Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Wash.: Suit against Costco over online and in-store price differences moves forward, (Apr 30, 2026)

By Brian Craig, J.D.

The complaint contains sufficient allegations from which a reasonable consumer may infer that the “free shipping” promise for the online purchase had the capacity to deceive a substantial portion of the public.

In a false advertising case brought by a consumer against Costco alleging price differences between items that the retailer sells online and in-store with promises of “free shipping” for online purchases, the federal district court in Seattle has held that the claims can proceed. In denying Costco’s motion to dismiss based on the reasonable consumer test, the court held that the complaint contains sufficient allegations from which a reasonable consumer may infer that the “free shipping” promise for the online purchase had the capacity to deceive a substantial portion of the public. The court also held that common-law claims for breach of contract, breach of warranty, and misrepresentation can move forward (Zaimi v. Costco Wholesale Corp., No. 2:25-cv-01076-JHC (W.D. Wash. Apr. 28, 2026)).

A consumer purchased a sectional sofa online from Costco for $2,399.99. When purchased online, and at checkout, “Shipping & Handling” is listed as “$0.00.” The same couch is available for $2,099.99 when bought in a physical Costco store. The online listing says that “Delivery, setup and packing removal [are] included,” and that “Items may be available in your local warehouse, prices may vary.”

The consumer filed suit against Costco Wholesale Corporation (Costo) in the federal district court in Seattle alleging false advertising under various statutes and the common law. The consumer alleges the price of the online listing shows that Costco essentially adds the $300 shipping cost to the price of the item online while also promising free shipping, despite the “prices may vary” disclaimer. The consumer contends that because Costco promises that shipping will cost $0.00, reasonable consumers believe that they are not paying for shipping.

The statutory claims include alleged violations of the Washington Consumer Protection Act, the California False Advertising Law, and the California Consumer Legal Remedies Act. The common-law causes of action include claims for breach of contract, breach of warranty, quasi-contract/unjust enrichment, and negligent and intentional misrepresentation. The retailer moved to dismiss the complaint.

Reasonable consumer test. The court concluded that the complaint sufficiently alleges claims for false advertising under the reasonable consumer test for the statutory claims. The court applied the reasonable consumer test to all of the statutory claims. The reasonable consumer standard requires a probability that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.

In this case, the court found it is plausible that a reasonable consumer could be misled, because Costco affirmatively states that “Shipping & Handling” is “$0.00,” despite the listing’s statement in light grey font that “Delivery, setup and packing removal [are] included.” A reasonable plaintiff could read that shipping and handling is free, believe that to be true, and be induced into purchase based on that belief. The online listing does not state that the prices will be lower in-store and the online disclaimers that “prices may vary” do not necessarily cure the deception, the court found. The consumer’s theory is bolstered by the allegation that consumers expect free shipping, given the ubiquity of online shopping, even for large purchases like furniture. Therefore, the court denied the motion to dismiss the statutory claims.

Breach of contract. The court also found that the complaint sufficiently alleges false advertising to support breach of contract. The court concluded that the complaint asserts that the free shipping was a contractual term. Because the free shipping term on the online listing can also be thought of as functionally an advertisement of a price term, it can amount to an offer as part of a contract. The online listing for the couch, which included the free shipping statement, contained other essential terms of a contract for the sale of goods, such as the price of the couch and the terms of delivery.

Breach of warranty. In addition, the court concluded that the breach of express warranty claims can proceed. The complaint alleges that the retailer created an express warranty by advertising the couch as shipping for free. The promise of free shipping “relates to” the couch sold by Costco and was offered as part of the basis of the bargain. A jury could conclude that the online listing for the couch, including the free shipping statement, constituted a statement of fact and that this statement became part of the basis of the bargain.

Other claims. Finally, the court concluded that the other common law claims for misrepresentation and quasi-contract can move forward. The misrepresentation allegations are distinct from the breach of contract allegations. To support misrepresentation, the complaint asserts that the retailer induced the consumer into forming a contract with the false promise of free shipping. Because the court cannot yet conclude that there is no plausible basis for the court to find that a contract did not exist between the parties, it is premature to dismiss the quasi-contract and unjust enrichment claim. Therefore, the court denied the motion to dismiss.

The Case is No. 2:25-cv-01076-JHC.

Judge: Chun, J.

Attorneys: Christin Kyungsik Cho (Dovel & Luner LLP) for Christina Zaimi. Kathleen M. O'Sullivan (Perkins Coie) for Costco Wholesale Corp.

Companies: Costco Wholesale Corp.

Cases: Advertising StateUnfairTradePractices WashingtonNews