Based on the feedback that we have received from a myriad of e-mails, and from our Blog regarding Tilli Tomas’s refusal to sell their yarns to us because of our free-market policies, and based on our own research, we have concluded that “Price-Fixing” and “Bid Rigging” is indeed illegal in the United States at the Federal and State levels.
As stated on a web page of the Office of the Attorney General of the District of Columbia, “Price fixing and bid rigging occur when competitors agree to set prices for goods or services. An effective agreement among sellers results in prices that are artificially high. Artificially high prices can damage government or business buyers. Buyers lose the ability to get the best price that results when there is competition among sellers.” Another page of this website further states, “If any person knows or suspects that competitors, suppliers or even an employer are violating the law, that person should alert the DC Office of Attorney General (OAG) or federal antitrust authorities so that they can determine whether to investigate,” and that “Price-fixing, bid-rigging and similar conspiracies are most likely to occur where there are relatively few sellers who have to get together to agree. The larger the group of sellers, the more difficult it is to come to an agreement and enforce it.” They offer suggestions of telltale signs of these practices.
It has been elucidated to us that the best evidence comes from documentation submitted by a manufacturer or product seller themselves, when it clearly states that their terms of business requires that the reseller follow "keystone pricing."
These practices are carefully monitored by the US Department of Justice Antitrust Division, the Federal Trade Commission Bureau of Competition, and the Office of the Attorney General of the District of Columbia and of every state in the Union.
During a conversation I had with JaggerSpun last week, they told me that “Price Fixing” was a practice “implemented” many years ago in an attempt to protect resellers. This practice was later found to be in violation of Antitrust laws.
Now why would so many yarn manufacturers and retailers want to pursue violating The Law, thus exposing themselves to costly class action and other types of lawsuits? Especially given the stiff penalties, fines, and possibly even jail time that usually follows?
We will never encourage or subscribe to Price Fixing, just as much as we never encourage our Tax and Accounting clients to try to cheat or play games on their tax returns. We walk away from such clients, because we have been brought in to clean up major messes made by companies who cheated on their Federal and/or State taxes, and then either wound up paying astronomical penalties, serving jail time, and in most cases, both.
-- Sarah Siegel
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28 comments:
Does this mean that you will be hiring an attorney or no? Has TT been forwarded the information you posted here?
Dear luv2knit46,
You don't even have to hire an attorney to initiate a complaint -- you can do this through the various government agency websites that I had mentioned in my post. Anybody can do this -- an end consumer, or a retailer like myself. Obviously we have the critical documentation that proves that Tilli Tomas engages in price fixing because we were required in their documentation to adhere to "keystone pricing" and were instructed to raise our prices immediately. There is a complete audit trail on the Yahoo! system of this to back up the facts.
We are not interested in hurting any business, but we strongly believe that nobody should be above The Law.
In response to all of the e-mails that we have received about knitting groups getting together to file complaints against Tilli Tomas, I wrote a letter to Tilli Tomas yesterday, sent to Tracy Robinson via e-mail, fax, and Federal Express Priority Overnight, urging the company to change their policies. We developed our own color cards for our Tilli Tomas sales, as this company does not offer them for resale in the same manner as JaggerSpun does. We included Tilli Tomas color cards in every shipment that we made, for free, in order to promote their product. We invested a great deal of time developing swatches, patterns, etc. This slap-in-the-face that we received caught us by complete surprise.
I stated in our letter to Tilli Tomas that pride has no place in business, and that we would be willing to continue to buy their yarns at the wholesale prices that they had faxed to us on July 17, 2006. However, I made it clear that we will not abide by any price fixing policy as it is clearly illegal in the US at the Federal and State levels, and ultimately, unethical and immoral. Finally, we offered to publish their change of policies on our Blog.
I also appealed to Tracy Robinson's perceptions of "social justice" with respect to "driving yarn companies out of business" and reminded her that our inability to sell diversified products hurts our business and our three (3) employees. Competition is good for all of us, especially in our current inflationary economy with rising fuel and staple costs, which are making people have to start watching everything they spend. And what about all those people who took out ARM mortgages, who now, given the fact that interest rates have risen, have "LEGS" to pay?
