Taichung Bookkeepers Association

Case:

Key Words:

trade union, concerted action, advertising prohibition

Reference:

Fair Trade Commission Decision of December 5, 2012 (the 1100th Commissioners' Meeting), Disposition Kung-Ch'u-Tzu No. 101083

Industry:

Accounting Services (6920)

Relevant Laws:

Article 7 and 14 of the Fair Trade Law

Summary:

1. The FTC received an anonymous complaint revealing that a certain bookkeepers association had prohibited its members from advertising to gain their businesses. The FTC initiated an ex officio investigation and discovered that, as indicated in the 2011 Member Handbook, Article 3 of the Membership Rules of the Taichung City Bookkeepers Association specified that "members of this association should not take inappropriate measures or use advertising to gain business.” The conduct was in violation of the regulations against concerted actions set forth in the Fair Trade Law.
2. Findings of the FTC after investigation:
   The Taichung City Bookkeepers Association decided at the 13th ad hoc Board of Directors Meeting on May 31, 2008 and the 3rd Member Assembly during the First Term on June 13 to stipulate in Article 3 that no members are allowed to advertise to gain their businesses. The purpose was to prevent the members from engaging in price competition through advertising and the association had indeed intervened when members posted price advertisements in the past.
3. Grounds for disposition:
   (1) The prohibition imposed by the Taichung City Bookkeepers Association was not on price, production, trading area or trading counterparts. However, if it did lead to market competition restrictions and could not be rightfully justified as a measure of promoting market competition, it had to be considered a concerted action as described in the Fair Trade Law. The said prohibition was imposed not only upon exaggerated, untrue or misleading advertising, but also truthful and non-misleading advertising. It was a restriction against all types of advertising posted by its members who provided standard and routine bookkeeping services such as tax filing, bookkeeping, business registration, and so on, to companies and various types of business operations, not to ordinary consumers. Therefore, there was no high-level information asymmetry between the provider and recipient of such services. On the one hand, the prohibition obstructed the conveyance of information between the members of the association and potential clients and thus increased the cost of potential clients to find a bookkeeper. On the other hand, under the prohibition the members of the association were unable to convey price messages to potential clients and they would not be able to get enough quantity of clients even though the services they offered were cheaper than those from the competitors. The incentive for the members to engage in price competition was thus reduced and the conduct could not be justified under the argument of promoting market competition. Therefore, it was considered a competition restriction.
   (2) The members of the Taichung City Bookkeepers Association accounted for 10.9% of the bookkeepers operating in the relevant market and, therefore, their collective market power was strong enough to influence the supply-demand function of the market. The conduct at issue met the description set forth in Article 7 (4) of the Fair Trade Law, that is, "the act of a trade association to restrict activities of enterprises by means of … a resolution of a general meeting of members or a board meeting of directors or supervisors, or any other means," and was in violation of Article 14 (1) of the same law. The FTC therefore acted according to the first section of Paragraph 1 of Article 41 of the same law, ordered the association to cease the unlawful act. However, as there had been no precedent of similar practices and the Taichung City Bookkeepers Association also revised its advertising prohibition regulation in the Membership Rules, the FTC did not impose any administrative fine on the Association.

Summarized by: Tai, Mei-Chin; Supervised by: Liao, Hsien-Chou