Saturday, April 7, 2018

Costco Proposal to Tiffany Co. (2017)

The Controversy
One of the Biggest retailers

Costco is the second biggest retailer in the nation. They have been a dominating force in the discounted shopping world since 1976. Costco and Price Club merged in 1993, giving the corporation a total of 206 locations with annual sales at 16 billion. To this day, their philosophy of keeping it simple and keeping the cost down has caused them nothing but success. Well, almost nothing that is. In 2013, Costco released a line of discounted engagement rings, which were given the name Tiffany. Tiffany & Company, the world-renowned jeweler from New York, had no relation to this new line of rings. Tiffany & Co. was a trailblazer in establishing the ring setting style that is used today; the claw. This organization is one of the most popular diamond retailers, so if someone thought they were getting a real Tiffany ring at a discounted price, the opportunity was unsurpassable. Costco sold 2500 of these engagement rings, profiting a cool 3.7 million dollars from their discounted line. When Tiffany & Co. caught wind of this misleading advertising, they immediately took legal action.
Jewelry company 

While Tiffany & Co. argued that the word Tiffany is a trademark, Costco claimed that the word Tiffany has just become a generic word for diamond. After a long and grueling lawsuit, Costco was found guilty of trademark infringement. They had to pay 11.1 million dollars because of the lawsuit, as well as 8.25 million dollars in punitive damages, totaling 19.4 million dollars. Tiffany claims they did not lose a single sale because of the whole thing, so they only were affected positively. Costco on the other hand had a drop in stock prices from 160 dollars to 152 dollars. A small misleading name for an engagement ring line ended up costing Costco about 20 million dollars.

A wide variety of people were affected by this lawsuit. Costco itself was very negatively affected because that had to pay out over 19 million dollars in lawsuits and their stock went down 8 points. This means that anyone that had bought stock within Costco was also affected negatively by this lawsuit, because the value of their investments had declined. Not to mention all the bad press that they were receiving about the ordeal. On the flip side of the matter, Tiffany & Co. was positively affected because they not only gained 19.4 million dollars, but they also walked away with the victory from the lawsuit. This victory confirms that the name Tiffany is trademarked, which boosts their company’s reputation because it will deter others from trying to use their name on products. Lastly, the customers who actually purchased the 2,500 rings were also affected by the scandal. Even though Tiffany did only identify ten people that had the wool pulled over their eyes, those ten people were negatively impacted. They fully believed that they were getting a great deal on an authentic ring, so finding out otherwise was quite the letdown. However, the other 2490 understood that and were content with their purchase regardless.

When looking at individualism, a company needs to pass two objectives, the first being that it stays within the law. The second is that it is the most profitable avenue for the owner of the business and or the shareholders. In this controversy, Costco did not meet either one of these criteria. It was apparent that they did not stay within law since they did lose the lawsuit with Tiffany & Co. Also, the company lost millions of dollars, so the ring line turned out to most definitely not be the most profitable route. Lastly, because of this lawsuit, the stock of the company in which all the shareholders sink their money went down eight points. This means that for every share a stockholder had they lost eight dollars, so this controversy was not profitable at all for them either. Someone who believed in individualism would most definitely not be thrilled with Costco in this situation.

A popular Tiffany Co. ring 

The goal of the utilitarianism is to maximize happiness for all, no matter the situation. When looking at this controversy, you have to see which option would be the most satisfying in the long run. It is not about immediate happiness, but about whether or not they are happy at the end of the day. There are a few different parties needed to be satisfied for this theory to deem the situation successful, one being Costco. They are definitely not happy with the outcome because they had to pay out 19.4 million, but since Costco made 2.6 billion dollars last year so the 19 million they had to give up is a drop in a bucket, so overall they were not too upset. Another party that needs to be happy in this case is Tiffany & Co. They were happy with this case because they ended up gaining 19.4 million dollars and a validation that their name is in fact a trademark. This way it will deter competitors and knock-off brands from using their name without permission. Lastly, the customers were satisfied with the Costco ring sales because of the 2500 rings sold, only 10 customers admitted that they had been wrongly convinced that they were actually buying a Tiffany ring. Overall this controversy passes utilitarianism.

Kantian Theory
Kantian theory is all about goodwill; doing the right things for the right reasons. To pass this theory you need to make sure that you are giving all the necessary information, which is the formula of humanity. When Costco was selling the rings, they were not trying to convince people that it was an actual Tiffany ring, and once they lawsuit they happened they owned up to their mistake and are paying the damages. Costco was being as transparent as they could be, so there was not deception. Overall, Costco is doing the right things for the right reasons. That is why they passed the Kantian Theory.

Virtue Theory
When looking at the Virtue Theory, you need to analyze the four characteristics of the theory: courage, honest, justice, and temperance. Looking at Costco, they exhibited a great amount of courage because it is not easy to do the right thing and stand up and admit that you were at fault. This take honesty as well because when asked if they sold Tiffany rings, they said yes and did not try to hide anything, admitting that they were unaware of the name’s trademark. Justice was also apparent because this controversy did make its way through the court system, with Costco eventually losing the lawsuit. Finally, Costco displayed temperance because they remained calm, cool, and collected through the whole ordeal, and in the grand scheme of things, remained an extremely successful company. Someone who believed in the Virtue Theory would definitely approve of this controversy. 

1 comment:

  1. I enjoyed your work on breaking down this controversy and thoroughly agreed with each theory except Kantianism. You state in the controversy that it is misleading advertising which by definition would make it fail under Kantian Theory based on the premise that not all the information available to Costco was presented to customers, there were 10 customers mislead. Therefore it impeded the customers ability to make a decision rationally, the only thing of essential value. I see you interpret it not trying to pass it off as a Tiffany & Co ring but you admit it was deceitful, which seems contradictory.