The Kaohsiung City Association of Funeral Directors and the Kaohsiung County Association of Funeral Directors violated the Fair Trade Law by prohibiting member funeral directors from contracting with non-member providers to provide foods and decorate mourning halls
Case:
The Kaohsiung City Association of Funeral Directors and the Kaohsiung County Association of Funeral Directors violated the Fair Trade Law by prohibiting member funeral directors from contracting with non-member providers to provide foods and decorate mourning halls
Key Words:
funeral director, concerted action, food provision, mourning hall decoration
Reference:
Fair Trade Commission Decisions on January 10 and January 17, 2002 (the 531st and 532nd Commissioners' Meetings); Dispositions Kung Ch'u Tzu No. 091010 and 091011
Industry:
Funeral Services (9630)
Relevant Law:
Article 14 of the Fair Trade Law
Summary:
1. The complainant, Hsin Yi Law Offices, alleged in a letter that the Kaohsiung City Association of Funeral Directors (the City Association) on 25 October 2000 circulated a letter (Ref. Kao-Shi-Yi-Shang-Tzu No. 059) to member funeral directors demanding that the City Association and the Kaohsiung County Association of Funeral Directors (the County Association) conduct in concert all future food provision and mourning hall decoration services undertaken by association members at the Kaohsiung City Funeral Parlor and prohibiting association members from contracting with non-member providers for said services, with violators subject to suspension of their association membership rights. In the letter, the complainant further requested that the Fair Trade Commission (FTC) order the City Association to cease the said practices and rescind all relevant resolutions passed during the third meeting of the seventh plenary of its joint board of directors and supervisors meeting to maintain trading order and protect the rights and interests of consumers.
2. Findings of the FTC investigation: (1) Relevant details of the case with respect to the City Association:
(i) In a letter (Ref. [90] Kao-Shi-Yi-Shang-Tzu No. 031) dated 13 August 2001, the City Association stated there had been "absolutely no prohibition of association members contracting non-member service providers" and that the association "merely attempted to persuade members to cooperate in order to increase the mutual welfare of all members." The association letter added that "with regard to violations by member funeral directors, although the distribution of [membership] benefits may be suspended, the boards of directors and supervisors has never resolved to make any disposition regarding this matter and the policy has since been rescinded in accordance with a letter (Ref. Kao-Shih-She-Chu-Yi-Tzu No. 15673) issued 27 June 2001 by the Kaohsiung City Government's Bureau of Social Affairs." Additionally, the Funeral and Internment Division of the Kaohsiung City Government's Bureau of Social Affairs on 24 July 2001 issued a letter (Ref. Kao-Tzu-Pin-So-Yi-Tzu No. 0001245) stating: "Food provision and mourning hall decoration are not mandatory and it is not required that such services be performed by an association member. Mourning families may conduct such arrangements themselves or contract with another party for their conduct, and the fees charged shall be determined by market practices and may be negotiated between the two parties."
(ii) The FTC's investigation, however, indicated that the third meeting of the seventh plenary of the City Association's joint board of directors and supervisors was held on 23 October 2000 and the following was expressly set forth in the meeting agenda:
Discussion with regard to the handling of members who continue to be uncooperative, despite repeated persuasion. Explanation: (1) For the convenience of the bereaved families and to preserve the order and tidiness of the mourning hall, expenses collected by the association and/or members engaged to conduct "food provision" and "mourning hall decoration" work shall be used to cover labor and waste disposal costs, with the entire remaining portion to be used on member benefits, conducting a domestic or overseas self-improvement activity or the distribution of gratuitous goods among members to expand association operations and member services. This has a legal and logical basis and is not unreasonable. (2) Unfortunately, a small number of member funeral directors, despite repeated persuasion, remains uncooperative with the policy and is contracting with non-member providers. It is likely that it will affect the other members' dedication to this association. (3) Accordingly, it will be inequitable and contestable if the above-mentioned uncooperative members continue to enjoy all association membership benefits.
Further, a resolution was adopted into the minutes reading: "An express mail will be immediately sent to all association members requiring cooperation in implementing these measures or, in case of failing to comply, suspension of all member benefits in accordance with the provisions of Article 15 of the association charter."
