guidelines, a merger is presumed likely to
`create or enhance market power—and is presumably illegal—when the post-merger HHI
`exceeds 2,500 and the merger increases the HHI by more than 200 points.
`In the U.S. market for closed-system e-cigarettes, the Transaction resulted
`in a post-Transaction HHI exceeding 2,500, with an increase in HHI of more than 200.
`Thus, the Transaction resulted in concentration that establishes a presumption of
`competitive harm in the relevant market.


`Altria Agreed to Withdraw from Current and Future
`Competition in Exchange for the Opportunity to Share in
`JLl's Dominant Position
`During the negotiations between Respondents, JLI's executives made
`clear their position that Altria could not remain a competitor in the relevant market if
`there was to be a deal:
`• Mr. Danaher JLI's fo1mer CFO, testified:
`On July 30, 2018, in advance of a meeting between Respondents' lead
`negotiators, Nick Pritzker, a JLI Board member, emailed Howard Willard, the Altria
`CEO, an opening tenn sheet for discussions. The te1m sheet included the following key


`On August 1, 2018, Respondents' negotiators met at the Park Hyatt Hotel
`in Washington, DC to discuss te1ms. The attendees of this meeting consisted of the lead
`negotiators for each side: Nick Pritzker and Riaz Valani, two members of JLI's Board of
`Directors, Kevin Bums, JLI's CEO, Howard Willard, Altria's CEO, and Billy Gifford,
`Altria's CFO. No attorneys were present from either side at this meeting.
`After this meeting, Altria' s top executives understood that ceasing to
`compete in the e-cigarette business might be a condition for reaching a deal with JLI.
`oints dated Au st 5, 2018, for Mr. Willard to use on a call with
`Altria's draft talkin
`52. When Altria sought to modify JLI's proposed non-compete term, JLI
`responded negatively and reiterated its demands. On August 9, 2018, Billy Gifford sent
`over a marku of the te1m sheet to Nick Pritzker, Riaz Valani, and Kevin Bums that was
`On August 15, 2018, Riaz Valani of JLI met with Dinny Devitre, one of
`Altria's Board Members at Mr. Devitre's office in New York. The
`ose of this
`After negotiations between Respondents were suspended temporarily,
`Altria' s executives knew that they had to reaffnm their commitment to meeting JLI' s
`demands if they were to restait talks successfully. On October 5, 2018, Altria's Howard
`Willard sent Nick Pritzker, Riaz Valani, and Kevin Bums a letter assurmg them that:


`Upon receivino this letter Kevin Bums fo1warded it to JLI's Chief Legal Officer with a
`The concessions contained in this letter helped to restart
`simple note:
`the stalled negotrnt10ns. Soon after, Altria began to take key steps that would facilitate a
`possible wind down of the Nu Mark business.
`On October 25, 2018, Altria announced that it was temporarily halting its
`MarkTen Elite business, ostensibly out of concern that pod-based systems and non­
`traditional flavors could be contributing to youth usage. A few days later, Altria and JLI,
`which was the largest seller of a pod-based system and non-traditional flavors, agreed to
`basic deal tenns, which included Altria not competing in the e-cigarette market.
`On December 7, 2018, after five years of continuous paiticipation in thee-
`cigarette market, Altria announced its decision to wind down its remaining e-cigai·ette
`business, including its MarkTen cig-a-like.
`On December 20, 2018, less than two weeks after Altii.a ailllounced its
`decision to discontinue its e-cigarette operations, Respondents executed the Transaction
`whereby Altria invested $12.8 billion and in return, JLI issued stock to Altria amounting
`to a 35% ownership stake in the company.
`he Transaction also closed routes to other potential
`acqms1tlons or partners 1ps through which Altii.a might have pa1ticipated in the relevant
`market. As JLI summarized in a set of draft talkino oints for the annmmcement of the
`Respondents' Conduct Caused Harm to Competition
`Respondents ' conduct as alleged herein had the purpose, capacity,
`tendency, and effect ofrestraining competition unreasonably, and the Transaction
`substantially lessened competition, in the U.S. mai·ket for closed-system e-cigai·ettes, in
`the following ways, among others:
`a. Eliminating Altii.a's MarkTen products from the relevant mai·ket, thereby
`eliminating cunent and future price competition between Respondents, in
`particular promotional activity to create awai·eness and drive sales;