I do not expect a reply to my letter, but to give the company the benefit-of-the-doubt, we will wait about a week.
The only major concern that my partner pointed out is that I may have my knee-caps broken one of these days, or show up on the subway tracks under a train for being so radically outspoken. Well, my response to him was that doing the right thing may be worth the risk ... but I confess, I'm not that brave :-)
--Sarah Siegel
I have been in touch with Tracy from Tilli Thomas and she said that neither she nor her employees have posted comments on the blog. Nor did they slag any other yarn manufacturers. I may not agree with the business practices and I will not buy their product again, but she's been very courteous and respectufl and I do believe her about that.
In all my dealings with Tracy Robinson she was always quite courteous and respectful.
The facts are that we will never know the truth about who posted which Anonymous comments on our Blog. But we should always give people the benefit of the doubt.
--Sarah Siegel
So, Sarah, you are looking to Walmart the yarn industry? Deep discounts hurt all small business owners including LYS's. A dollar difference is not going to matter, but you were discounting Tilli Tomas by over 40% over other retailers. If you did the same with Jaeger, I am sure they would not continue to sell to you. Your business practices give online stores a bad name. This is why many, many yarn companies will not do business with online stores, an LYS will not and cannot discount their yarns to the extent you did with Tilli Tomas and stay in business. I wonder if you will have the courage to publish this differing opinion?
To the last anonymous blogger:
What’s wrong with Walmart? Are you another one of those people who is insulting the masses – including us – that must buy there because that’s what they can afford or because they find that Walmart will give them the best possible value? Walmart sells really useful and good stuff, and they manage their business tightly – which is how they can afford to pass low prices on to the consumer.
So what if we were discounting Tilli Tomas by over 40% over other retailers? We were still making a profit – that’s how overpriced the “other retailers” are. Believe me, they can get off their butts and do the same thing we do. It seems to me that it is really uncomfortable for some people to have to actually WORK for a living. To be rather blunt, it seems that the word WORK is like one of those four-letter-words for some of the other “retailers.”
And with respect to Jagger, we have the best selling prices on JaggerSpun and Jagger Brothers yarns – perhaps in the world. They’ve received calls about us from all over the world. But they haven’t refused to sell to us, nor did they ever asked us to price fix – they encouraged competition instead. And as they have stated to me before, “they have never experienced sales levels like this before.” Why? Simply because the other retailers changed their inefficiencies in order to step-up-to-the-plate. And everybody won out in the end. Now what’s wrong with that?
My business practices give online stores a bad name? What are those? Managing our inventory like hawks and investing lots of capital in having our inventory in-house so that we can guarantee rapid-fire fulfillments, lowering our costs, and working our rear ends off to make sure that our customers get their orders immediately simply because they paid for them and they are now the owners of the goods, and not us? Even though we have daily pickups from the USPS, UPS and FEDEX, I will still send my people to the post office right before they close just to make sure that our customers get their stuff really fast because it now belongs to them. What’s wrong with that? Why can’t the “other guys” give their customers the same level of respect, instead of relying on “drop-shipping” and other “easy” ways to do business?
We operate much the same way Amazon.com does – but we do our best to provide the best possible one-on-one customer service that we can – via e-mail, telephone, and even in person. We accommodate our customers. We can spend 2 hours on the phone with somebody who wants to buy a $5 ball of yarn and is having difficulty choosing colors and/or patterns, as much as we’ll spend the same amount of time with the customer who wants to buy $5,000 worth of yarn cones from us. Now what’s wrong with that?
Online stores lose site of a very important factor: the personal touch required to sell anything, anywhere. And the fact that you have to believe in and be really into what you are selling.
Ultimately, the bottom line is that it is illegal to price fix and bid rig in the United States and in every state in the Union.
Now what do you have to say to that?
