UNITED STATES OF ANIERICA
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`BEFORE THE FEDERAL TRADE COMMISSI I
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`OFFICE OF ADMINISTRATIVE LAW JUDGE
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`"a
`07 27 2020
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`5990 1 0
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`SECRETARY
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`In the Matter of
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`Altria Group, Inc.
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`a corporation;
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`And
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`JUUL Labs, Inc.
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`a corporation.
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`0RlG'NAL
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`Docket No. 9393
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`ANSWER AND DEFENSES
`OF RESPONDENT ALTRIA GROUP INC.
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`Pursuant to Rule 3.12 of the Federal Trade Commission’s (“FTC” or the “Commission”)
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`Rules of Practice for Adjudicative Proceedings (the “Rules”), Respondent Altria Group, Inc.
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`(“Altria”), by and through its undersigned counsel, hereby files the following answer to the
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`Commission’s Administrative Complaint (the “Complaint”) against Altria and JUUL Labs, Inc.
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`(“JLI”).
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`INTRODUCTION
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`Through this action, the FTC is seeking to unwind Altria’s $12.8 billion minority
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`investment in JLI based on a fimdamental misunderstanding of why Altria made that investment,
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`a flmdamental misunderstanding of why Altn'a shut down Nu Mark (its e—vapor subsidiary), and
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`a fundamental misunderstanding of the regulatory framework in which Altria and JLI operate.
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`As will be shown in this proceeding, contrary to the FTC ’s allegations, Altlia did not withdraw
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`its own products to facilitate a JLI deal, and Altria’s e-vapor products did not serve as a
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`competitive constraint on JLI — which, afier Nu Mark’s exit, would go on to lower prices in
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`response to competition. Altria withdrew its e-vapor products because it concluded that they
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`could not meet FDA’s regulatory requirements, because they lacked consumer appeal, and
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`because they had lost money and had no short- or long-term path to profitability. The minority
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`investment that the FTC challenges, which was designed to make JLI a more successful
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`competitor by, among other things, helping it to successfully navigate complex regulatory
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`hurdles and thereby continue selling its products, does not violate the antitrust laws. Altria
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`submits that, on the full record, and in considering the applicable law, the relief sought by the
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`Complaint should be denied.
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`Altria’s subsidiary, Philip Morris USA, has for more than a century been one of the
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`nation’s leading manufacturers of conventional, combustible cigarettes. In 2012, Altria
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`established a new subsidiary, Nu Mark, to develop reduced-harm tobacco products, recognizing
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`that adult consumers were becoming interested in e-vapor products because they could
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`potentially provide some or all of the satisfaction of combustible cigarettes without the
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`associated tar and without the stigma associated with smoking. Although Altria set up Nu Mark
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`to compete, it did not have scientists or technical experts who were experienced in developing
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`e-vapor products. After failing in its initial efforts to develop a successful product on its own,
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`Altria undertook an acquisition strategy beginning in 2014. All of this was done at a time when
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`the FDA did not regulate e-vapor products.
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`Far from being a “threat to JLI’s market dominance” as the FTC alleges, Altria’s effort
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`was a failure. By late 2017, the original product using a platform that Altria had acquired in
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`2014, the “cig-a-like” MarkTen, had failed to gather traction with consumers and was ineffective
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`in getting smokers to convert to e-vapor products. Consumer demand was shifting to pod-based
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`products, like JUUL, a product introduced by JLI, a Silicon Valley startup. Still without proven
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`research and development capability required to internally develop a competitive e-vapor
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`product, Altria again sought to acquire products in the hope of expanding sales.
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`By this point, FDA regulations imposed a significant constraint on Altria’s options.
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`Congress has designated the FDA as the only federal agency that “possesses the scientific
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`expertise needed to implement effectively all provisions of the Family Smoking Prevention and
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`Tobacco Control Act.” Pub. L. No. 111–31, § 2(45), 123 Stat. 1776, 1781 (2009). Under that
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`statute, as made applicable to e-vapor products via an FDA regulation known as the “Deeming
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`Rule,” all e-vapor products had to obtain FDA authorization before they could be sold to
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`consumers (through a submission known as a Premarket Tobacco Product Application
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`(“PMTA”)).