(iii) Subsequently, in keeping with the intent of the above-mentioned resolution, the City Association on 25 October 2000 issued a letter (Ref. Kao-Shih-Yi-Shang-Tzu No. 059) to all association members advising that any member that failed to comply with association measures would be deemed in violation of the association charter and would be subject to suspension of all benefits.
The above-cited agenda and minutes of the joint meeting of the City Association's boards of directors and supervisors and the City Association's letter (Ref. Kao-Shih-Yi-Shang-Tzu No. 059) to City Association members show that the City Association did, in fact, demand that all members perform "food provision" and "mourning hall decoration" services at the Kaohsiung City Funeral Parlor perform those services jointly with the association and that those failing to comply would be deemed in violation of the association charter and subject to suspension of all benefits to which they were entitled as members.
(2) Relevant details of the case with respect to the County Association:
(i) The County Association on 16 August 2001 issued a letter of response (Ref. Kao-Hsien-Tsang-Kung-Tzu No. 106) to the FTC stating: "The County Association has never prohibited members from contracting with non-member providers to conduct 'food provision' and 'mourning hall decoration services" and "furthermore, the County Association serves only its members and refuses to provide services to non-members and bereaved families alike. As a result, this association believes this matter to be within the scope of its autonomous power and does not require the approval of the competent authority."
In addition, the Kaohsiung County Government on 10 August 2001 issued a letter (Ref. [90] Fu-She-Hsing-Tzu No. 136977) stating: "The Kaohsiung County Association of Funeral Directors undertakes the performance of the two above-mentioned services strictly because they are time and labor-consuming with little chance of recouping expenses when performed by association members. Furthermore, the association serves only its members and refuses services to non-members and/or bereaved families, so these matters should be within the scope of the Association's autonomous power."
(ii) According to the minutes of the fourth meeting of the third board of directors of the Kaohsiung County Association of Funeral Directors on 30 October 2000, however, the ninth proposition of that meeting is listed as: "Proposition: Consideration of how to handle members of this association who fail to cooperate with the association to provide food and interior decoration services. Resolution: 1. Suspend all member benefits. 2. Inform all other members in writing." The County Association subsequently on 2 November 2000 issued a letter (Ref. Kao-Hsien-Tsang-Kung-Tzu No. 051) to all association members demanding compliance with the association's policy. In the event of non-compliance, all member benefits (such as member souvenirs, Double Ninth Festival celebrations, scholarship eligibility and stipends for self-improvement activities) of violators would be suspended.
(iii) Based upon the records from the above-mentioned meeting and the content of the written documentation of the County Association letter (Ref. Kao-Hsien-Tsang-Kung-Tzu No. 051) sent to all association members, the County Association did require members to contract with the association to jointly conduct any food provision and mourning hall arrangements demanded at the Kaohsiung City Funeral Parlor. Members who failed to comply were subject to suspension of the benefits to which they were previously entitled.
(3) Subsequently, the Ministry of the Interior (Central Taiwan Office), in its capacity as the competent authority for civic groups, on 31 August 2001 issued a response letter (Ref. Tai [90] Nei-Chung-She-Tzu No. 9024058) to the FTC stating: In a letter issued by the Kaohsiung City Government's Bureau of Social Affairs regarding this dispute, it is stated that: 'This case involves the operations of the association in question and the Bureau has determined that the association exceeded the limits of its authority. As such, this Bureau has issued a formal letter to the association rescinding the association's resolution to suspend the benefits of association members that contracted with non-member providers to perform food provision and mourning hall arrangements.' The Kaohsiung County Government, on the other hand, held that the Kaohsiung County Association of Funeral Directors never issued a letter prohibiting association members from contracting services from non-member providers as members voluntarily cooperate with the association to provide such services, and furthermore that the association serves only its members and refuses services to non-members and/or bereaved families, so this matter should be within the scope of the Association's autonomous power.
In summary, the above-mentioned business involves a contractual act between the funeral director and the bereaved family, and the associations may not use resolutions of their general meetings or boards of directors or supervisors to adopt concerted measures.
