Here's a classic retail dilemma: if a store charges you extra because of a government fee, and then a court says that fee was illegal, who gets the money back? The store, or you? That's the question at the heart of a new proposed class-action lawsuit against Costco (COST).
The lawsuit, filed this week in federal court in Illinois by a shopper named Matthew Stockov, argues that Costco shouldn't get to keep a "double recovery." The background is the Supreme Court's ruling in February that tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA) were illegal. Those tariffs were paid by importers like Costco, who presumably passed the cost along to consumers in the form of higher prices. Now that the tariffs have been voided, the lawsuit says any refunds Costco gets from the government should go back to the customers who ultimately footed the bill.
Costco's CEO, Ron Vachris, addressed the topic on an analyst call last week. He said it's still unclear if or when businesses will actually get refunded for the tariffs they paid. But he added an important detail: if Costco does receive refunds, the company plans to use that money to "lower prices and enhance value for customers." In other words, they'd spread the benefit across their general pricing strategy rather than cutting checks to past shoppers. The lawsuit seems designed to challenge that plan, seeking a court declaration that would force Costco to return the funds directly.
This isn't Costco's first legal move on this front. The company actually sued the Trump administration back in December, demanding a refund of the tariffs before the Supreme Court even ruled they were illegal. They were getting ahead of the game. They're not alone; FedEx Corp. (FDX) filed a similar suit against the U.S. government after the Supreme Court's decision.
The scale of the potential refunds is massive. Following a lawsuit by Atmus Filtration Technologies Inc. (ATMUS), the U.S. Court of International Trade in New York recently ordered the government to refund potentially billions in unlawfully collected tariffs. In that case, Judge Richard Eaton noted Atmus had paid about $11 million. In response, a U.S. Customs and Border Protection (CBP) official told the court the agency is scrambling to build a new system to handle all these refunds. Brandon Lord of CBP said the system should be ready within 45 days and will require minimal input from importers.
Lord also provided some staggering numbers: as of March 4, over 330,000 importers had made more than 53 million entries with CBP, paying about $166 billion in tariffs that now may need to be refunded. That's the pot of money everyone is now fighting over—importers like Costco want it back from the government, and now customers want it back from Costco.
So, what happens next? The lawsuit against Costco is just proposed at this point; a court will have to decide if it can proceed as a class action. Meanwhile, CBP builds its refund system, and companies wait to see if and when money actually starts flowing back. The core argument is pretty simple: if you paid an illegal surcharge at the register, should the refund go to you, or to the store's corporate treasury to be used for future discounts? The answer might depend on what a judge thinks "enhancing value" really means.
