Kirby Company

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This article is about the vacuum maker. For the maritime company, see Kirby Corporation.
Kirby Company
Division
Industry Consumer products
Founded 1914 (as the Scott Fetzer Company) 1935 (as the Kirby Company)
Headquarters Cleveland, Ohio
Products Vacuum cleaners
Parent The Scott Fetzer Company
Website www.kirby.com

The Kirby Company is a manufacturer of vacuum cleaners and home cleaning accessories, based in Cleveland, Ohio, USA. It is a division of The Scott Fetzer Company (also known as Scott & Fetzer) which in turn is part of Berkshire Hathaway. Dealers are located in over 50 countries throughout the world. Kirby's products are only sold via in-home door-to-door demonstrations.[1]

The Kirby Company is a member of the Direct Selling Association.

History

Kirby Chrome

The first Kirby vacuums were designed by Jim Kirby (1885-1971) for George Scott and Carl Fetzer after World War I, although the Kirby name was not used on a vacuum cleaner until the 1930s.[2] James Kirby invented the "vacuette" circa 1920.[3]

The Vacuette Electric, introduced in 1925 with its removable floor nozzle and handle, became the forerunner of today's multi-attachment Kirby vacuum models. In 1935, the company introduced the Kirby Model C, the first product to carry Jim Kirby's name.[4]

From 1935 through the 1960s, continuous improvements and refinements were made to the Kirby home care system. The last model of this first generation, the Dual Sanitronic 80, was produced in 1967 and still resembled the original.[4]

In 1970, input from Kirby distributors, dealers, management and customers guided Kirby engineers in developing the Kirby Classic. The model was an instant success, with soaring sales, forcing the company to expand its manufacturing facilities outside of Cleveland for the first time. In 1972, Kirby West began operations in Andrews, Texas. The facility doubled the company's manufacturing capabilities.[4]

Berkshire Hathaway bought Kirby parent Scott Fetzer in 1986 for $315 million.[3] Two years prior, Ivan Boesky had offered to buy Scott Fetzer for $60 a share, or $420 million.[5] Warren Buffett has singled out Scott Fetzer to Berkshire's shareholders as the "prototype" for the "kind of company—and acquisition—he was interested in."[6] According to Berkshire managers, "absolutely no changes were made to the existing Scott Fetzer business or management, and the entire business (and its jet) was preserved."[7]

Beginning in the 1990s, the Generation series - starting with the Generation 3, ushered in a new platform for the cleaner. The addition of TechDrive variable power assist eliminated 90% of the effort required to move the unit back and forth.[4]

As of 2003, Kirby is the largest source of revenue and profit for Scott Fetzer, with approximately 500,000 sales per year, about a third of which are outside the United States.[8] In 2003, Scott Fetzer sold the vacuums to about 835 factory distributors, who in turn sell the vacuums door to door.[8]

Kirby unit models

The Kirby Company generally produces only one model at a time. Kirby's vacuums made until 1919 were made by Frantz Premier. Those made from 1919 to 1934 are branded and made by The Scott & Fetzer Company. After 1934 all machines have been made by Scott & Fetzer, though branded as Kirby.

The current model, the Avalir, is a system that converts into several different units and is sold by Kirby's independent distributors. The Avalir can be converted and used as a canister vacuum, hand portable vacuum, air pump, floor polisher, and more. It can also be converted into a shampoo system for carpets and a mopping system for floors using the optional Multi-Surface Shampoo System attachment. [9]

Sales practice

Since 1920, new Kirby home care systems have only been sold through in-home demonstrations by independent, authorized Kirby distributors.[1] The Kirby Company manufactures the unit and sells it to a group of authorized distributors. Each distributor is an independent business, and as such sets their own price for the unit and conducts their own business operations. Independent distributors recruit dealers who are also independent contractors. The dealers sell the unit door-to-door (utilizing ultra-aggressive hard sell methods) and are generally compensated only through commission.[10]

Criticism of marketing and sales practices

The practices of some of Kirby's independent distributors have been subject to criticism. The Kirby is included by Lon Fuller and Melvin Eisenberg, Professors of Contract Law at Harvard Law School and UC Berkeley School of Law/Columbia Law School, as a textbook example of unconscionability.[11] Kirby has been subject to relentless criticism by consumer protection agencies.[3] As of 1999, of the 22 state consumer protection agencies, 15 had received a total of more than 600 complaints in just a few years.[3] Between 1996 and 1999, the Wisconsin Department of Agriculture, Trade and Consumer Protection received 50 complaints regarding Kirby dealers, and concluded from its investigation that Kirby, through its distributors, engaged in a "statewide pattern of trade practices" violation of state consumer-protection laws.[3]

