E-Cigarette Direct Purchasers Fight Forced Arbitration

A number of direct purchasers are pushing back, filing an antitrust class-action lawsuit against the e-cigarette giant Juul Labs and its minority stakeholder Altria according to Law360. The direct purchaser plaintiffs allege that Juul conspired with the Altria Group to tighten their hold over the e-cigarette market.

Unlike consumers who purchase e-cigarettes from a store or through an intermediary (indirect purchasers), direct purchasers are the companies and stores that buy directly from the manufacturers themselves.

The current struggle that many direct purchasers face in pursuing the current antitrust action against Juul and Altria is that there was an agreement to terms and conditions that included a forced arbitration clause on the distributor’s website.

Under the forced arbitration clause, California-based U.S. District Judge William H. Orrick has determined that some members of this potential class-action will be unable to sue until they satisfy the arbitration clause of the terms and conditions. However, this forced arbitration will only apply to the distributors who used the site during or after 2021.

If enforced, the direct purchasers would have to take their antitrust case to arbitration before being allowed to go to trial. The current antitrust lawsuit alleges that the 35% purchase of Juul Labs by the Altria Group was part of a conspiracy to push Altria out of the e-cigarette marketplace in a bid for supremacy over e-cigarette prices.

Katharine L. Malone, attorney for the plaintiffs, has argued that the terms and conditions pages have not adequately alerted direct purchasers to the fact that they are being locked into a forced arbitration agreement.

While Malone acknowledges that the page is in its best state, she argues that the decision to force arbitration should not be based on the most recent edition of the terms and conditions, especially since the most recent member joining the class action did so in 2020.

In addition to this class-action from direct purchasers, Juul Labs and Altria also face allegations that they marketed e-cigarettes to children.

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