Why is Costco suing makers of Titleist

Golf is hugely popular. It can also get somewhat expensive. So, you can bet when a quality product launches at a good price point, golfers are very interested. Such was the case for Costco, which recently stocked a ball they said combined good quality with a great price. Golfers agreed, and the company soon ran through all its stock. Unfortunately for Costco, the deal grabbed the attention of Acushnet, the maker of Titleist golf balls, who was none too happy with the situation. They sent a harsh letter to Costco, alleging false advertising and patent infringement. Costco responded by suing Acushnet, hoping the suit will stop the accusations.

On the surface, it seems to be a fairly open and shut case…Costco said its “Kirkland Signature guarantee” that all products sold under the store’s brand would “meet or exceed the quality standards of leading national brands…” is far from false advertising. It’s just a promise the company makes to its valued customers about every Kirkland brand product on the shelves.

According to the lawsuit, as reported by CNN, “Costco has never publicly compared the KS ball with any Acushnet ball, including Acushnet’s Pro V1 golf balls…”

The company does admit using language saying the balls had been praised by reviewers, including golf pros, who compared the brand to “tour quality” balls marketed by Titleist, TaylorMade, and Callaway. This, the company alleges, is comparison, not false advertising or infringement. There’s been no verdict yet in the case, and, at least at this point, Titleist has taken no further action, either to pursue legal recourse or to withdraw the request. Meanwhile, though the balls are sold out online, Costco says they are getting more and plan to continue selling them. And, given the price comparison, as long as the quality really is comparable, it’s highly likely people will keep buying them.

Consumers face this decision any time they run up against a “store” or “generic” brand versus a “name” brand. You see it in the pharmacy section of most supermarkets, where store brands are significantly less expensive than competitors. This is prevalent in the grocery aisle and frozen food too.

To make up the difference name brands must convince the customer their product quality is measurably better to make it worth the cost. And, if the consumer has the extra money, they can make that choice. In this case, with the Titleist balls costing significantly more than the store brand, it’s easy to see why Acushnet is aggravated by the situation.

William Doonan is a tax law and legal expert in New York.