Many of the complaints involve "older customers who lack the will to stand up to grueling sales pitches."[3] The Wall Street Journal records examples where an elderly couple was unable to remove three Kirby salesmen from their home for over five hours; in another example, a disabled woman who had been living alone in a mobile home on $1000/month in Social Security payments and suffering from Alzheimers was discovered to own two Kirby vacuum cleaners, having paid $1,700 for the second one.[3] In 2002, the Florida Agriculture and Consumer Services Commissioner obtained $13,000 in refunds for 13 senior citizens.[12]

According to the Wall Street Journal, the device "costs more than four times what other top-of-the-line vacuum cleaners do."[3] Kirby compares the price difference to that between luxury and economy cars, yet "luxury-car dealers don't make house calls in trailer parks. But Kirby dealers do."[3] The Kirby vacuum cleaner is "marketed exclusively door-to-door—often to people who can ill afford a $1,500 gadget, but succumb to the sales pitch nonetheless."[3]

In 2001, the West Virginia Attorney General obtained more than $26,000 in refunds and credits for dissatisfied Kirby buyers.[12] In 2002, ABC's Primetime conducted a hidden-camera investigation in response to more than a thousand complaints regarding Kirby's salespeople.[12] In June 2004, the Arizona Attorney General filed suit against Kirby distributors for violations of the Consumer Fraud Act, seeking an injunction against any other home sales.[12] Public authorities flooded with complaints about Kirby vacuum cleaners is not a recent phenomenon; even in the 1960s and 1970s, Kirby had been "cited by various agencies a number of times" and the Detroit Better Business bureau had received so many complaints that it decided to turn the matter over to the Wayne County prosecutor.[13]

Kirby attempts to disclaim liability for its sales force, whom it holds out as independent contractors.[3] Its "Distributor Code of Ethics" enumerates 12 principles, including "observe the highest standards of character, honesty and integrity in dealings with my customers, fellow Distributors and other members of the Kirby profession."[3] Kirby also teaches its distributors direct-sales laws, and requires them to resolve complaints within 24 hours under threat of termination.[3]

Litigation

Between 1998 and 2001, in Alabama alone, more than 100 lawsuits were filed against Kirby and its affiliates and subsidiaries, resulting in nearly $2 million in judgements and settlements.[14]

Twelve distributors of Kirby vacuums in Massachusetts were cited for violations of the Commonwealth's wage and hour laws by the MA Attorney General's Office in July 2010. The 12 distributors were cited for a variety of different wage and hour violations including nonpayment of wage, nonpayment of minimum wage, misclassification, child labor, retaliation and record-keeping violations. The distributors were fined a total of $199,300 for the violations and also ordered to pay restitution.[15]

Sexual assault

The Texas Supreme Court held Kirby liable for a rape committed by one of its door-to-door salesmen, finding that the manufacturer maintained control of its distributors and their salespeople, by requiring its distributors to make sales via in-home visits, and that the risk was foreseeable.[16] In that case, the court found that—had the employee's references been checked—Kirby would have discovered complaints of inappropriate sexual behavior at his previous employer and an arrest and deferred adjudication for indecency with a child.[17]

The Supreme Court of North Dakota also held Kirby liable in a similar rape incident, where the salesman was hired after being convicted of assault and with charges of criminal sexual misconduct in the third degree pending against him.[18][19]

Fraud and RICO

A federal class-action lawsuit is pending against Kirby under the civil action provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), for allegedly selling used vacuums as new; the complaint alleges that "Not only is Kirby aware of this practice, it 'participates in the scheme by, among other things, selling to its distributors duplicate or replacement "Original Purchaser's Registration" cards to be given to secondhand purchasers.'"[20] The complaint also alleges that "Kirby commonly sells distributors new empty boxes and packaging material for the obvious purpose of repackaging units that the distributor previously sold to a prior customer."[21] Kirby's motion to dismiss was rejected.[20] After Kirby refused discovery requests for its sales contracts and other documents, Judge Clay D. Land compelled Kirby to disclose the requested documents.[22]

A class-action lawsuit was also filed against Kirby in Bullock County Court in Alabama over its sales practices, specifically its use of credit cards issued expressly to fund Kirby purchases, under truth in lending laws.[3] Kirby succeeded in persuading a trial judge to recuse himself.[23]

Actions against unauthorized dealers

Kirby has sued unauthorized Kirby vacuum dealers for United States trademark infringement where the vacuums are identified by the Kirby name and logo. The United States Court of Appeals for the Fifth Circuit has held that such use does not constitute trademark infringement.[24][25] The United States Court of Appeals for the Ninth Circuit vacated an injunction granted in Kirby's favor by a lower court in that Circuit based on similar trademark claims against an unauthorized distributor.[26]

