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Michael Kors sues Costco for false advertising

A sign is pictured outside a Costco Wholesale store in Los Angeles, California March 6, 2013. REUTERS/Mario Anzuoni
A sign is pictured outside a Costco Wholesale store in Los Angeles, California March 6, 2013. REUTERS/Mario Anzuoni

By Bernard Vaughan

NEW YORK (Reuters) - Upscale fashion accessories maker Michael Kors Holdings Ltd sued Costco Wholesale Corp on Friday, accusing the largest U.S. warehouse club retailer of running a "bait-and-switch" false advertising scheme.

According to a complaint filed in Manhattan federal court, Costco has never been an authorized retailer of Michael Kors handbags, yet it has recently run advertisements nationwide falsely suggesting that the handbags are available "starting at $99."

In one example cited, Costco in April sent an email ad touting a selection of handbags for Mother's Day "starting at $99.99," several of which were Michael Kors handbags featuring the company's trademarks.

But Michael Kors, which also makes shoes, watches and jewelry, said that its representatives visited Costco's website and 19 retail stores, and found none carried its handbags.

On the Michael Kors website on Friday, most full-size women's handbags were priced between $298 and $1,195.

The point of Costco's ads is to "lure unsuspecting consumers away from bona fide Michael Kors retailers and into Costco stores," the complaint said.

"When a consumer 'takes the bait' and seeks to purchase Michael Kors handbags at a Costco store or on Costco's website, no such handbags are available," it added.

Michael Kors is seeking a court order to stop Costco from advertising its products, and to recoup profits plus punitive damages stemming from the alleged false ads.

A spokesman for Costco, based in Issaquah, Washington, was not immediately available for comment.

The lawsuit resembles one that Tiffany & Co brought against Costco in February. In that case, the jeweler accused Costco of using Tiffany's trademarks online and on at least one in-store ring display case.

The case is Michael Kors (USA) Inc et al v. Costco Wholesale Corp, U.S. District Court, Southern District of New York, 13-04832.

(Reporting by Bernard Vaughan; Editing by Steve Orlofsky)

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