-- Sarah
Man, I don't think I'm ever again going to order anything from any current Tilli Thomas online retailer. Seriously, I'm doing some mad googling and will make a permanent note of those current selling their product and will never buy from them again. If the above anonymous comment is indicative of how snotty they are (and I'd bet my left foot that comment was from an online retailer) then I don't want anything to do with them.
I've forwarded your post on to Brenda Dayne's Cast-On podcast. (evil grin) She seems very agahst at TT's behavior, and I wouldn't be suprised to hear something about it this friday or saturday when she publishes her podcast...
I didn't read any insult to Walmart. Nor did I read an earlier one about Lion Brand. You and some of your customers are reading into all of this in order to critize and antagonize, and cause hostility. These are just different retail venues. They have different retail philosphies than LYS's. No one is insulting them.
Sarah,
You are putting yourself out of business. No wholesalers will sell to you. They see you as "Trouble!" You may have an in with your small handful of customers, buy they aren't going to make you a millionaire... and all of this is becoming very public.
To fairly give the people who mentioned Walmart and Lion Brand, you may be right.
But why should WE be insulted simply because we believe in hard work, following fair market policies, and abiding by The Law?
--Sarah Siegel
To the anonymous blogger who says that we are putting ourselves out of business:
You are wrong – there are wholesalers out there who are selling to us because they obey The Law, and because at the end of the day, they want to sell their products, if anything, so they can provide their two-cents of jobs to the US Economy.
If I am “Trouble” for certain wholesalers because I am a firm believer in free market policies and fair competition, in obeying the Laws of the United States of America and of every State in the Union, and because I follow a policy of full disclosure and believe in standing up for what I consider to be the right thing, then I and other knitters in the knitting community don’t need to buy from these wholesalers. Remember, there are so many beautiful yarns out there, and there are so many wholesalers who do follow the right rules.
Sure, not being able to buy from these wholesalers that want to break The Law by price fixing their beautiful yarns makes our lives a lot harder because we have had to invest a great deal of time, effort and money in order to find the “right” wholesalers, or alternatively, in coming up with our own quality luxury yarns. As an example, we have just launched our own Luxury 100% Cashmere yarns – at unbeatable prices, 100% quality assured and guaranteed.
Perhaps the wholesalers who are in fact committing criminal acts by breaking laws at both the US Federal and State levels will end up realizing that they are taking a very, very costly business risk and will in the end decide to not incur this fatal risk by obeying The Law. Perhaps they will want to make our lives easier and decide to sell their yarns to us so that we can in turn sell them following our policies and beliefs. We’ll never know.
And regarding your comment about our small handful of customers not making me a millionaire: greed is not part of our Business Plan. Yes, I am a businesswoman and our company must make a profit in order to remain in business in the long run. But what motivates me is not “being a millionaire.” It is the fact that I am a knitter and fiber arts enthusiast, and fully understand how it feels to be on that side of the fence. Being a millionaire will do me no good – remember, when we die we all go empty-handed, not to mention the sobering fact that based on our experience through our Accounting and Tax practice, in most cases half of what people leave behind goes to the US Treasury.
--Sarah Siegel
What it all comes down to is this:
Companies, and TT isn't the only one, do this because they can, and because at the end of the day, folks, this industry is driven solely on disposable income. As more and more independant companies, smaller yarn mills and those that develop their own yarns ( which is NOT that hard to do )work toward superior products, reasonable pricing, the larger companies will start losing more and more money, meaning they will do what they need to do to survive. That doesn't make it right.
I said it when I developed my yarns that I was fed up with the obscene pricing this industry is getting into. 300$ for yarn for a sweater?? You have got to be kidding me!! So as people like Sarah, and myself and others strike back against the "keystone pricing" that is rampant in this industry , and as the world gets smaller due to the internet, and as people research ( and believe me , after many years of research I know what companies are paying for their yarn per kilo from turkey, china, peru, etc ) the companies will have no choice but to abandon holding small LYS's by the proberbial short hairs.
Just my opinion and worth entirely what you paid for it
Hey Sarah,
never mind the anonymous snits out there who aren't brave enough to leave their name. I think they have their undies in a bundle because someone is willing to break price fixing barrier and eventually put them out of business.
