Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC staff comments on Pennsylvania General Assembly proposals affecting pre-need cemetery sales, (Oct 20, 2015)

By Linda O’Brien, J.D., LL.M.

The staff of the FTC’s Office of Policy Planning and Bureaus of Economics, Competition, and Consumer Protection, in response to a request from the Missouri House of Representatives, provided a comment today on the legislative proposals that would further regulate the pre-need sale of cemetery and funeral merchandise and services in Pennsylvania.

The comment concerns two separate but similar bills—SB 874 and HB 1364—as well as SB 1491, which would amend the “Cemetery and Funeral Merchandise Trust Fund Law.” If enacted, the bills appear to impose additional restrictions and requirements on cemeteries that engage in the pre-need sale of cemetery goods. “These provisions could lessen competition, resulting in potentially higher prices and few options for consumers, without countervailing benefits to consumers,” the comment states.

The staff comment notes that the legislative proposals under consideration by the General Assembly may reduce or eliminate pre-need sales of cemetery merchandise and could inhibit innovative business models and lessen competition between cemeteries and funeral homes, as well as competition between pre-need and at-need providers. This could reduce the range of choices available to consumers and also may increase prices for those consumers interested in prearranging their own funeral.

According to the comment, first, the proposals would prohibit the delivery and installation of certain cemetery merchandise prior to need. These prohibitions could discourage cemeteries from offering these products to consumers as part of a pre-need sale, which could lessen competition between cemeteries and funeral homes, as well as between pre-need and at-need sellers. Such a prohibition also could forestall reported economic and environmental benefits associated with the pre-need installation of burial vaults and lawn crypts.

Second, regarding the requirements for merchandise trust funds and refunds, the proposals would mandate that 100 percent of the retail price of pre-need merchandise be placed in a merchandise trust fund and that the cemetery refund 100 percent of the monies paid, plus interest, if the consumer were to default on his or her payments at any point prior to full performance of the pre-need sales contract and for any reason. Cemeteries and other sellers of pre-need burial merchandise may be hesitant to engage in pre-need sales if the law requires that 100 percent of the retail price be deposited into a merchandise trust account. A 100 percent trust requirement could therefore increase the costs of serving the pre-need market, and deny consumers the lowest possible prices and a full array of pre-need alternatives and pricing option.

Third, the comment notes, that General Assembly should not adopt the requirement that sellers of pre-need sales contracts adhere to the FTC’s Funeral Industry Rule regarding the sale of merchandise since the Rule was promulgated to apply to funeral homes and generally does not apply to cemeteries. The proposals as currently drafted are vague as to the specific Funeral Rule disclosures or prohibitions to which cemeteries must adhere, which could cause confusion for both consumers and businesses. FTC staff recommends that the General Assembly examine the requirements of the Funeral Rule and specify the disclosures or prohibitions with which it wants cemeteries to comply when selling merchandise.

News: Antitrust ConsumerProtection FederalTradeCommissionNews