The first of the private lawsuits against Juul is scheduled to go to trial next month in San Francisco. The whole legal system is designed to encourage voluntary settlement, so it is likely that there are or soon will be serious negotiations between the plaintiffs and Juul in an effort to avoid the risks that a trial brings.
The trend in Juul settlements so far with state attorneys general has not been encouraging. After a reasonable first step in North Carolina, the settlements with Arizona, Washington and Louisiana have got steadily weaker, in terms of money, restrictions on Juul’s behavior, and document disclosure.
In particular, the “limitations” on Juul’s marketing to kids only codify changes Juul has already voluntarily made and Juul is left in charge of policing itself. And there are no meaningful costs to Juul if kids continue to use its products.
A better solution would be to create a performance standard that removes the economic incentive for Juul to make sure kids stop using its products. The settlement should commit Juul to paying an amount every year equal to the discounted present value of all the products Juul is selling to youth under 21 as well as the money Juul would earn from kids they addict when they continue as Juul customers after they grow up.
As I explained when making a similar proposal for cigarettes in 1993, Juul would simply pay an amount equal to some multiple of the current retail value of all Juul e-cigarettes consumed by kids, not just Juul e-cigarettes purchased by kids. This is an important distinction because in 2021 kids only bought 31% of the e-cigarettes they consumed.
Juul’s commitments to reduce youth access in the existing settlements, even if effective, would only impact 31% of youth consumption. This is like building a dam one-third of the way across a river and expecting the flow to stop.
Charging Juul to recover all the money they are making off kids — as well as the money they will make in the future by addicting kids today — would create a business incentive to Juul to see that kids actually stopped using their products. How Juul accomplishes this would be up to Juul.
Another advantage of this approach is that it is easy to implement. Youth consumption information by brand is available in two large surveys that CDC does, the National Youth Tobacco Survey and the Youth Risk Behavior Surveillance System. NYTS has a national sample and YRBSS has samples in most states. The settlement could commit Juul to paying an amount each year fee based on the number of youth consuming their products and how much they are consuming times Juul’s suggested retail prices.
This amount would start out with a multiplier that would make it equal to the discounted present value of current and future consumption of Juul products by youth. In future years, this amount would be multiplied by increasing factors to increasing stiffen the cost to Juul of kids continuing to use its products.
To avoid future controversy, Juul and the plaintiffs would agree on which survey to use and the precision needed in the estimates, which depend on sample size. If Juul wanted higher precision, they would simply commit to paying to increase the sample size to accomplish the precision they want.
Of course, if Juul effectively stopped youth use, for example by changing their products, advertising and marketing, or prices, Juul wouldn’t pay anything.
(Of course, the settlement should also have strong document disclosure provisions that fix the problems with the North Carolina settlement disclosure provisions).