Tuesday, 19 February 2013

Costco CEO: We Shouldn't Have Used Tiffany to Describe Rings [EXCLUSIVE]

by Shirley Brady


Tiffany is more than irked at Costco for selling diamond engagement rings as "Tiffany" rings. The luxury jeweler last week formally filed suit against the wholesale retail giant.
Costco CEO Craig Jelinek commented in an internal email communication that was sent to all employees this evening [Feb. 18, 8:27 pm EST], "We are disappointed that our efforts to resolve the issue with them did not result in an amicable solution as we had hoped."
Jelinek also acknowledged that the retailer erred by using the word "Tiffany" in describing the engagement rings:
"That was intended to describe a setting style used in those rings, and was not intended to claim that the rings were of any particular brand. In retrospect, it would have been better had we not used that description the way we did."
Below, read Costco's company-wide email:
Subject: Tiffany & Co. Lawsuit Against Costco
To: All employees
From: Craig Jelinek, President & CEO
You have probably seen or heard some media coverage of a lawsuit filed by the jewelry retailer, Tiffany & Co., against our company, claiming that we sold diamond rings that were improperly labeled as Tiffany. As you well know, our policy has always been to sell only genuine goods. We have no motive to do otherwise, because our business depends on the continued trust and loyalty of our more than 60 million cardholders around the world. In the past few years, we have sold some high-quality diamonds that were signed or labeled using the word "Tiffany." That was intended to describe a setting style used in those rings, and was not intended to claim that the rings were of any particular brand. In retrospect, it would have been better had we not used that description the way we did. Still, we do not believe that any of our members believed they were buying a Tiffany-brand ring. If any of our members were confused, under our company protocol and our long-standing Membership Satisfaction Policy, they can obtain a full refund at any time. When Tiffany & Co. brought this issue to our attention, we changed the signs and cooperated fully with their requests for historical sales data. We are disappointed that our efforts to resolve the issue with them did not result in an amicable solution as we had hoped.
Craig Jelinek, President & CEO
Tiffany's Feb. 14th press release on its suit:
Tiffany Files Lawsuit Against Costco for Trademark Infringement
Tiffany protects customers and brand by seeking to halt sales of counterfeit diamond rings
Moving to protect its customers and its brand, Tiffany and Company, wholly owned subsidiary of Tiffany & Co. (NYSE: TIF) today filed suit against Costco Wholesale Corporation to prevent further sales of counterfeit diamond engagement rings and for damages associated with prior sales. The suit was filed in the U.S. District Court for the Southern District of New York, and alleges trademark infringement, dilution, counterfeiting, unfair competition, injury to business reputation, false and deceptive business practices and false advertising.

In November, 2012, a customer alerted Tiffany to the sale of what was promoted on in-store signs as "Tiffany" diamond engagement rings at a Costco store in Huntington Beach, California. Tiffany immediately launched an investigation, and later learned that for many years, and without Tiffany’s knowledge, Costco had apparently been selling different styles of rings that it has falsely identified on in-store signage as "Tiffany." The rings are not in fact Tiffany rings, nor are they manufactured by, approved by, licensed by, or otherwise in any way properly associated with Tiffany. In this way, Costco led its members to believe they were purchasing authentic Tiffany products at significant discounts, when in fact, that was simply not true.
"We now know that there are at least hundreds if not thousands of Costco members who think they bought a Tiffany engagement ring at Costco, which they didn’t. Costco knew what it was doing when it used the Tiffany trademark to sell rings that had nothing to do with Tiffany. This is not the kind of behavior people expect from a company like Costco, and this case will shed a much needed light on this outrageous behavior,”  said Jeffrey Mitchell of Dickstein Shapiro, Tiffany’s counsel in the case. "The Tiffany brand has been damaged, Costco members have been damaged, and Costco has profited from the sale of engagement rings by misrepresenting what they were. We will get to the bottom of what Costco was up to and why, and right a terrible wrong," Mitchell added.
For more than 175 years, the Tiffany trademarks have been applied to high quality goods, including in particular high-end jewelry. Authentic Tiffany jewelry is manufactured to strict specifications, and then subjected to rigorous quality control standards to assure the public about the provenance and quality of each Tiffany item.  Tiffany diamond engagement rings are then backed by a lifetime guarantee. Additionally, to protect the brand, Tiffany fine jewelry is sold only in Tiffany retail stores by trained sales professionals, and is not distributed or sold at discount through other wholesale or retail establishments. In particular, Tiffany has never sold nor would it ever sell its fine jewelry through an off-price warehouse retailer like Costco, either directly or indirectly.
To protect the public, Tiffany maintains an aggressive and rigorous intellectual property program, and regularly takes actions against counterfeiters and infringers. "What’s different here from many other cases of counterfeiting," notes Mitchell, "is that here customers might be more easily taken in since Costco members expect authentic brand name merchandise at discount prices at Costco. Everyone knows that buying something on a street corner or over the internet from an unknown source is risky. Until now, no one would have thought it could be risky to buy brand name merchandise from Costco as well."
About Tiffany & Co.
Tiffany & Co. operates jewelry stores and manufactures products through its subsidiary corporations. Its principal subsidiary is Tiffany and Company. The Company operates TIFFANY & CO. retail stores and boutiques in the Americas, Asia-Pacific, Japan, Europe and the United Arab Emirates and engages in direct selling through Internet, catalogue and business gift operations. For additional information, please visit www.tiffany.com.

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