People love shopping at Costco (COST). The membership-based warehouse club has dominated the American Customer Satisfaction Index's annual retail survey.
The retail giant has topped the survey for six straight years scoring an 81 on a scale that goes to 100, leading its top rival Target (TGT) and Walmart's (WMT) Sam's Club, which both scored a 78 while Walmart landed at the bottom of the survey with a 71.
Keeping customers happy is essentially Costco's business. The company sells memberships and member retention and growth are its two most important metrics.
In recent years, the warehouse club has done well with both. Its U.S. and Canada renewal rates have inched up to over 90% and its membership growth has been steady. Members renewing and providing the chain positive word of mouth (to bring in new members) are the core of its business model.
The company has generally done well in those areas, but a new class-action lawsuit suggests that some of its members are not happy with how Costco operates.
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Costco Sued Over Advertising
A class-action lawsuit has been filed against the warehouse club in California. The suit revolves around claims Costco has made about its house-brand tuna.
Costco falsely and deceptively advertises and labels its tuna products, including its
Kirkland Signature White Albacore Tuna in Water, as “DOLPHIN SAFE” (the “Product(s)”).
Costco’s false advertising scheme deceives millions of consumers into believing the Products are “DOLPHIN SAFE,” meaning they are manufactured using fishing methods that neither kill nor harm dolphins. However, the grim reality is that the Products are sourced using fishing methods that seriously injure and kill thousands of dolphins and other marine life each year. Costco knowingly and intentionally labels and advertises its Products as “DOLPHIN SAFE,” to increase profits at the expense of sustainability concerned consumers and innocent marine life, while gaining an unfair economic advantage over their law-abiding competitors that sell truly “DOLPHIN SAFE” tuna products.
Both the can and packaging of the Kirkland tuna cans do carry the "dolphin safe" label. The lawsuit claims Costco's claims regarding its tuna "are false, misleading, deceptive, unfair, fraudulent, and unlawful under California’s Consumers Legal Remedies Act (CLRA)."
The lawsuit is a nationwide class-action lawsuit in which any impacted customers can join.
Costco Lawsuit Based on Definition of "Dolphin Safe"
Basically, the lawsuit hinges on the idea that Costco knowingly benefitted from calling its tuna "dolphin safe," while not actually delivering on that claim.
"In recent years, consumers have become increasingly concerned about protecting the environment, including dolphins, through individual action, such as purchasing 'Dolphin Safe' tuna products, which are made from tuna harvested using a method of fishing that does not kill or injure dolphins. Thus, 'Dolphin Safe' tuna products, such as the products in this case, are rapidly increasing in popularity due to their perceived positive ecological benefit," the lawsuit claims.
Broadly, this is a lawsuit being that challenges what actually constitutes "dolphin-safe" fishing. That's a question that's not unique to Costco as in 2019, Chicken of the Sea, Bumble Bee Foods also faced a class action suit over those companies using the "Dolphin Safe" label, IntraFish reported.
That lawsuit currently remains in litigation. A federal judge declared on Jan. 17 that the case against Costco could move forward.