Personally, I didn't know about your business until I read the post on SKC, but as soon as I "need" more yarn, you've got my business!
Dear Jill,
Thank you humbly from all of us for your kind support. All the best.
--Sarah Siegel
I received an email from an online yarn retailer that is selling Simple Knitted Bodice kits, in response to my inquiry if they'd make kits with yarns from different manufacturers. After some back-and-forth, she basically accused Sarah of trying to create a monopoly on Tilli Thomas, she *actually* said "Believe me, that one company is not reducing the prices for the "customers". They are reducing so that everyone buys from them exclusively. They hope to make alot of money without regard for the product or fair competition."
I was aghast that one online retailer would slander another like that to a customer (and she said a lot more than that). If Sarah wanted to have a monopoly on TT yarn, she probably would have advertised her prices like crazy all over the place, when in fact, most people have heard about Sarah's Yarns from word of mouth.
This whole episode has been a real eye-opener for me. I'm definitely going to be frequenting for more independent online yarn retailers and purchasing yarns made by smaller companies instead of the over-priced and snotty "big girls" in the future.
The comment relayed by the last anonymous post, which was made by an online retailer selling Simple Knitted Bodice Kits, and which accuses of trying to create a monopoly on Tilli Tomas yarns, is ridiculous at best.
First of all, why would we want to put our business at risk by exposing ourselves to a series of costly Antitrust violation lawsuits? Especially since price fixing and anti-competitive practices are precisely the points that I personally and passionately have been arguing and fighting against in our Blog and in our day-to-day business dealings?
Our business is based on trust and respect for our customers – and we understand fully that customers are smarter than we are and figure things out rather quickly.
Next, in order for us to “create a monopoly” on Tilli Tomas yarns, we would have to buy out all, if not most, of the company’s inventory. We are not rich, and we are self-funded because we don’t want to buy into the credit philosophy. Keep in mind that credit generates extra costs in the form of interest payments, and we feel that our customers shouldn’t have to pay for our cash-flow management procedures – that’s our responsibility. The reason why we can offer our customers lower prices is because we cut our costs – and that includes eliminating interest payments. We buy our inventory with the proceeds that we receive from our sales, and carefully manage our purchases based on our customer’s desires and needs.
So given that we are self-funded, why would we want to tie up our capital – which is limited primarily by our sales – by “putting all of our eggs in one basket” when there are so many other beautiful yarn products out there that our customers have asked us for and that cost less than Tilli Tomas's beautiful yarn products?
It is true that once we commit to a product line, we develop swatches, yarn sample cards (if the company doesn’t provide them), build up our inventory based on customer demand for specific product lines and colors so that we can execute rapid-fire fulfillments, negotiate discounts with wholesalers, and provide all of our first time customers with yarn color cards of all of our offerings, unless we don’t have them in stock. By the way, we keep track of who got our first-time color cards, and for the past week or so our first time buyers did not get our color cards with their first-time purchases because we ran out of stock – so we will be sending these customers a follow-up mailing including all of our color cards, as we feel we owe them to these first-time customers based on our business philosophies and procedures. As a knitter, I understand fully the importance of being able to look and feel the yarn before making a purchase!
So in conclusion, we neither have the means nor intentions of monopolizing the market on any particular yarn line. It is simply not a good business practice from any point of view.
--Sarah Siegel
We received an e-mail that we feel we should post on our Blog. Since the e-mail was sent directly to us and not posted to our Blog, we will be conservative and not disclose who the e-mail came from to respect the person who sent us this e-mail.
“Price fixing occurs when two or more companies servicing the same market with the same products enter into a collusion to set prices or to drive out competitors in such a way as to be mutually beneficial to the parties involved in the collusion. So, by definition, a single company or manufacturer cannot be guilty of price fixing. There is no law that prohibits a manufacturer from establishing a list price for their products, or from dictating to their distributors what prices they are allowed to ADVERTISE their products for. Battery manufacturers, such as Duracell and Eveready, are notorious for this practice. Their retail distribution contracts are so lengthy they would make your head spin.
