Taichung City Security Trade Union

1334th Commissioners' Meeting (2017)

Case:

Taichung City Security Trade Union violated the Fair Trade Law by restricting members from giving quotations

Keyword(s):

Trade union, security, cost analysis

Reference:

Fair Trade Commission Decision of May 31, 2017 (the 1334th Commissioners' Meeting); Disposition Kung Ch'u-Tzu No. 106039

Industry:

Activities of Businesses and Employers Membership Organizations (9421)

Relevant Law(s):

Article 14 and 15 of the Fair Trade Law

Summary:

1. The FTC received from the Taichung City Government a written inquiry regarding whether security service quotations from the Taichung City Security Trade Union (hereinafter referred to TCSTU) and the items included were subject to the concerted action regulations in the Fair Trade Law. After an initial inspection, the FTC discovered the TCSTU had established a "List of Statutory Costs of Security Service within Work Hours in Compliance with the Labor Standards Act" (hereinafter referred to as the Statutory Cost List) and had also requested some of its members offering prices lower than the amounts indicated on the Statutory Cost List when bidding for apartment buildings security service procurement projects to donate the "advance payments" to the TCSTU. As the conduct involved the concerted act regulations in the Fair Trade Law, the FTC launched an investigation.
2. Findings of the FTC after investigation:
   (1) The TCSTU had 116 members. Most of them were security companies operating in Taichung City, but some were security companies from other counties and cities.
   (2) During a general assembly, the members passed the "Regulations Governing the Fundamental Practices of Security Companies" in which the Subparagraph 15 of its Article 3 stipulated "prices quoted for security personnel service may not be any lower than the amounts specified in the Labor Standards Act and the tatutory substantial costs.'" At the same time, it was also prescribed in its Article 4 that any member found in violation of Article 3 would "accept sanctions unconditionally and without objection" as well as donate the advance payment to the TCSTU and at the same time turn in an equal amount as the penalty. The "statutory substantial costs" referred to contents indicated in the "Statutory Cost List." A member found in violation of the "Regulations Governing the Fundamental Practices of Security Companies" had to donate the NT$20,000 turned in as the advance payment when joining the TCSTU.
   (3) The TCSTU began to issue the "Statutory Cost List" to its members in 2013. The costs on the list were calculated according to the regulations in the Labor Standards Act and were revised a number of times in accordance with the adjustments made to related provisions in the Labor Standards Act. After each revision, the TCSTU would send the new version to each of its members.
3. Grounds for disposition:
   (1) Paragraph 15 (1) of the Fair Trade Law provides that "[N]o enterprise shall engage in any concerted action In Article 14 (4) of the same Act, it is specified that "[T]he act of a trade association or other groups, as referred to in Article 2 Paragraph 2, to restrict activities of enterprises by means of its charter, a resolution of a general meeting of members or a board meeting of directors or supervisors, or any other means, to restrict activities of enterprises is also deemed as concerted action as used in this Act." The "Regulations Governing the Fundamental Practices of Security Companies" were approved by the TCSTU General Assembly as a trade union resolution. Members giving quotations lower than the amounts indicated in the "Statutory Cost List" were considered in violation of the "Regulations Governing the Fundamental Practices of Security Companies" and had to donate the advance payment turned in when they joined the union. Under such circumstances, the resolution had to be considered a restriction imposed on the business activities of the members. In the meantime, the "Statutory Cost List" was established and issued by the TCSTU and the TCSTU did indeed impose penalties on members giving quotations lower than the amounts indicated on the "Statutory Cost List." For this reason, the FTC concluded the TCSTU had used the resolution of the general assembly and other measures to restrict the business activities of its members.
   (2) The TCSTU restricted the members from giving security service quotations lower than the amounts calculated according to the "Statutory Cost List" but could not assure the wages (or other labor conditions) of security personnel could comply with rates specified in the Labor Standards Act. Even if security companies could be guaranteed to receive minimum service charges, the motivation for suppressing wages or lowering labor conditions to maximize the profit still existed. The restriction imposed by the TCSTU to keep the members from giving quotations lower than the amounts calculated according to the "Statutory Cost List" was by no means only to repeat the regulations in the Labor Standards Act and other regulations, but it was also to add restrictions outside the law. As the TCSTU was the only business group of security companies in the relevant geographic market in which there were 130 security companies operating and 100 of them were members of the TCSTU, the restriction the TCSTU imposed on the business activities of its members could easily have an effect on the competition on the marketplace.
   (3) The TCSTU used a general assembly resolution and other measures to restrict security companies from determining their security service quotations. The practice restricted the business activities of its members and also affected the supply-demand function in the relevant market in violation of the regulation prohibiting concerted actions specified in Article 15 (1) of the Fair Trade Law. It had to be stopped immediately. Meanwhile, the Subparagraph 15 of Article 3 of the "Regulations Governing the Fundamental Practices of Security Companies" also gave the union the right to restrict the members' freedom to decide their security service quotations. For this reason, the FTC ordered the TCSTU to change the content of the regulation set forth in the subparagraph into indicating the union could not restrict the security companies' decision of security service quotation, while imposing an administrative fine of NT$200,000 on the union.