Costco sued for seeking refunds on tariffs customers paid
arstechnica.com
arstechnica.com
I doubt customers have much standing here. They were free to not buy items if they didn’t like the price. And I do believe Costco will use this to lower prices vs just pocketing the money.
Customers (had to) accept prices under the assumption that the money went to the government, who are supposed to use it for the public good. You can easily argue that they would not have accepted the same price, knowing that it would benefit a for-profit corporation.
Massive caveat that I'm not American, it just seems like public sentiment doesn't broadly think that all the money going to the US government is used for "public good "
You cannot do that if you simultaneously feel the government is the not the best custodian of those marginal dollars.
The government was busy telling the hoi polloi that foreign companies were paying the tariff. They fought US companies that wanted to list the tariffs on receipts. They were actively suppressing clarity on the matter to end buyers. Your claim that customers assumed the higher prices was going to the government is specious or simply misinformed.
Had the business been listing tariffs directly on receipts it would be a very different conversation.
"When we looked at -- we also source flowers from Central and South America. We looked at that item and decided that while we were able to offset some of the tariffs through similar activity that we did increase some price there because we felt that, that was something that the member would be able to absorb and it was more of a discretionary item there."
Customers purchasing from them are on the revenue side and there was no line item on receipts listing tariffs, just increased prices. As a customer if you assumed that 100% of a price increase is because the business is paying tariffs, then you are almost certainly mistaken. Even if the price increase was 100% because of the tariff, the business made the decision to internally absorb the fees and not directly involve the customer. They absorbed that extra cost of business by increasing prices as needed to maintain business margins within acceptable ranges.
TL;DR: A customer paid a unit price for a good from a vendor. The cost the vendor paid or any future refunds they may receive on those costs do not factor into the transaction.
Paid prices are revenue to the business, not cost.
>Costco was telling it's investors why they had to raise prices
It told everyone. They were public. There was zero limitation at all that it go to investors, nor a ban from investors being a customer. It might have been targeted to investors but it was an earnings call broadcast to customers, indeed publicly made available to ~all their customers.
>Customers purchasing from them are on the revenue side and there was no line item on receipts listing tariffs, just increased prices.
They line itemed in their earnings call that part of it was to pay for tariffs. Not saying an exact amount doesn't unbind you from this and if no tariffs are paid it is a false representation (though in this case, not wittingly so, though they should still pay to rectify this false covenant).
I think this is even more obvious if you remove the political bias here by just saying something like "part of our prices are increased to donate to charity." If it turns out the charity was paid but for whatever reason had to return the money and no charity was actually paid, it would be obvious the business must repay the customers for this breach of agreement the portion of price raised to pay the charity even though there was no fraud or intentional deceit and even if they never told the customers the exact amount of the increase actually initially paid to charity.
> Even if the price increase was 100% because of the tariff, the business made the decision to internally absorb the fees and not directly involve the customer. They absorbed that extra cost of business by increasing prices as needed to maintain business margins within acceptable ranges.
Costco did absorb part of the cost, which turned out to be no tariff owed. They are in a position now though where the customers are simply asking the company to do what they promised the public in their earnings call which was for the tariff increases to be zeroed since the company promised and itemized out they would be used to pay for tariffs which are zero. A non-zero increase based on a promise to pay a tariff but with a tariff of zero obviously breaches this covenant made in the earnings call, as it can't be simultaneously true that a non-zero amount was actually collected in payment of a tariff while zero being owed in tariff.
This isn't a moral failure or even a case of fraud, just customers asking the company to fulfill the promise they made to the public.
It's public because they are publicly traded. How about you venture a guess at how many non-investor customers had any knowledge about that call. Maybe some number caught a news article, but it wouldn't have been an appreciable number.
> false covenant
Seriously? Even if it was a "false covenant", it was to *INVESTORS*! For an investor, it's happy days if they recoup those costs because that's a net increase in revenue.
The company set the price for the good based on their costs. Customers bought the good based on the price advertised. The fact that the company might be able to reclaim some of those costs has ZERO bearing on the price customers paid. That's as far as you need to look. Trying to contort the situation to conflate it with fraud is disingenuous. They didn't lie or defraud anyone.
> Political bias
There's no political bias in discussing the core aspect. Sure, the situation leading to it is politically charged, but the core of the issue is the company made a pricing decision based on their costs, the customers bought the products, and in the future the company might be able to recoup some of their costs.
On your last paragraph, a few things. First, tariffs were paid and have not been refunded. They are still trying to affect that change. Second, they made no promise to customers regarding tariffs. Third, you happened to use the PERFECT word here to explain why your entire argument is flawed. You said "collected in payment of a tariff" with "collected" being the operative word here. Costco did no such thing. If they had, you'd have had a line item stating so, like the one for taxes. Costco is obligated to collect and remit taxes. The importer of record is obligated to pay the tariff (or ensure it has been paid). They didn't say they were increasing prices by adding and collecting tariffs. The raised prices to offset the cost of them having to pay the tariff or to cover the higher cost of purchasing goods from parties that imported the goods and paid the tariff.
