Spanning more than 146,000 square feet and containing about 4,000 different products at any time, the average Costco store is quite impressive. But a recent class action suit has revealed that some customers are less than impressed with the products within those stores.

The lawsuit in question claims that Costco advertised its Kirkland Signature Moist Flushable Wipes incorrectly, giving buyers the false impression that the wipes would break down easily in water, similar to paper products. Instead, the wipes stayed intact, causing widespread damage to plumbing septic systems and municipal sewage lines. Several sewage management experts provided proof of these claims, showing that the product caused significant damage to New York’s waste system between 2011 and 2017.

After much speculation over the outcome of the suit, Costco chose to settle for $2 million out of court, without admitting to any wrongdoing. The decision is likely a strategic move, used to eliminate any damage that a lengthy trial and more publicity might do to Costco’s reputation. Costco also avoids a court-ordered financial judgement, which could have been exponentially larger. Finally, the settlement allows Costco to continue to sell the product, as long as the company alters the name and packaging to remove misleading claims.

Still, this case likely has undermined some consumer trust in Costco’s products, especially as more details about the case emerge. Costco’s core customer base is made up of middle-class families, the kind that depend on everyday household products. Reports about a significant problem with one of these items, combined with an apparent attempt to mislead them about it, could be a cause for concern.

This settlement exemplifies the delicate nature of advertising. It also highlights just how much effort brands must devote to designing the wording of their advertisements and the claims on their packaging, to reduce the liability risks. Moving forward, it’s likely that we’ll see the effects of this case industry-wide, as other retailers work to tighten their own practices.

Discussion Questions 

1. Was the product’s name was misleading? Why or why not?
2. Why is it important for companies to give thought to the wording on product packaging?
3. How do lawsuits force companies to modify their misleading advertising practices?

Sources: Dennis Limmer, “Costco Must Pay $2M Over Misleading Flushable Wipes,” RetailWire, July 6, 2024; Pilar Arias, “Costco Flushable Wipes Settlement Has Wholesale Giant Agree to $2M Payout,” Fox Business, July 2, 2024; PublicLawLibrary.org, “Costco Settles for $2 Million Over Misleading ‘Flushable’ Wipes Claims; Shoppers May Be Entitled to Compensation,” July 7, 2024; OpenAI ChatGPT, “Assistance with Research on Misleading Advertising and Costco Flushable Wipes Lawsuit,” ChatGPT, August 12, 2024.