Crystal City could not attack Ferrol since it was on a different tier, but the relatively midway Papell Town, which was an ally and a business partner for decades, could.
Papell Town actually had no idea that there was such a new product at first. The merchants naturally chose to head straight to Cities when they could, as the items were resold there for a much higher price.
It was just that some people from the Town would occasionally go to the City, and they found a superior equivalent to theirs. It was sold at a higher price by the merchants.
Then they found out through close connections that they had apparently added a lot of markup along with others. This actually made things even more concerning because this meant that somehow, the other side could produce the superior products for cheap! Possibly at even lower cost than what they could!
