Costco Slapped with Lawsuit from Michael Kors

July 12, 2013 by Paul Ausick

Luxury goods
Source: Thinkstock
In the second such action so far this year, Costco Wholesale Corp. (NASDAQ: COST) is being sued by a luxury goods maker for selling or promoting luxury items that the warehouse store doesn’t sell. Today, Michael Kors Holdings Ltd. (NYSE: KORS) filed suit; last February it was Tiffany & Co. (NYSE: TIF) that was peeved.

Kors alleges that Costco was running a bait-and-switch scheme by running advertisements suggesting that the warehouse stores were selling handbags, including some with Kors’s trademarks, beginning at $99.95. A typical Kors handbag sells for $298 to $1,195 according to the Kors website.

Kors is seeking a court order to stop Costco from advertising Kors’s products and is also seeking to recover profits plus punitive damages from Costco according to a report at Reuters.

Costco has not commented on either lawsuit, and is not likely to until the company either settles or goes to trial. Even if the allegations by Kors and Tiffany turn out to be true, the impact on Costco is likely to be small. Most purchasers of Kors and Tiffany products are not likely to be regular Costco shoppers — and vice versa.