Chinese police are investigating claims that a security firm colluded with officials to detain protesters in secret prisons, known as "black jails".
State media said police had arrested the chairman and general manager of the company, Anyuanding Security Services.
It is alleged they took money from local governments to abduct and imprison people who travelled to the capital, Beijing, to complain about local injustices.
The company denies this.
Human rights groups say China has hundreds of such jails, and detainees are often subject to abuse - but the Chinese government has repeatedly denied they exist.
Anyuanding chairman Zhang Jun, and general manager Zhang Jie, were detained for "illegally detaining people and illegal business operations", reported the official China Daily, quoting other media outlets.
It did not say when the detentions took place.
The firm is accused of assisting the Beijing-based liaison offices for local governments to detain petitioners trying to come to the capital to report local injustices - a practice which dates back to imperial times.
Reports say the company charged local and provincial governments up to 300 yuan ($45; £28) per person per day for apprehending and detaining them, in a business said to have earned the firm some $3.1m in revenue in 2008.
Petitioners claim to have been locked up for weeks or months - stripped of mobile phones and identification - until being sent home. Some say they were physically abused while in detention.
In a report released in November last year, Human Rights Watch interviewed 38 people who said they had been victims of forced detention when attempting to lodge complaints with central authorities. Some said they were beaten.
Local officials are penalised according to the number of grievances lodged from their locality, the report said, thus providing an incentive for them to prevent petitioners pursuing their complaints.
'Beyond one company'
Phelim Kine, Asia researcher for Human Rights Watch, told AFP news agency that the police investigation into Anyuanding Security Services was an "encouraging development".
But he said the case was only the tip of the iceberg.
"The fact is that the problem of black jails goes far beyond one company. It involves a web of government officials, security forces, huge numbers of plainclothes thugs and dozens of facilities in Beijing alone.
"Meaningful action against black jails will require the political will to locate and close all of them, freeing their detainees and prosecuting their captors."
- 12 November 2009