Hope that helps.”
The problem with our situation, based on conversations that our fellow knitters have had with the US Department of Justice Antitrust Division, the Federal Trade Commission Bureau of Competition, and the Office of the Attorney General of the District of Columbia and of their respective states is that there is clearly a collusion within the Yarn Industry between the wholesalers and retailers to fix prices so that competitors are either driven out of the market, or cannot enter it in the first place – as is clearly being done to us.
Further, this price fixing is being done for the benefit of the retailers currently in this market so that they are guaranteed a minimum 100% markup on their sales. In our opinion, this is outrageous.
We had qualified and met Tilli Tomas’s criteria to sell their products – which is how we started buying from them in the first place. All of our orders were charged to our account before shipping, so there were no “payment problems” with the company.
When our sales took off, they e-mailed a document to us which states that we are now required to adhere to “keystone prices” and instructed me personally over the phone to immediately raise the prices on our website by a ridiculous amount “to level the playing field,” which indicates that they had received complaints from other retailers. These facts clearly point to collusion, and further, hurt our business by putting us on-the-spot with our customers, as our relationship with them is based on trust and respect.
Would you trust someone who is selling a product to you at a certain price, puts all this time into promoting it by developing swatches, patterns, and sending customers free color cards, and then suddenly increases their prices outrageously on you? Because of our business practices, I had to inform our customer base immediately of what had happened.
Right after I raised our prices on our website as instructed, Tilli Tomas agreed to ship a large order to us, and charged our account accordingly. However, we never received the goods and after more than one week of numerous unreturned phone calls and un-replied e-mails to Till Tomas, Ms. Tracy Robinson informed me that “for the time being, they did not want to ship to us anymore.” By the next day, the funds that had been tied up for this last large order were released back into our account and made available to us.
There is a complete audit trail of all of the aforementioned facts, and they clearly point to collusion, unless Tilli Tomas agrees to continue to sell and ship to us, and allows us to price according to our business model.
--Sarah Siegel
I think what you are doing is terrible. I don't understand why you are so proud of hurting other peoples business. You may think it is great to save everyone money but really it isn't in the long run. NO I don't work for a yarn company, but I think you are really missing a huge piece of the puzzle in trying to argue for something just to win. You are never going to last in business because you clearly don't know how to build good trusting relationships with suppliers and others in your same situation. You clearly don't respect others who are trying to make a living in this business either and that is a big mistake. You say you aren't interested in hurting others in business but you are.
To the last anonymous blogger:
We are not “proud of hurting other people’s business.” For starters, that is not what we are in business to do.
I must bring the following to your attention. Throughout my long-suffering years living in NYC, I have witnessed MANY yarn retailers go in-and-out-of business, even after wholesalers caved into their demands for price fixing. So I beg the question: does giving candy to your child just to shut him or her up really take care of “the problem?” As a parent, I must tell you that you have to stop and help your child deal with his/her problem so that they can learn to grow-up.
To me, price fixing is no different than giving candy to a kid just to shut him or her up. But surely the fact that so many yarn retailers go in-and-out-of business proves that price fixing is not even a remotely reasonable solution to the “real” problems that we – the yarn retailers – face in today’s competitive and demanding world.
Further, if I were a wholesaler, why would I want to cater into price fixing – which is a Criminal Activity in our Country, and exposes my firm to many costly legal risks – when I know upfront that a lot of retailers will be out of business anyway? During a conversation that I had with a very well know supplier today, with whom we have placed our first orders, this person admitted – “we get most of our business from 20% of our customers – because we have to take into account that a lot of them just can’t manage a business and won’t be around for long.”
Whether or not we last in business is a question – we can only tell you that we are 100% committed to playing with our best shots. And rest assured, we have great respect for everybody in this business, and further, have no interest in hurting anybody else. But why should we be punished because we try our best to cut our costs and work for our real bosses: our customers?
