Last week Michael Kors, maker of expensive clothing, shoes, handbags ,and perfumes, sued Costco for false advertising. The whole case is related to an ad in the US showing Michael Kors purses on sale at Costco stores starting from $99.99, apparently. Kors claims that Costco is not an authorized retailer and did not actually have Michael Kors handbags available at the 19 Costco locations and Costco.com that brand representatives visited at the time of the ad. Thus, they feel that Costco was using a bait and switch advertising scheme to lure legitimate Michael Kors shoppers away from their official retail stores to make purchases at Costco. The company is seeking a damage amount to be determined at trial, as well as attorney’s fees, and any revenue Costco gained from shoppers who went looking for Kors handbags and bought something else instead.
I don’t really know how they are going to be able to determine that shoppers went to Costco looking specifically for a Michael Kors handbag and wound up buying a different one instead. How do you prove that? So, right there I can’t even see how they could determine that damage amount. It seems to me that if you had your heart set on a Michael Kors bag, you might shop around but if you didn’t find the one that you wanted you would go to a Michael Kors store and make your purchase. I do that with things all the time, including handbags. Secondly, Costco has a lot more than 19 retail locations across the US, so I’m not really sure if that is a statistically valid sampling. Since Costco now has in excess of 450 US locations (that was at the end of 2012 I think), 19 would be just 4.2% of stores, that’s not really very many, especially if they were all in one region of the country. There’s always different merchandise at different Costco locations around the country, as well as online. Or, maybe they had just sold all of the stock by the time they got there to do their checks. I’ll assume that they have better, more concrete evidence that no Costco location in the US, including the website, had Michael Kors bags in stock at the time that the ad was emailed out to customers. Though from the ad, it looks like the purses were available only through the Costco website, so they might not have been available at any of the physical Costco locations, just the website. Of course, it also pretty clearly states “while supplies last” in the ad.
For those of you that aren’t familiar with Michael Kors handbag prices, they are significantly higher than $99.99, the low end would more likely be around $200 going up to well over $1,000 at their official retail stores. I would be amazed (and very sad) if Costco actually sent out an email ad showing images of products they did not have in any of their stores. That would seem highly out of character for them and seemingly go against their corporate attitude. I’m not really sure why they would need to do that when they have lots of other great designer handbags available anyway; different ones at different locations at different times of the year. Currently, at the high end they have lots of Prada bags on the Costco.com site and at the lower end of the price scale they have Ralph Lauren bags as well. I’ve also seen Burberry, Longchamp, and Mulberry bags at Costco stores, as well as Kate Spade and lots of other designers that I’ve forgotten by now. I’ve seen lots of different designer brands in Costco’s little glass enclosed cabinets for purses and other high end items, and certainly Michael Kors is no more special or exclusive than any of them. And really, they have his purses at Zappos.com now too and some of them are just $98.00. Is he going to sue them next? Or what about all the retailers selling discounted Michael Kors handbags through Amazon.com? From the stories of the lawsuit it seems like the price and the fact that Costco was selling the bags was the real problem and using this false advertising claim is just a way to let everyone know that his stuff isn’t cheap and shouldn’t be at Costco.
As you can maybe tell, I’m not a big fan of Michael Kors’ handbags, and wasn’t even before this lawsuit. His stuff always has that cheap feeling to it and to me it just doesn’t compare favourably to the truly high quality handbags on the market, well except for the prices. I think this might be a case of a snooty designer trying to act like they are too good to be sold in Costco stores. I do understand wanting to maintain the reputation of your brand, however, I’m not sure this is the best way to go about it. Of course, I don’t think selling goods at Costco connotes that a brand is low quality or cheap either; usually that isn’t the case at all. As has been well hashed out in the courts already, being an authorized dealer isn’t the be all and end all to who can sell your goods. There’s a little thing called the first sale doctrine that should apply in this case, meaning that Costco can sell items that they have obtained from an authorized Michael Kors retailer and they can do it for whatever price they want. Also, with so many people constantly shopping at Costco, it is hard to tell how much stock they have of something because if it is popular they could run out of their limited stock rather quickly; I’m sure we’ve all experienced that. Maybe this is a loss leader for them, who knows? Maybe they only had a few of the purses at a few stores or online and people rushed in to buy them immediately because Michael Kors is such a popular brand (number one US brand according to Internet searches).
However, if Costco did not have the bags and was using an image of one in their ads then shame, shame on Costco. They don’t need to stoop to such lousy tactics to get people into their stores or shopping on their website. But really, does this seem like something Costco would do or need to do, to you?
For more on this topic:
- Reuters: Michael Kors sues Costco for false advertising
- Bloomberg Businessweek: Michael Kors Tries to Wipe Some Costco Mud Off Its Gold-Plated Brand
- Huffington Post: Michael Kors Sues Costco Over Ads
- Business Insider: Another High-End Brand Is Furious At Costco For Claiming To Sell Its Products