Kirby also did not prevail in a similar action against an unauthorized dealer in Minnesota—where it asserted trademark infringement, false and unfair competition, and trade disparagement; the authorized dealer prevailed on a $90,000 counterclaim against Kirby for defamation and then in a suit against an insurer who refused to defend the suit when the dealer refused Kirby's settlement offer.[27][28] Kirby's parent lost another such suit in Minnesota based on trademark infringement and other related state law claims.[29]

Nor did Kirby prevail in a tortious interference with contractual relations claim in Washington against an unauthorized retailer; the Supreme Court of Washington awarded attorney's fees to the retailer.[30] However, Kirby has prevailed in cases where unauthorized retailers went farther than using the name and logo to identify the vacuum cleaner, misrepresenting themselves as the manufacturer and claiming the existence of factory warranty.[31]

Notes

  1. ↑ 1.0 1.1 Lua error in package.lua at line 80: module 'strict' not found.
  2. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  3. ↑ 3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 3.11 3.12 3.13 Joseph P. Cahill, Lua error in package.lua at line 80: module 'strict' not found. The Wall Street Journal (October 4, 1999).
  4. ↑ 4.0 4.1 4.2 4.3 The Scott Fetzer Company, "A History of Quality, Reliability & Performance" (#739807 copyright 2007)
  5. ↑ Robert Cole. "Boesky makes bid for Scott & Fetzer" New York Times (April 27, 1984).
  6. ↑ Miles, 2003, p. 273.
  7. ↑ Miles, 2003, p. 274.
  8. ↑ 8.0 8.1 Miles, 2003, p. 276.
  9. ↑ Avalir by Kirby copyright 2014 The Scott Fetzer Company 730114.
  10. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  11. ↑ Lon L. Fuller and Melvin Aron Eisenberg, Basic Contract Law, Eight Edition 80 (2006).
  12. ↑ 12.0 12.1 12.2 12.3 Greg Dawson, "Kirby Always Cleaning Up After Others," Orlando Sentinel (August 27, 2004).
  13. ↑ Sidney Margolius, The innocent investor and the shaky ground floor 117 (1971).
  14. ↑ National Union Fire Ins. Co. v. Cavins, 226 Fed.Appx. 895 (11th Cir. 2007).
  15. ↑ http://www.mass.gov/?pageID=cagopressrelease&L=1&L0=Home&sid=Cago&b=pressrelease&f=2010_07_21_kirby_citation&csid=Cago
  16. ↑ Read v. Scott Fetzer Co., 990 S.W.2d 732 (Tex. 2008).
  17. ↑ Phillip R. Jones, Jennifer A. Youpa, and Stacey S. Calvert, "Employment and Labor Law," 53 SMU Law Review 929 (2000).
  18. ↑ McLean v. Kirby Co., a Div. of Scott Fetzer Co., 490 N.W.2d 229 (N.D. 1992).
  19. ↑ Paul S. Swedlund, "Negligent Hiring and Apportionment of Fault between Negligent and Intentional Tortfeasors: A Consideration of Two Unanswered Questions in South Dakota Tort Law," 41 South Dakota Law Review 45 (1995-1996).
  20. ↑ 20.0 20.1 Jordan v. Scott Fetzer Co., 2007 WL 4287719 (M.D. Ga 2007).
  21. ↑ Civil RICO Report, "Customers claim vacuum sales violate RICO" (January 1, 2008).
  22. ↑ Jordan v. Scott Fetzer Co., 2009 WL 1885063 (M.D. Ga 2009).
  23. ↑ Ex parte Kirby Co., 784 So.2d 290 (Ala. 2000).
  24. ↑ Scott Fitzer Co. v. House of Vacuums, Inc., 381 F.3d 477, 478 (5th Cir. 2004).
  25. ↑ Phillip B. Philbin and Carmen E. Griffin, "Intellectual Property Law," 58 SMU Law Review 985 (2005).
  26. ↑ Scott and Fetzer Co. v. Dile, 643 F.2d 670 (9th Cir. 1981).
  27. ↑ Williamson v. North Star Companies, 1997 WL 53029 (Minn. Ct. App. 1997).
  28. ↑ Louis J. Speltz and Ann S. Grayson, "Is that your final answer? Are insureds entitled to insurance coverage for trademark infringement?" 23 Hamline Law Review 348 (2000).
  29. ↑ Scott Fetzer Co. v. Williamson, 101 F.3d 549 (8th Cir. 1996).
  30. ↑ Scott Fetzer Co., Kirby Co. Div. v. Weeks, 786 P.2d 265 (Wash. 1990).
  31. ↑ Scott Fetzer Co. v. Gehring, 288 F.Supp.2d 696 (E.D. Pa. 2003).

References

  • Miles, Robert P. 2003. The Warren Buffett CEO: Secrets from the Berkshire Hathaway Managers.
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