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`The FDA made clear that e-vapor products would only be authorized to be sold if they
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`were appropriate for the protection of public health because they generated positive health
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`benefits for American consumers of tobacco products. But the FDA exercised its enforcement
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`discretion to allow products that had been for sale in the United States on or before August 8,
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`2016 to remain for sale, pending PMTA approval, so long as an application was filed by a
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`deadline set by the agency. That enforcement discretion could be revisited, and, regardless, the
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`FDA was clear that any new or changed product without “8/8/16 status” could not be sold to
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`consumers until after receiving PMTA approval, a multi-year process.
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`Recognizing that its existing cig-a-like products were not competitive, Altria, in late
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`2017, scrambled to acquire a pod-based product that had 8/8/16 status. Altria held unsuccessful
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`exploratory discussions with JLI and, at the same time, scoured the globe for pod-based products
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`with 8/8/16 status that it could acquire. As talks with JLI were going nowhere, in the fall of
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`2017, Nu Mark licensed the rights to an e-vapor product owned by a Chinese manufacturer that
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`had 8/8/16 status. Due to the product’s 8/8/16 status, Nu Mark could not make material
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`modifications to the newly acquired e-vapor product without waiting for PMTA approval.
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`Nu Mark rushed to rebrand the Chinese-made product as MarkTen Elite and to expand its
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`availability to consumers in March 2018. But after initial optimism about its prospects, Altria
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`realized by the summer of 2018 that Elite had many problems and was not converting adult
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`smokers. Elite also was not effectively competing with other e-vapor products, including JUUL,
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`which was successful in large part because of its proprietary nicotine salts formula that provided
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`users with a satisfying, cigarette-like experience. Elite, by contrast, did not provide consumers
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`with an experience similar to that of traditional cigarettes or other e-vapor products, like JUUL.
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`Despite Altria spending millions and using its distribution expertise to introduce Elite to
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`consumers, at the time it was pulled, Elite had a trivial nationwide share of sales and little
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`consumer appeal. In the four years before the business was wound down, Nu Mark had lost
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`hundreds of millions of dollars — and it was projected to lose hundreds of millions more in the
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`coming years. Altria also concluded that Elite, as well as Nu Mark’s preexisting MarkTen
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`products, could not obtain PMTA approval in their current form. Both MarkTen and Elite lacked
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`a key element for obtaining PMTA approval — the ability to convert existing smokers and
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`thereby significantly reduce the overall harm to the health of American tobacco consumers.
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`As a result of these considerations, in September 2018, at a time when negotiations with
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`JLI had broken off, Altria began the process of shutting down the vast majority of its ongoing
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`e-vapor development work (including work on a PMTA for Elite), having concluded that the
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`existing Elite product could not obtain FDA approval. Instead, Altria would restructure its
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`resources to transition to “growth teams,” charged with hitting the reset button on Altria’s
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`e-vapor strategy and trying to come up with a competitive e-vapor product from scratch. But
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`even in a best-case scenario, where Altria would be able to rapidly develop such a product (its
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`poor track record notwithstanding), it would not be able to sell the product for many years and
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`only if authorized by the FDA.
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`Meanwhile, on September 12, 2018, FDA Commissioner Gottlieb wrote letters to Altria,
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`JLI, and three other e-vapor manufacturers, expressing concern that e-vapor products were
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`contributing to the “epidemic rate of increase in youth use,” threatening to revisit its enforcement
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`discretion as set out in the Deeming Rule, and expressly calling for manufacturers to consider
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`stopping the sale of flavored products. Altria recognized the letter as creating new regulatory
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`exposure for e-vapor products. In response, on October 25, 2018, Altria determined to
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`discontinue its Elite product and the flavored MarkTen products (other than the traditional
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`tobacco, menthol, and mint varieties).
