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In the lawsuit, filed in state district court, Farouk Systems alleges that the Issaquah, Wash.-based wholesale club is selling the flat irons for as little as $59.99, whereas they cost at least $100 in salons.
The company describes its business model, saying it sells to authorized distributors, which in turn sell the tools and Farouk's BioSilk-brand hair-care products to salons. It prohibits its distributors from selling to large retailers or wholesale clubs to avoid "tarnishing its reputation," according to the lawsuit.
Costco officials said they did not have a comment, while a Farouk spokeswoman said she could not comment about pending litigation.
In the lawsuit, Farouk's lawyers said sometimes Chi products find their way to stores through a "diverted" market, or through improper distribution channels.
And these products are more likely to be counter- feit products, the lawsuit said.
Farouk's lawsuit claims it found instances of Costco selling fake ceramic hairstyling irons in Texas and California.
On June 29, Farouk penned a letter to Costco warning it to stop selling Chi products, and that correspondence was included in the lawsuit. Earlier this month, Austin hair salons received advertisements offering the Chi for $59.99 at Costco, the lawsuit says.
The company seeks an injunction to prohibit Costco from buying and selling Farouk products and is seeking $75,000 in attorney's fees and others costs.
Earlier this year, Farouk built a plant in Houston and said it plans to manufacture its products in Texas instead of in Asia.
jenalia.moreno@chron.com
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