`b. Eliminating current and future innovation competition between
`Respondents; and
`c. Eliminating cunent and future competition between Respondents for shelf
`space at retailers through rebates and other incentives.
`Altria's agreement to exit the relevant market eliminated one of JLI's most
`dangerous rivals. As a large, well-established, and well-funded company with long­
`standing relationships and significant shelf space with retailers nationwide, Altria had the
`resources and infrastrncture to drive sales and compete aggressively. For example, Altria
`used its extensive distribution network to ex and its distribution ofMarkTen Elite-
`Before the shut-down of Nu Mark, Respondents relied on price
`promotions to drive trial and grow sales of their respective e-cigarette products. In
`addition, each monitored the other's pricing in setting its own strategy. Altria's decision
`to pull its MarkT en products brought this price competition to an end.
`In addition to price competition, Respondents competed through product
`innovation, including device features and e-liquid fonnulations. For example, it was
`JLI's success that prompted Altria to acquire and fmther develop various pod-based e­
`cigai-ettes (including Elite), and to commit significant resources toward developing e­
`liquid fo1mulations with nicotine salts and higher nicotine concentrations.
`Altria leveraged its ownership of leading brands across multiple tobacco
`categories in order to secure substantial and favorable shelf space at retailers throughout
`the United States. In 2018, for example, to JLI's alaim, Altria launched a major
`campaign to secure shelf space for its innovative tobacco products (including e­
`cigarettes ), offering retailers product discounts, slotting fees, and fixture payments. After
`the Transaction, instead of competing for shelf space, Altria leased its shelf space to JLI,
`effectively replacing its own MarkTen products with JLI's Juul product.
`Before committing to the Transaction, Altria had eve1y intention of
`remaining in the relevant market for the long te1m. Altria ' s documents and executive
`statements repeatedly evince their recognition that e-cigai·ettes were the future of the
`tobacco industry and their absolute commitment to paiticipate in that future. For


`• Mr. Martin BaITington, Altria' s fo1mer CEO, stated to investors: "So we'll
`be clear: We aspire to be the U.S. leader in autho1ized, non-combustible,
`reduced-risk products."
`• Mr. Howard Willard, Altria's current CEO, in an interview with the Wall
`Street Journal, stated: "At a time when e-vapor is going to grow rapidly
`and likely cannibalize the consumers we have in our core business, if you
`don't invest in the new areas you potentially put your ability to deliver that
`financial result at risk."
`Instead of continuing to pursue its ambitions in the relevant market
`through competition, including aggressive price promotions, produ ct development, and
`incentives for shelf space, Altria sought a sho1i cut to market leadership by investing in
`its competitor. Altria agreed to abandon its long-standing and significant effo1is at
`current and future competition in exchange for a significant share of JLI' s profits
`resulting from a significantly less competitive marketplace.
`Respondents cannot demonstrate that entty into the relevant market by
`new competitors or expansion by existing competitors would be timely, likely, or
`sufficient to offset the anticompetitive effects of the conduct alleged above.
`The ently of new competitors into the relevant market is unlikely because
`th e regulato1y approval process is exceptionally time-consuming and expensive.
`Res ondents themselves estimate that re arino a PMTA for an e-ci arette would require
`No manufacturer
`has achieved PMTA approval for an e-cigarette product, but Philip Mon-is futernational, a
`multi-national tobacco manufacturer, submitted a PMTA application for its iQOS heat­
`not-bm11 ("HNB") device (which is comparable to an e-cigarette in technical complexi )
`in Ma 2017 and received a
`roval two ears later in A ril 2019. Altt-ia estimated
`Respondents' internal doclllllents
`suggest that these figures may significantly underestimate th e costs of the PMTA process.
`In addition to achieving regulato1y approval, a new entt-ant would need to:
`(1) develop or acquire a product; (2) manufacture the product at quality and scale; (3) sell
`th e product; ( 4) develop a disti·ibution system; and (5) develop a marketing plan,
`including a plan to secure shelf space in retail outlets.
`Existing closed-system e-cigarette competitors cannot effectively replace
`th e lost competition because: (1) they lack Altt-ia' s brand strength to secure favorable
`shelf space at retailers; (2) they lack the substantial resources Altt·ia had at its disposal to
`commit to e-cigarette research and development as well as to pursuin

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