Published On: Thu, Jul 18th, 2013

Michael Kors Sues Costco- Alleges a Bait and Switch

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Michael Kors Holding company (NYSE:KORS) has filed a lawsuit against Costco Wholesale Corp. (Nasdaq: COST) for false advertising and using a bait and switch tactic to lure customers with Kors’ high end handbags.

In a lawsuit filed on July 11, 2013 Kors is alleging that the retail giant, Costco, showed 4 high ends in an April 16 advertisement. The retail giant then offered Mother’s Day’s gift ideas. Kors’ calls this email as a bait and switch advertising scheme as Costco has no agreement to sell Michael Kors’ products and for sure not the handbags pictured. The website for Costco has no products relating to Kors.

This is not the first time Costco has been sued for this type of activity. In February, Tiffany & Co. (NYSE: TIF) also sued Costco claiming they falsely used some of their rings in an Advertisement. Costco has responded to the lawsuit, as reported in BusinessWeek, that they sold the rings with Tiffany settings. They claimed this was a generic term. This was quickly refuted by Tiffany & Co. That suit is still pending.

Kors further states that Costco might have carried Kors handbags at one time, but not at the $99 price point in the advertising. This fact could complicate the suit for Kors.
As a new company Kors, investors want to see a high rate of growth. This means the brand would like to open doors in the middle market. However, it needs to be careful as not to hurt its high end product line. In 2013, Kors brought in $2.2 billion in revenue.

Kors is asking that money awarded for any damages to be determined at trial. The amount of damages should include attorney’s cost and any revenue Costco gained from the alleged bait and switch scheme. At the time of this article, Costco had yet to respond to the complaint.

Michael Kors was born was born August 9, 1959 and raised on Long Island, New York. Mr. Kors moved to NYC where he attended the prestigious Fashion Institute of Technology (FIT). He left the school after 2 semesters.

In 1981, Kors launched his first women’s collection and has been a judge on the Bravo reality Series Project Runway in 2004. His clothing has been worn from celebrities to First Lady Michelle Obama who wore one of his dresses in in her first official portrait.

Mr. Kors has been awarded the CFDA Women’s Designer of the Year (1999), the 2003 CFDA Men’s Designer of the Year, the 2010 CFDA Lifetime Achievement Award among many others. With new lines always in production, and even more clients being drawn to his label from his time on Project Runway, his fashion empire continues its meteoric climb.

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