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`Altria also continued its effort to reach a deal with JLI. And, on December 20, 2018,
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`after twenty months of on-again, off-again discussions, Altria made a $12.8 billion investment
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`for a 35% stake in JLI. Recognizing that JLI and Altria had different strengths developed in
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`different markets — JLI with the ability to design satisfying e-vapor products and Altria with
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`mature distribution systems and regulatory know-how — as part of the agreement, the parties
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`designed a pro-competitive structure under which Altria would devote significant resources to
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`help shore up JLI’s crucial PMTA efforts. In order to facilitate the provision of those services,
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`Altria also agreed as part of the final transaction that it would not develop or acquire new
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`e-vapor products while holding a significant investment in JLI. Altria’s commitment was
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`reasonably ancillary to the pro-competitive benefits provided by the transaction; without it, JLI
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`could not have agreed to allow Altria access to JLI’s development plans and gained the full
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`benefits of Altria’s regulatory expertise. The transaction thus both made JLI more efficient and
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`had no anticompetitive effect. On January 28, 2020, Altria and JLI amended their support
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`service agreement to eliminate some other aspects of the agreement, but Altria agreed to
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`continue to support JLI in navigating the complex regulatory pathway to obtaining the PMTA
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`approval on which JLI’s future success hinges.
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`The Complaint ignores these business realities in alleging that this pro-competitive
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`transaction violates Section 1 of the Sherman Act, Section 5 of the FTC Act, and Section 7 of the
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`Clayton Act. And its allegations fail to “recognize and reflect the distinctive economic and legal
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`setting of the regulated industry to which it applies,” IA Phillip E. Areeda & Herbert
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`Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 243g
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`(4th ed. 2020) (quoting Verizon Commc’ns, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S.
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`398, 411-12 (2004)), i.e., the heavily regulated market for nicotine-based products. In short, the
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`FTC’s Complaint — which ultimately rests on the premise that consumer welfare would have
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`been enhanced if Altria had continued selling products that it concluded would ultimately not
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`pass PMTA review — is totally ill-conceived.
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`Equally ill-conceived is the notion that the remedy the FTC seeks — an order of
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`divestiture that would relieve Altria of its obligation to assist JLI in its effort to obtain regulatory
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`approval for JUUL and allow Altria to attempt to develop its own e-vapor products — would
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`benefit consumers. Given the FDA’s regulatory scheme, even if Altria’s investment were
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`unwound and it began to seek to compete with JLI — and even if Altria could figure out (despite
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`its poor track record) how to develop a competitive product — it could not bring that product to
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`consumers for years. In the meantime, Altria would be penalized by being forced to divest its
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`stock before being able to realize the value of its investment in JLI. And, for its part, JLI would
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`lose the support from Altria that it needs to obtain PMTA approval and to pursue its mission to
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`convert smokers.
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`In sum, and as will be demonstrated at trial, consumer welfare will be served by denying
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`the FTC the relief that it seeks and permitting Altria and JLI to proceed to provide consumers the
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`benefits of their agreement.
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`RESPONSE TO THE SPECIFIC ALLEGATIONS OF THE COMPLAINT
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`All allegations not expressly admitted herein are denied. Altria does not interpret the
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`headings and subheadings throughout the Complaint as well-pleaded allegations to which any
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`response is required. To the extent such a response is required, Altria denies all allegations in
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`the headings and subheadings of the Complaint. Use of certain terms or phrases defined in the
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`Complaint is not an acknowledgment or admission of any characterization the Commission may
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`ascribe to the defined terms. Unless otherwise defined, capitalized terms shall refer to the
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`capitalized terms defined in the Complaint, but any such use is not an acknowledgment or
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`admission of any characterization the Commission may ascribe to the capitalized terms.
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`Altria does not concede the truthfulness of third-party articles and news sources quoted or
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`referenced in the Complaint. To the extent that a response is required, Altria denies all
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`allegations of the third-party articles and news sources quoted in or referenced in the Complaint.
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`Altria additionally denies that the Commission is entitled to any of the relief sought in the Notice
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`of Contemplated Relief on page 16 of the Complaint. Altria reserves the right to amend and/or
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`supplement this answer at a later stage of the proceedings as permitted by the Rules. Each
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`paragraph below corresponds to the same-numbered paragraph in the Complaint.
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`I.
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`NATURE OF THE CASE
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`1.
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`The first sentence of Paragraph 1 sets forth legal conclusions to which no
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`response is required. To the extent that a response is required, Altria denies the allegations.
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`Altria admits the allegations of the second sentence of Paragraph 1. Altria denies the allegations
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`of the third sentence of Paragraph 1, except to admit that it began selling e-vapor products in
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`2013, that there has been a shift in consumer demand toward alternative nicotine products, and
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`that it sought to meet this consumer demand. Altria denies the remaining allegations of
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`Paragraph 1.
