Can Swatch Stop Costco from Selling Omega Watches?


Costco Wholesale (COST) on Monday asked the U.S. Supreme Court to continue to allow it to sell products made overseas at a discount in U.S. stores. The debate comes after Swiss company Swatch Group (SWGAY) pushed to use its copyrighted logo to legally prevent the largest U.S. warehouse retailer from selling its Swiss-made watches in the U.S., Bloomberg News reported.

Costco asked the court to extend a 1998 ruling that limits foreign manufacturers' ability to bar goods from being imported to the U.S. after they'd been sold to a distributor or other entity overseas, according to Bloomberg. The ruling opened the door for the so-called "gray market," in which retailers can take advantage of lower prices offered in other countries.

Swatch's Omega unit imposed its copyright after Costco found an overseas distributor selling Omega's Seamaster watches at such a low wholesale price that Costco was able to offer them for almost $700 below the watch's $1,995 suggested retail price, according to Bloomberg. A Deloitte report estimates the gray market can cost global manufacturers $63 billion, or almost 5%, in annual sales, the story notes.

Costco said last month that its fiscal fourth-quarter profit rose 16% from a year earlier, while same-store sales increased 6%. Revenue rose 7.8% to $23.6 billion.

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