This entire lawsuit is flawed at it's core as is this entire line of argument.
Thus the whole disingenuine "gotcha" where we say " ha ha ha, it's not on the receipt" is just a fraud to pretend the customers weren't explicitly itemized out in the investor call that they were partially paying a non-zero amount for what turns out to be a zero tariff.
Of course, we reveal your whole 'receipt' nonsense as a fraud -- the investor call came before many of these purchases while a receipt comes after the purchase yet you anachronously flip things expecting the receipt to be used to know about something that is only issued after the transaction. So you're receipt argument is flawed it its core and safely dissmissed.
That being said, we should treat the designated audience of the information as an indicator how the information should be interpreted. Just because an investor shops at Costco and was on the public call doesn't somehow change the messaging on the receipt.
Kind of like assuming tariffs are used for public benefit.
"When we looked at -- we also source flowers from Central and South America. We looked at that item and decided that while we were able to offset some of the tariffs through similar activity that we did increase some price there because we felt that, that was something that the member would be able to absorb and it was more of a discretionary item there."
Customers are buying many goods at Costco one might deem as essential (food, toilet paper, etc) in bulk to save on cost. An illegal tax was being collected everywhere and likely at an even higher cost.
I think people are missing the forest for the trees here and immediately defending a corporation reflexively. The point here is to try and recover money that was illegally gathered by the government. Costco offloaded the tax burden onto the consumers and now they can collect said taxes back from the government.
Still, seems kind of hard to argue that retail sales are not an offer and direct acceptance of that offer.
This is the same if you walk the chain backwards. Suppliers to Costco that simply raised prices and internally absorbed the tariffs are the ones due a refund, not Costco. Suppliers that sent Costco and invoice with a tariff line item should be on the hook to refund Costco (which means they should be seeking a refund from the US)
But to save only the "SKU, qty., unit price, date" receipt info - which you would need to process tariff refunds - that'd be maybe 16 bytes per receipt line? To hit even 1TB/day, you'd need a billion customers, each buying 64 items. On that one day.
Yes, I'm being charitable but not having to spend part of the refund on an extra program could benefit their customers more in the long run.
(We're Costco members.)
- credit cards offered by costco offer generous cashback
- most costco food items include discount pricing thats predictable and visible in the price itself. the decimal value of the price can even determine if the item is being phased out.
- even costco memberships are broken down into savings and the staff will gladly quantify your expenditures and potential cash back should you change or upgrade a membership. unused membership portions are even refunded.
- the refunds. no questions asked, for virtually anything, any time. this is where the costco member expects tariffs to be refunded as well.
I occasionally get a gift card in the mail for a product I already purchased from Costco because they negotiated a better price for the batch after the fact.
It looks like this: https://content-images.thekrazycouponlady.com/nie44ndm9bqr/3...
I did some consulting work there a long time ago building some software to manage inventory in one of their departments.
When we asked about their goals, like improve margins, they said "absolutely not, we will not increase beyond 14%". When we asked why, they said "the minute our customers think we are increasing margins, we will lose members, and membership is the goal."
There are others as well, they have more precise meaning for their internal procurement processes but that’s the customer facing rule of thumb.
If the narrative that u.s. consumers paid inflated prices because of this then the money should go back to the consumers.
And
‘They’re’
If you’re going to make legal arguments, spelling matters.
This requires an assumption of actions that might be performed if a condition in the future is met.
That is not a solid basis for a lawsuit.
I think that this is a standard play to seek a settlement to make the pain in the backside disappear.
Hear me out on an alternative POV: the government engaged in lawless economic coercion, and the coercion trickled down. If you don't like it, sure, you can always go get coerced somewhere else, it's your free choice. I don't see why anyone would object to that, assuming of course they are a corporation or a government
I'd rather they did it for good reasons. It makes it more likely that they'll continue to. But they might also do it just to help keep my business, and that suffices.
Yes, those pesky political companies...
* Paying their employees above average wages
* Working with their suppliers to achieve win/win/win outcomes wherever possible
* Stocking products that enhance their customers' lives instead of optimizing for profit margins and nothing else
* Etc
Costco is a rare example of a company doing the right thing and succeeding under late stage capitalism.
I just think their branding is more appealing to you, combined with a more pessimistic view of companies you don’t use.
> Paying their employees above average wages
Their reasons for having higher wages are well-documented and they are equally self-serving.
> Stocking products that enhance their customers' lives instead of optimizing for profit margins and nothing else
They are one of the most aggressive profit seekers in existence! Often that presents publicly in their deals with supplier.
If this is your idea of "appealing branding" then call it whatever you need to.
Unfortunately, experience shows these rare gems are often one generation away from going to shit when the principled types retire and are replaced with backstabbing money grabbers who think the only way to win is in a race to the collective bottom, because "that's what everybody else is doing."
The bottom line is that they are paying their employees much more than their competitors would. You're going to pass that off as "self-serving"?
Their biggest competitor is owned by a family whose combined net worth is half a trillion dollars that derives from founding a megacorporation worth a trillion dollars....yet for some reason can't find the money to pay their employees a living wage, so they instruct their employees to go on government assistance.