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`2.
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`Altria denies the allegations of Paragraph 2, except to admit that JLI introduced
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`JUUL, its pod-based e-vapor product, in 2015, and, by 2017, had obtained significant sales.
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`3.
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`Altria denies the allegations of the first four sentences of Paragraph 3, except to
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`admit that its Nu Mark subsidiary offered products in the e-vapor category, including the
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`MarkTen and MarkTen Elite, and that Nu Mark expanded the availability to consumers of
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`MarkTen Elite, a pod-based e-vapor product, in March 2018. Altria denies the allegations in the
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`last sentence of Paragraph 3 and respectfully refers to its statements to the investment
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`community for a more complete and accurate statement of their contents.
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`4.
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`5.
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`Altria denies the allegations of Paragraph 4.
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`Altria denies the allegations of Paragraph 5, except to admit that it did not reach
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`an agreement with JLI until December 20, 2018.
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`6.
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`Altria admits the allegations of the first sentence of Paragraph 6. Altria denies the
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`remaining allegations of Paragraph 6 and respectfully refers to the Class C-1 Common Stock
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`Purchase Agreement, by and among JUUL Labs, Inc., Altria Group, Inc., and Altria Enterprises,
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`LLC, dated as of December 20, 2018 (the “Purchase Agreement”), the Relationship Agreement,
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`by and among JUUL Labs, Inc., Altria Group, Inc., and Altria Enterprises LLC, dated as of
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`December 20, 2018 (the “Relationship Agreement”), the Services Agreement, by and between
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`Altria Group, Inc. and JUUL Labs, Inc., dated as of December 20, 2018 (the “Services
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`Agreement”), the Intellectual Property License Agreement, by and between Altria Group, Inc.,
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`its Subsidiaries, and JUUL Labs, Inc., entered into as of December 20, 2018 (the “Intellectual
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`Property License Agreement”), and the Eighth Amended and Restated Voting Agreement, by
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`and among JUUL Labs, Inc., Altria Group, Inc., Altria Enterprises LLC, certain Investors, the
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`Key Common Holders, and each Additional Party, made as of December 20, 2018 (the “Voting
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`Agreement”), for a more complete and accurate statement of their contents.
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`7.
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`Altria denies the allegations of the first two sentences of Paragraph 7. Altria lacks
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`knowledge or information sufficient to form a belief as to the truth of the remaining allegations
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`of Paragraph 7 and denies them on that basis.
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`8.
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`9.
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`Altria denies the allegations of Paragraph 8.
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`Altria admits the allegations of Paragraph 9, but avers that the departure of its
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`Chief Growth Officer to JLI was unrelated to the Transaction.
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`10.
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`The first sentence of Paragraph 10 sets forth legal conclusions to which no
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`response is required. To the extent that a response is required, Altria denies the allegations.
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`Altria denies the allegations of the second sentence of Paragraph 10, except to admit that product
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`development or acquisition requires time and/or capital and that new tobacco products require
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`premarket authorization by the FDA pursuant to statutory and regulatory requirements before
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`such new tobacco products can be marketed and sold in the United States. Altria respectfully
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`refers to the FDA statutory and regulatory requirements for a more complete and accurate
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`statement of their contents.
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`11.
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`The first two sentences of Paragraph 11 set forth legal conclusions to which no
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`response is required. To the extent that a response is required, Altria denies the allegations.
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`Altria denies the allegations in the last sentence of Paragraph 11, except to admit that it entered
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`into certain amendments with JLI in January 2020 that removed some support that Altria had
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`been providing to JLI, but maintained other support, including with respect to regulatory matters,
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`which is ongoing. Altria respectfully refers to those amendments for a more complete and
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`accurate statement of their contents.
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`12.
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`Paragraph 12 sets forth legal conclusions to which no response is required. To the
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`extent that a response is required, Altria denies the allegations.
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`13.
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`Paragraph 13 sets forth legal conclusions to which no response is required. To the
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`extent that a response is required, Altria denies the allegations.
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`II.
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`JURISDICTION
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`14.
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`15.
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`16.
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`Paragraph 14 sets forth legal conclusions to which no response is required.
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`Paragraph 15 sets forth legal conclusions to which no response is required.
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`Paragraph 16 sets forth legal conclusions to which no response is required.
