‘A Simple Case of Consumer Deception’: Class Action Filed Over Costco Battery Replacement Warranties [UPDATE]

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A proposed class action alleges the “free” battery replacement warranty sold by Costco for Interstate-branded car batteries does not work as consumers believe it will.

The 27-page lawsuit alleges that although consumers believe Costco’s 36- or 42-month battery replacement warranty is good for the no-additional-cost replacement of an Interstate battery in the event the product is defective, the warranty, unbeknownst to buyers, actually comes with an additional price increase for the replacement battery. 

“In other words, Costco’s advertised Free Replacement Warranty for the Interstate Batteries is not free at all, but instead, costs consumers the difference in the original purchase price of their Interstate Batteries and the increased price of the replacement batteries Costco requires consumers to purchase,” the case, filed in Florida federal court, claims. 

According to the lawsuit, Costco’s “scheme” pertaining to Interstate battery warranties is deceptive to consumers in that they expect to receive a replacement battery at no extra cost or, at the very least, have their purchase price for the original product refunded and then be charged the same price for the replacement battery. Costco’s failure to honor its free replacement warranties for Interstate batteries and/or its failure to disclose to customers that they must pay the difference in the original purchase price and the increased price of a replacement battery amounts to an unfair and deceptive trade practice, the complaint alleges. 

“Costco’s failure to honor the Free Replacement Warranty also constitutes a breach of warranty and a breach of the implied covenant of good faith and fair dealing, and Costco has been unjustly enriched by its conduct,” the suit contends. 

Per the lawsuit, the Federal Trade Commission (FTC) has long been concerned with the use of the term “free” by businesses in marketing or promotional materials, in part because the word “can easily lead to deception.” The FTC, for more than 45 years, has had guidance on the use of the word “free” that, the suit argues, makes clear that the agency forbids entities like Costco from charging customers for a purportedly “free replacement” battery. According to the case, nearly every state consumer protection law, including Florida’s Deceptive and Unfair Trade Business Practices Act, expressly provides that courts are to give due consideration and weight to the FTC’s interpretation of the Federal Trade Commission Act as it pertains to the term “free.” 

Per the lawsuit, the labels of Costco’s Interstate batteries, from 2014 until around 2019, depicted a “free replacement” representation, which the retailer referred to as a “warranty” on the batteries’ price tags. During that time period, the case says, Costco “did not limit or qualify the Free Replacement Warranty in any way” for the Interstate batteries, or make any disclosure to consumers about any terms or conditions that applied to the free replacement warranty: 

“A reasonable consumer purchasing an Interstate Battery would expect to receive a replacement battery for free if his or her Interstate Battery became defective within 36/42 months of purchase, and certainly would not expect to have to pay out of pocket any additional amount to receive the battery replacement. That is what ‘free’ means, as common-sense dictates, and as the FTC has made clear.” 

Costco, contrary to the expectations of reasonable consumers and without notice, has instead charged Interstate battery buyers an additional cost when they attempt to replace their battery within the warranty period, the lawsuit alleges. Even worse, consumers who buy Interstate batteries are not aware that they will have to pay out-of-pocket for an in-warranty replacement until after they bring their defective battery into Costco, the complaint claims. 

The lawsuit looks to represent all persons or entities in the United States who purchased an Interstate Battery at a Costco and were not provided with a free replacement battery when their Interstate Battery became defective. The suit similarly looks to cover a “subclass” comprised of persons and entities in Florida who fit the same criteria.

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