Lululemon Athletica has filed a lawsuit against Costco in a California court, claiming that the retail giant is selling dupes of its popular athletic wear. The Complaint is 49 pages long. It alleges that Costco’s offerings are “virtually identical” to Lululemon’s hallmark products, including Scuba hoodies and sweatshirts, Define jackets, and ABC pants. In case you missed it, Lululemon just announced price increases on its pants, shorts and tops partly in response to the new industry-wide tariffs. In turn, this lawsuit has risen up.
Specifically, in its lawsuit, Lululemon alleges that Costco’s Kirkland private label is illegally peddling knockoff goods. The brand claims that these products, as well as others like them from Danskin, Jockey, and Spyder, deceive consumers. The Vancouver-based company seems to be moving in the right direction. They’re seeking a court order requiring Costco to pull ads for these products, including those posted online and in print. Moreover, Lululemon is seeking damages for lost profits caused by the sales of lower-quality knockoffs.
Allegations of Consumer Confusion
Lululemon contends that many customers are unable to differentiate between its authentic apparel and the cheaper alternatives offered by Costco. The lawsuit states,
“Some customers incorrectly believe these infringing products are authentic Lululemon apparel while still other customers specifically purchase the infringing products because they are difficult to distinguish from authentic Lululemon products, particularly for downstream purchasers or observers.”
This assertion is a good indication of the brand protection and consumer feeling that have the company so worried. Intense competition from other businesses that offer similar products on the market may threaten Lululemon’s brand image. This potential dilution could irreparably harm its reputation with consumers.
Cease and Desist Efforts
Prior to taking legal action, Lululemon tried to avoid litigation, first sending cease and desist letters to Costco. These letters sought to put a stop to the production and sale of any items that Lululemon claims violate its rights of intellectual property. Yet in the absence of a desirable outcome achieved through these early notices, Lululemon has gone to the courts to seek relief.
The lawsuit points to an important new trend in consumer behavior. Thanks to climbing inflation and an ongoing global trade war, dupes have exploded in popularity. Yet this inflationary environment has created an economic incentive for consumers to trade down to lower-cost options away from these higher-priced brands. In contrast to this trend, Lululemon is committed to continuing to protect its brand and make sure customers are getting the genuine product they expect.
Recent Price Increases and Market Challenges
That’s exactly what Lululemon did when it filed its recent lawsuit. The company similarly declared price hikes on a third of its product line earlier this year, owing to looming tariffs on Chinese imports. This decision was announced several weeks before the Ahold lawsuit was filed against Costco. The company has had a hard time maintaining consumer excitement for the last year. Thousands of these customers were deeply unsatisfied at what they saw as stagnation of new products.
The intersection of these three factors underscores Lululemon’s desire to pivot in a evolving market landscape, all while protecting their brand image. This lawsuit might dramatically change the fortunes of either company. With the growing, cutthroat retail environment, the stakes have never been higher.