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`III. RESPONDENTS
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`17.
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`Altria admits the allegations of the first two sentences of Paragraph 17. Altria
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`denies the allegations of the third sentence of Paragraph 17. Altria admits the allegations of the
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`last sentence of Paragraph 17.
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`18.
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`Altria admits the allegations of the first sentence of Paragraph 18, except notes
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`that JLI has announced that its headquarters are moving to Washington, D.C. Altria denies the
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`allegations of the second sentence of Paragraph 18.
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`IV.
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`THE TRANSACTION
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`19.
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`Altria denies the allegations of the first and third sentences of Paragraph 19 and
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`respectfully refers to the Purchase Agreement, Services Agreement, Relationship Agreement,
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`Voting Agreement, and Intellectual Property License Agreement for a more complete and
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`accurate statement of their contents. Altria denies the allegations of the second sentence of
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`Paragraph 19, except to admit that Altria’s initial investment did not require a notification under
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`the Hart-Scott-Rodino Act.
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`20.
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`Altria denies the allegations of Paragraph 20 and respectfully refers to the
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`Purchase Agreement, Services Agreement, Relationship Agreement, Voting Agreement, and
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`Intellectual Property License Agreement for a more complete and accurate statement of their
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`contents.
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`21.
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`Altria admits that, on February 4, 2019, it filed under the HSR Act with respect to
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`its conversion of its interest into voting securities. The remaining allegations of Paragraph 21 set
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`forth legal conclusions to which no response is required. To the extent that a response is
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`required, Altria denies the remaining allegations of Paragraph 21.
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`22.
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`Altria denies the allegations of Paragraph 22 and respectfully refers to the
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`Relationship Agreement for a more complete and accurate statement of its contents.
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`23.
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`Altria respectfully refers to the Services Agreement and Relationship Agreement
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`for a more complete and accurate statement of their contents. To the extent that the allegations
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`of Paragraph 23 are inconsistent with the Services Agreement and Relationship Agreement,
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`Altria denies such allegations.
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`24.
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`Altria respectfully refers to the Intellectual Property License Agreement for a
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`more complete and accurate statement of its contents. To the extent that the allegations of
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`Paragraph 24 are inconsistent with the Intellectual Property License Agreement, Altria denies
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`such allegations.
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`25.
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`Altria admits the allegations of Paragraph 25 and respectfully refers to
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`Amendment No. 1 to Class C-1 Common Stock Purchase Agreement, by and among JUUL Labs,
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`Inc., Altria Group, Inc., and Altria Enterprises, LLC, entered into as of January 28, 2020, and the
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`Purchase Agreement (together, the “Amended Purchase Agreement”), Amendment No. 1 to
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`Relationship Agreement, by and among JUUL Labs, Inc., Altria Group, Inc., and Altria
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`Enterprises LLC, entered into as of January 28, 2020, and the Relationship Agreement (together,
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`the “Amended Relationship Agreement”), Amendment No. 1 to Services Agreement, by and
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`between Altria Group, Inc. and JUUL Labs, Inc., made and effective as of January 28, 2020, and
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`the Services Agreement (together, the “Amended Services Agreement”), and the Ninth Amended
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`and Restated Voting Agreement, by and among JUUL Labs, Inc., Altria Group, Inc., Altria
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`Enterprises LLC, certain Investors, the Key Common Holders, and each Additional Party, made
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`as of January 28, 2020 (the “Revised Voting Agreement”), for a more complete and accurate
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`statement of their contents.
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`26.
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`Altria respectfully refers to the Revised Voting Agreement for a more complete
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`and accurate statement of its contents. To the extent that the allegations of Paragraph 26 are
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`inconsistent with the Revised Voting Agreement, Altria denies such allegations.
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`27.
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`Altria respectfully refers to the Amended Relationship Agreement for a more
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`complete and accurate statement of its contents. To the extent that the allegations of Paragraph
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`27 are inconsistent with the Amended Relationship Agreement, Altria denies such allegations.
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`28.
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`Altria respectfully refers to the Amended Services Agreement for a more
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`complete and accurate statement of its contents. To the extent that the allegations of Paragraph
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`28 are inconsistent with the Amended Services Agreement, Altria denies such allegations.
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`V.
