Michael Kors Sues Costco for Alleged Bait-and-Switch Scheme

By ABC News

Jul 16, 2013 11:38am

High-end designer Michael Kors Holdings Ltd. is suing Costco, alleging that the warehouse club falsely advertised its luxury  bags for at least half price in a “bait-and-switch-scheme” to lure customers into the big-box retailer.

The lawsuit, filed last week in New York, claims that Costco sent an email blast for Mother’s Day showing pictures of Michael Kors bags that advertised the designer purses for as low as $99, even though the Issaquah, Wash.-based wholesaler is not authorized to sell the merchandise. The lawsuit seeks a halt to the ads, along with unspecified damages.

Michael Kors bags can range anywhere from $178 to $1,395, according to a search of handbags on the company website.

“It’s Michael Kors’ decision if it wants to go down to a lower price point at a store where you’re allowed to buy a jumbo-sized toilet paper before you buy its luxury bag,” Business Insider reporter Laura Stampler told ABC News. “So it doesn’t necessarily want to make that leap down yet.”

Michael Kors sent its officials to 19 Costco stores and they found no products from the designer on shelves or the wholesaler’s website, according to the complaint.

Costco declined to comment on the accusations. Michael Kors Holdings did not respond to ABC News’ request for comment. Founder Michael Kors now owns only a small percentage of the publicly traded company (NYSE: KORS).

Tiffany & Co. took Costco to court earlier this year  for allegedly misleading customers into thinking its signature diamond rings were from the iconic jewelry store. Costco countersued, saying the word “tiffany” is a generic term to describe a kind of ring setting.

Experts say with the latest suit, the wholesaler could be risking its relationship with the luxury brands it does carry.

“If Michael Kors is going to be going to court and publicizing that Costco is a low-end brand that they don’t want to be associated with, that could negatively affect other brands,” Stampler said.

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