The JUUL and the Capture Theory of Regulation

If you have been on Grounds the past two years, you are probably familiar with the JUUL, a popular electronic cigarette sold by PAX Vapor company. The e-cigarette itself is a single-purchase, rechargeable USB device paired with interchangeable flavored “pods” containing vapor juice with nicotine. The JUUL was originally designed as an alternative for adult smokers that reduces externalities associated with cigarette smoking: secondhand smoke and litter. However, the product’s popularity has yielded an unintended consequence: purchase and use by those who did not already use nicotine products. Despite being restricted for purchase by those 18 and older, JUUL products have infiltrated high schools and caused many teenagers to develop nicotine addictions.

Last week, the FDA cited an 80% increase in teen vaping to justify a partial ban on the sale of flavored electronic cigarette products. In compliance with these new regulations, most retailers are barred from selling flavors other than tobacco, menthol, and mint. JUUL is still permitted to sell flavors like Mango and Creme Brulee online and in age-restricted locations like vape shops. These regulations respond to an adverse effect of PAX Vapor’s endeavor to end cigarette smoking, but what about the potential ramifications of the economic regulation itself?

It seems irresponsible to addict a generation to a product and then render that product nearly impossible to acquire. This new FDA regulation might incentivize nicotine-addicted JUUL consumers to turn to more accessible sources of nicotine such as cigarettes, the very product e-cigarette companies seek to deter consumers from purchasing. The counter-intuitive nature of this regulation mandates assessment from an economic perspective.

The FDA relies on a public interest based argument for enforcing e-cigarette regulations. FDA Commissioner Dr. Scott Gottlieb cited his conscience before promising to utilize “the full range of our regulatory authorities to directly target the places kids are getting these products and address the role flavors and marketing are playing.” I argue that this is an excuse for the FDA’s compliance in the capture theory of regulation, as posited by Stigler. These new regulations play directly into the Big Tobacco agenda, whose interest groups probably lobbied aggressively for sanctions on the sale of e-cigarettes. It is obvious that these regulations aim to protect substitute goods rather than prioritize consumer welfare or improve the industry. If the FDA truly wanted to reduce nicotine addiction in teenagers, they would equally regulate the tobacco industry.