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`INDUSTRY BACKGROUND
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`Altria Recognized the Need to Invest in E-cigarettes
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`A.
`Altria denies the allegations of Paragraph 29 as to Altria, except to admit that it
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`29.
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`acknowledged the opportunity to pursue various alternative nicotine growth categories, including
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`e-vapor products. Altria otherwise lacks knowledge or information sufficient to form a belief as
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`to the truth of the remaining allegations in Paragraph 29 and denies them on that basis.
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`30.
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`Altria denies the allegations of Paragraph 30, except to admit that Nu Mark
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`introduced the MarkTen e-vapor product in 2013, that it made certain acquisitions of e-vapor
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`platforms, and that it expanded the availability to consumers of MarkTen Elite, a pod-based
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`e-vapor product, in March 2018.
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`31.
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`Altria denies the allegations in the first sentence of Paragraph 31, except to admit
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`that it discussed the e-vapor category in certain investor presentations and internal incentive
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`compensation plans, to which Altria respectfully refers for a more complete and accurate
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`statement of their contents. The second sentence of Paragraph 31 purports to characterize and
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`quote a statement by Howard Willard, Altria’s former CEO, to which Altria respectfully refers
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`for a more complete and accurate statement of its contents.
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`32.
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`Altria denies the allegations of Paragraph 32, except to admit that JLI was spun
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`off from Pax Labs, Inc. and in 2015 introduced a pod-based e-vapor product, JUUL.
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`The PMTA Process for E-cigarettes
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`B.
`Altria respectfully refers to the statutes, regulations, guidances, and other
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`33.
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`materials governing the FDA’s premarket authorization regime for a more complete and accurate
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`statement of the regulatory framework. To the extent that the allegations of Paragraph 33 are
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`inconsistent with that regulatory framework, Altria denies such allegations and avers that the
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`PMTA filing date has been adjourned to September 9, 2020.
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`34.
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`Altria admits that preparing a PMTA requires a significant amount of resources
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`— time, personnel, and money — and that the FDA has processes in place to assist small
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`companies in preparing PMTAs and has committed to a streamlined PMTA approval process for
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`small companies. Altria otherwise denies the allegations of Paragraph 34.
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`35.
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`Altria respectfully refers to the FDA’s January 2, 2020 announcement and the
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`referenced statute passed by Congress for a more complete and accurate statement of those
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`materials’ contents. To the extent that the allegations of Paragraph 35 are inconsistent with that
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`announcement and that statute, Altria denies such allegations.
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`VI.
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`THE RELEVANT MARKET
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`36.
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`37.
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`Paragraph 36 sets forth legal conclusions to which no response is required.
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`Altria admits the allegations of the first, third, and fourth sentences of Paragraph
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`37. With respect to the second sentence, Altria admits that there are two broadly defined,
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`although not exclusive, types of e-vapor products, closed-system devices and open-system
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`devices, but denies that they are their own “categories.” Altria denies the remaining allegations
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`of the second sentence. As to the remaining allegations of Paragraph 37, Altria respectfully
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`refers to the referenced FDA statement of enforcement policy for a more complete and accurate
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`statement of its contents. To the extent that the remaining allegations of Paragraph 37 are
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`inconsistent with that statement of enforcement policy, Altria denies such allegations.
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`38.
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`Altria denies the allegations of Paragraph 38, except to admit that open-tank
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`e-vapor products incorporate refillable tanks that users manually fill with e-liquid and that users
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`can customize various components.
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`39.
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`Altria denies the allegations of Paragraph 39, except to admit that closed-system
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`e-vapor products are sold through multi-outlet channels, as well as other outlets, and open-tank
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`systems are sold through retail outlets known as vape shops, as well as other outlets.
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`40.
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`Altria denies the allegations of Paragraph 40.
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`41.
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`The first sentence and third sentence of Paragraph 41 set forth legal conclusions
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`to which no response is required. To the extent that a response is required, Altria denies the
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`allegations. Altria denies the remaining allegations of Paragraph 41.
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`42.
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`Paragraph 42 sets forth legal conclusions to which no response is required.
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`VII. MARKET STRUCTURE
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`43.
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`Paragraph 43 sets forth legal conclusions to which no response is required. To the
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`extent that a response is required, Altria denies the allegations.
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`44.