3. Grounds for disposition:
(1) The members of the Kaohsiung City Association of Funeral Directors and the Kaohsiung County Association of Funeral Directors are businesses engaged in the provision of funeral services within the administrative districts of Kaohsiung City and Kaohsiung County, respectively, and, as such, are all horizontal competitors, thus meeting the "any competing enterprise" prong in Article 7 of the Fair Trade Law. The respondents, the City Association and the County Association, did pass resolutions (during the third meeting of the seventh plenary of the joint board of directors and supervisors and the fourth meeting of the third board of directors, respectively) and issue letters (Refs. Kao-Shih-Yi-Shang-Tzu No. 059 and Kao-Hsien-Tsang-Kung-Tzu No. 051, respectively) requiring their members to conduct jointly with the association all food provision and mourning hall decoration services performed at the Kaohsiung City Funeral Parlor, with violators subject to suspension of the member benefits to which they were entitled. The resolutions were intended to restrict business activities among competing association members, and have already restricted competitive mechanisms among horizontal competitors in the funeral services market in Kaohsiung city and county. They thus constitute "horizontal concerted action" as defined in the Fair Trade Law. Furthermore, the letter issued by the Ministry of the Interior in its capacity as the competent authority for civic groups indicates that the two associations may not engage in concerted action through resolutions reached during internal meetings.
(2) The respondents' claimed in their defense that the associations were "conducting joint services with respect to food provision and mourning hall decoration, for which they were engaged by member funeral directors and for which they possess the relevant letters of authorization from the member funeral directors proving that the members entered into the agreement of their own free choice. Since the associations neither compelled members nor behaved monopolistically, it is clear that members could contract with non-member providers, and [the allegation that] 'they may not contract with non-member providers' is unfounded."
However, the association meeting minutes and letters issued to members clearly contradict the respondents' arguments, and show their claims that they "never prohibited association members from contracting with non-member providers for the food provision and mourning hall decoration services" to be spurious. Furthermore, the compulsory actions adopted in the board resolutions and stated in the letters sent to association members had a profound impact on the members in both economic and real terms and the intent and potential consequences of the action were reprehensible infractions of business ethics. Moreover, the respondents have significant power within the scope of the funeral services market in the administrative districts for which the associations are registered, as the majority of funeral directors in Kaohsiung County and Kaohsiung City are already members of these associations. The letters sent out to member funeral directors following the resolutions of the associations' boards, which demanded that members jointly conduct all future food provision and mourning hall arrangements with their association rather than freely make their own arrangements as had originally been the case, indicate their intent to place compulsory restraints on commercial activities among members.
Accompanied by the threat of sanctions, these actions served not only to impede the competitive function of the relevant funeral services market, but also, considering the dominant position of the associations in the relevant market, were sufficient to affect the supply and demand mechanisms in the relevant market, thus meeting all the elements of a violation of Article 14 of the Fair Trade Law.
(3) In summary, the respondents' actions in requiring members through internal association resolutions to conduct all food provision and mourning hall decoration services undertaken at the Kaohsiung City Funeral Parlor jointly with the association, with violators subject to suspension of the benefits to which they were entitled as association members, affected the market functions of the Kaohsiung City and Kaohsiung County funeral services market, and constituted concerted action under the Fair Trade Law. An application was never filed with the FTC for approval to engage in this concerted action, in violation of the provisions barring concerted action in Article 14 of the Fair Trade Law.
Also, although the quality and content of funeral food provision and mourning hall decoration services are difficult to determine based solely on price, in light of the profitability of the services provided by the respondents and with consideration to the comparative profitability of the same services performed at funeral parlors in other cities and counties throughout Chinese Taipei, the FTC instructed the respondents to consider whether there is any room for reductions in the fees charged for the services in question, and deemed it necessary for the respondents to send further letters to their members formally rescinding the content of the resolutions contained in the original letters involved in this case. Finally, weighing such factors as the motives, purposes, severity of damage to the trading order, scale and operational status of the enterprises, market positions, past violations, and post-violation attitudes, the FTC imposed an administrative fine of NT$200,000 on each of the respondents pursuant to Article 41 of the Fair Trade Law.
Summarized by Mai, Huei-Li;
Supervised by Cheng, Chia-Lin