They have a different business model than their competitors.
> You're going to pass that off as "self-serving"?
Yes. Their model allows a few employees to serve many customers in a high-volume system. They have advocated for minimum wage laws increases in the past to deter competitors who have different models.
> yet for some reason can't find the money to pay their employees a living wage
eye roll.
If thats the right thing and were really in late stage capitalism, I'm extreamly worried about the future.
So on this point I agree with you, but it does not substantially subtract from my overall view of Costco as a company in every other regard. I trust that in time they will revise whatever needs revision in order to be fair to everyone involved. Oddly enough, at least in my area, this doesn't seem to have resulted in a disproportionate amount of one race or another.
people using costco as basically a small-business depot would be lifetime non-transferable free members, and typical family/consumer gets some extra years, which they'll turn around and spend in the store anyway
win/win? costco members are sticky, and refunding cash is hard
There is nothing wrong with a taxpayer who paid taxes later ruled illegal filing a request for a refund. This lawsuit is likely a shakedown opportunity for lawyers to enrich themselves. How Costco allocates the money they get back is up to them.
> That plan enraged customers who joined Costco based on the proposition that Costco would operate on the slimmest possible margins to ensure they never pay more for goods than Costco can afford to sell them.
I feel like Costco is generally a pretty good company, but this is a wild fantasy when dealing with any commercial entity with a fiduciary responsibility to shareholders.
Consider the Target backlash last year. They’re since down 14% vs Walmart (up 30-ish%). Regardless of anyone’s political beliefs, I don’t think a 14% loss seemingly caused by behavior that a segment of customers considered hostile is thinking of the shareholders.
To be fair, they’re being sued by customers who were marketed memberships.
Is that the case history? Or bullshit assumption? Because this looks plaintiff sponsored.
I mean, one of the legal firms behind this is Milberg PLLC, https://en.wikipedia.org/wiki/Milberg, who has been charged with illegally paying plaintiffs to sue in order to enrich themselves.
I can see the appeal of an immediate refund check, but using the tariff refund to lower future prices for customers in a way that drives continued sales seems like both responsible thing to do from a fiduciary perspective and a not unreasonable compromise for the customer. Many companies would, and will, simply pocket the refund.
This whole this is just lawyering at its core. I find the outrage “on behalf of customers” to be disingenuous.
"Fiduciary duty" is less strict than you'd expect. Courts generally recognize a "business judgment rule," where executives are offered broad discretion in strategy subject to some basic reasonability tests.
This would allow Costco to say "in order to cultivate goodwill and maintain our reputation, after we receive refunds we will distribute them to our customers based on purchased goods with refunded tariffs." It would also allow the directors to book the refund as profits, or use it for later incentives or marketing, or a variety of other actions.
The 'fiduciary duty' aspect here is mostly a myth. Directors do indeed have a fiduciary duty, but that duty is towards the corporation as a whole – including its long-term interests – rather than strictly towards short-term profit maximization. The fiduciary duty doctrine exists more to prevent graft and self-dealing, where managers and directors 'loot' the company by smuggling out profits in ways that benefit themselves personally rather than the company as a whole.
Almost everyone on this forum buys retail products, and every American’s purchases were affected by tariffs.
This article claims the victims feel “rage” about this. Have you ever felt rage for prices going up due to goods becoming more expensive? I could believe that. If so, was that rage aimed at the retailer who was forced to pay more for the imported goods, or to the person who imposed them? Weird, but okay.
If so, assuming the retailers were the target of your “rage”, did you become further enraged when you learned that the unconstitutional tariffs collected were being sought to be refunded by the people who were forced to pay them? What political Venn diagram are we in now?
And lastly, do you shop at Costco or were marketed to by Costco? If so, you would be the single person in the world that might be able to claim you are the enraged victim here. It doesn’t make sense.
I’ve talked to plenty of people who are mad about tariffs, or mad at capitalism, and certainly mad at Trump. But it’s rare to find a Costco member that thinks Costco is treating them unfairly. They’re kinda famous for the opposite in a sea of exploitive retailers. (They are “famous” for never doing loss-leader shenanigans or charging more than limited markups of 11-14% on any product.)
Hell, Costco is the only retailer that wouldn’t surprise me if they turned around and gave ME a tariff refund if they are successful.
To literally sue a company for seeking refunds to levied taxes that were declared illegal, appears to be some combination of victim blaming, political distraction, or more likely: convenient enrichment for class action mills.
Corporations claiming the refund on my behalf (and then not propagating that refund to me) is just icing on that shit-cake.
Companies get to benefit from higher prices being standardized (once a price baseline go up, they rarely go back down) and they get another check from Uncle Sam.
I think what you and the plaintiff need to show (direct connection between supplier costs and consumer prices) fundamentally goes against free business in the US. I mean, companies change prices all the time for whatever reasons they want, no?
But IANAL, "unjust enrichment" is apparently a real claim (though not sure if it applies to a store-consumer relationship) and consumer protection laws exist, so maybe I'm wrong.