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`Paragraph 44 sets forth legal conclusions and characterizations of the Merger
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`Guidelines and court decisions to which no response is required. To the extent that a response is
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`required, Altria denies the allegations.
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`45.
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`Paragraph 45 sets forth legal conclusions to which no response is required. To the
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`extent that a response is required, Altria denies the allegations of Paragraph 45.
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`VIII. ANTICOMPETITIVE EFFECTS
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`A.
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`Altria Agreed to Withdraw from Current and Future Competition in
`Exchange for the Opportunity to Share in JLI’s Dominant Position
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`46.
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`Altria denies the allegations of Paragraph 46 and respectfully refers to the
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`testimony of the referenced witnesses for a more complete and accurate statement of its contents.
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`47.
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`Altria admits the allegations of the first sentence of Paragraph 47, except to deny
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`the characterization of individuals as “lead negotiators” for Altria. Altria denies the remaining
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`allegations of Paragraph 47 and respectfully refers to the quoted term sheet for a more complete
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`and accurate statement of its contents.
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`48.
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`Altria denies the allegations of Paragraph 48 and respectfully refers to the
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`testimony of JLI’s former CFO for a more complete and accurate statement of its contents.
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`49.
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`Altria admits the allegations of Paragraph 49, except to deny the characterization
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`of individuals as “lead negotiators” for Altria.
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`50.
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`Altria denies the allegations of Paragraph 50 and respectfully refers to the
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`referenced draft talking points for a more complete and accurate statement of their contents.
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`51.
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`Altria denies the allegations of Paragraph 51 and respectfully refers to the
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`referenced draft talking points for a more complete and accurate statement of their contents.
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`52.
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`Altria denies the allegations of Paragraph 52 and respectfully refers to the email
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`sent by Billy Gifford and the term sheet markup for a more complete and accurate statement of
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`their contents.
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`53.
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`Altria lacks knowledge or information sufficient to form a belief as to the truth of
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`this allegation and denies it on that basis.
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`54.
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`Altria admits the allegations in the first two sentences of Paragraph 54, except to
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`deny that the purpose of this discussion was to go over a “few key points of disagreement.”
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`Altria denies the remaining allegations of Paragraph 54 and respectfully refers to JLI’s message
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`for a more complete and accurate statement of its contents.
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`55.
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`Altria denies the allegations of the first two sentences of Paragraph 55 and
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`respectfully refers to the quoted letter for a more complete and accurate statement of its contents.
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`Altria lacks knowledge or information sufficient to form a belief as to the truth of the allegations
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`of the third sentence of Paragraph 55, and on that basis denies those allegations. Altria denies
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`the remaining allegations of Paragraph 55.
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`56.
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`Altria denies the allegations of Paragraph 56, except to admit that, on October 25,
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`2018, it announced that Nu Mark would be discontinuing certain of its e-vapor products,
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`including MarkTen Elite and flavored MarkTen products (other than tobacco, mint, and
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`menthol), because of the concerns expressed by the FDA that pod-based systems and
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`nontraditional flavors could be contributing to youth usage.
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`57.
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`Altria denies the allegations of Paragraph 57 and respectfully refers to the quoted
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`email for a more complete and accurate statement of its contents.
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`58.
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`Altria denies the allegations of Paragraph 58, except to admit that, on
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`December 7, 2018, it announced Nu Mark was discontinuing its few remaining products.
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`59.
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`Altria admits the allegations in the first sentence of Paragraph 59. Altria denies
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`the remaining allegations of Paragraph 59 and respectfully refers to the quoted emails for a more
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`complete and accurate statement of their contents.
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`60.
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`Altria denies the allegations of Paragraph 60, except to admit that it executed and
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`announced the Purchase Agreement and other related agreements on December 20, 2018 and
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`respectfully refers to those agreements for a more complete and accurate statement of their
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`contents.
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`61.
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`Altria denies the allegations in the first two sentences of Paragraph 61, and
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`respectfully refers to the Purchase Agreement and other ancillary agreements for a more
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`complete and accurate statement of their contents, including Article 3(a) of the Relationship
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`Agreement, which prevents Altria from “tak[ing] actions with the purpose of preparing to engage
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`in the e-Vapor Business, including through engaging in or sponsoring research and development
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`activities.” Altria lacks knowledge or