Antitrust Law Daily Wrap Up, ANTITRUST NEWS: American Antitrust Institute opposes proposed funeral home business acquisition, (Aug 2, 2013)

By Jody Coultas, J.D.

Albert Foer, President of the American Antitrust Institute, wrote a letter to Federal Trade Commission Chairwoman Edith Ramirez opposing the proposed acquisition of the second largest funeral home operator in the country by the largest operator.

Service Corporation International (SCI) sought to acquire Stewart Enterprises Inc. SCI had revenue of $2.4 billion and operated 1,437 funeral homes and 374 cemeteries, including 213 combined funeral home and cemetery locations. Stewart had revenue of $526 million and operated 216 funeral homes and 141 cemeteries in 24 states. The parties predicted that the deal will yield $60 million in annual cost savings within 24 months of closing.

Foer argued that the proposed acquisition was part of a larger trend in the funeral home business and indicative of the anti-competitive issues within the business. SCI has already acquired the fifth-largest operator and the then-second largest operator. The letter noted that anti-consumer sales and service practices were well-documented in the funeral home business.

Preserving existing competition was essential to protecting consumers from further harm, according to Foer. Given the amount of money spent on funerals and related services, Foer argued that even a modest percentage increase in price can inflict serious economic hardship on consumers. The FTC has previously noted that national chains likely exert a greater competitive constraint on each other than smaller independent players. Competition between funeral homes allegedly provides consumers with affordable prices and high-quality funeral and burial services.

Cities that have many funeral and cemetery options may not offer a sufficient number of competitive choices for members of the African American, Chinese American, or Jewish communities due to cultural needs for burials. In the Washington, D.C. metropolitan area, Stewart owns the only low-cost funeral home that performs certain traditional Jewish rituals, while SCI owns the other three funeral homes conduct the majority of Jewish funerals in the metro area. The acquisition threatens to eliminate an aggressive market participant and impose a significant price increase on Jewish families in Washington D.C, according to Foer. The letter noted that the American Antitrust Institute did not have specific evidence of whether the D.C. situation was typical of many communities and that the FTC should investigate to determine whether there were minority communities with similar concerns.

The letter argued that if the FTC found that the acquisition would substantially lessen competition and harm consumers, or have anticompetitive effects in many markets, the FTC should not accept a consent order with conduct and/or structural remedies because crafting and enforcing appropriate remedies in dozens of markets would raise serious administrative challenges. The letter also urged the FTC to seek to enjoin the acquisition rather than expend limited governmental resources on trying to fix the merger so that it can be consummated subject to many conditions.

News: Antitrust FederalTradeCommissionNews