As somebody posted elsewhere on our blog: in sports, do you the coach of a losing team yell at the other team’s coach because they won the game? Do you see our Media try to “Level The Playing Field” by ensuring that each team gets a chance to win? Wouldn’t that would be ridiculous? Well, that’s the same argument that you are trying to tackle me with – and I don’t buy it.
All the best.
--Sarah Siegel
Good for you standing up for what is right. As a business owner, you have the right to discount how ever much you want to discount-your markup on an item is what you make from an item and if other small businesses want to always make their full 100% mark-up, they are certainly entitled to sell their products for whatever price they want.
Larger companies, like Wal-Mart buy in such huge quantities, they always get the maxiumum discounts from their suppliers. Small businesses however, cannot afford to order such huge orders and generally get less of a wholesale discount-however a lot of times a small business will get something in, even if their profit margin is low, to help make their customers happy and offer variety.
I had owned a small bookstore years ago and knew I couldn't compete with Borders or Barnes & Noble on some pricing and on selection. My wholesale discount was 20% and Borders received 40%, so I offered some items at my cost-it brought people in and some bought other items and some didn't-it was part of doing business and I knew this when I started the business. I also offered a paperback exchange type program to differentiate myself from a standard bookstore.
I never had any supplier ask what I was selling my items for, every price was suggested retail.
In business you have to have a good relationship with your suppliers and a good relationship with your customers to stay in business-if that means offering discounts, etc. then so be it. Customers make your business, pure and simple.
I just dropped in after hearing about this situation on Brenda Daynes' podcast. I've read through the entire length of posts and I've got this to say:
Thank you, Sarah, for choosing to do business honorably. You have given me, a small indie yarn company, the opportunity to buy luxurious yarns for handpainting. Consequently, I can compete in a market where many other fiber artists have already opened wholesale accounts with their suppliers. Talk about 'leveling the playing field'! You've done this for many of us!
Additionally, I appreciate your integrity. The writer who remarked that you wouldn't be in business for long has it backwards. Your business ethics and policies are the sort that create the foundation and framework to be well-established over the long haul.
Thank you, Sarah.
Response to Snooze:
Thank you very much for your kind comments!
We are fully committed to continuing to support fiber artists as best we can so that they can compete and grow profitably, and we welcome any ideas that can help us achieve that goal.
All the best!
--Sarah Siegel
This is related to the post... where do I find the list of wholesale yarn companies who are price-fixing their wares? On an earlier post there was talk of putting a button somewhere to link to this list... thanks!
Dear Jenny,
We had posted on our blog back in October information about the Consumer Friendly Yarns website. They are located at http://www.consumerfriendlyyarns.blogspot.com/.
The authors of this site did a very thorough job researching, publishing and factually disclosing a proven list of price fixing vs. non-price fixing yarn wholesalers and manufacturers.
--Sarah Siegel
WOW, I find that Anonymous poster to be such a coward! Shooting blanks behind the Anonymous mask. Are you sure that Anonymous speaker is not a past employee? Seems to know some details that only a ex-employee would know...and seemingly trying very hard to say you're a bad person for being ethical. Amazing. You've gained a new customer out of me.
Sarah,
I previously commented about TT yarns and my inability to purchase them ($200 for a sweater, no matter how beautiful it, or the yarn is, is simply out of my price range at this time.
In reguards to comments about you going out of business; I sincerely hope this is not the case - and I suspect it is not - I fully intend to give you my business whenever possible.
I thank you for your integrity in this matter, and look forward to knitting with your yarns.
melissa
mhudnut@mac.com
Hmmm ... in response to the Anonymous blogger who suggests that we may be going out of business:
We haven't planned on this. It is interesting how people draw conclusions of this nature, especially since, quite to the contrary, we have been expanding all of our existing yarn lines, and incorporating new 100% luxury, natural fiber yarn lines into our offerings ...
Thank you very much for your kind words of support, and I can only say that we will continue to work hard at doing business as we believe it should be done: to benefit everyone, most importantly, our customers.
Sincerely,
Sarah Siegel
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