RESPONSE OF SERVICE CORPORATION
The following are the comments of Service Corporation International ("SCI") in response to the Request for Public Comments published by the Federal Trade Commission ("FTC") in the May 5, 1999 issue of the Federal Register concerning the Trade Regulation Rule on Funeral Industry Practices (the "Funeral Rule" or the "Rule").
By way of background, SCI is the largest funeral service company in the United States. Through its affiliated companies, SCI provides funeral and cemetery services in 45 states and the District of Columbia (as well as a number of foreign countries). As of June 30, 1999, SCI affiliates operated 1553 funeral service locations, 478 cemeteries and 111 crematoria in the United States.
SCI has limited its responses to selected issues raised by the FTC. As a general statement, SCI believes that there is no compelling need to revise the Funeral Rule except to address certain compliance burdens resulting from the Rule's current provisions, as more fully discussed in our response to Question No. 17.
The numbering set forth below corresponds to that used by the FTC in its Request For Comments.
(1) Is there a continuing need for the Funeral Rule?
In its consideration of whether there is a continuing need for the Funeral Rule, the FTC should take into account the nature and extent of state regulation of the death care industry. SCI is in a unique position to furnish information concerning the degree of state regulation, based on the fact that SCI does business in more states than any other company in the funeral/cemetery industries, and therefore has extensive firsthand knowledge and experience regarding such regulation.
Every state where SCI does business has laws regulating various aspects of the funeral and cemetery industries, as well as regulatory agencies which oversee those industries. Attached is a partial list of such laws on a state-by-state basis (Exhibit "A"), as well as a list of state agencies responsible for the oversight and enforcement of such laws (Exhibit "B"). The subjects regulated include those covered by the Funeral Rule (i.e., price disclosure, deceptive practices, tying arrangements) as well as many other aspects of the death care business. The states have continued to adopt laws relating to the death care industry at a rapid rate notwithstanding the existence of the Funeral Rule. We have identified 484 statutes and 310 regulations relating to the death care industry enacted between January 1, 1996 and August 2, 1999.
While SCI is not advocating rescission of the Rule, we believe the FTC should carefully review the industry-related state laws so that it will be in a better position to make informed decisions concerning whether (1) there is a continuing need for the Funeral Rule, and (2) whether the Rule should be expanded.
(2) What changes, if any, should be made to the Rule to increase the benefits of the Rule to purchasers?
In its Request for Comment, the FTC has identified a number of proposed changes to the Funeral Rule being suggested by certain groups or individuals. Of particular note are proposals that the Funeral Rule be changed to (1) expand the scope of the Rule to cover cemeteries, monument dealers and casket sellers; and (2) eliminate the nondeclinable basic services fee. SCI's comments on these proposed changes are set forth below.
Expansion of Rule to Cemeteries
SCI does not believe that the Rule should be expanded to cover cemeteries. See Response to Question 22 for a more complete discussion of this issue.
Elimination of Nondeclinable Fee
The Rule's current provisions pertaining to the nondeclinable "basic services fee" promote the Rule's underlying objective of clear, consistent and simple price disclosure and should be retained.
Like any other professionals, funeral directors should be entitled to charge for their services. They provide various services which are not included in the 15 items otherwise required to be set forth on the General Price List (for example, making arrangements, planning the funeral, obtaining permits and death certificates, coordinating cemetery or crematory arrangements, and placing obituary notices). It is unreasonable to suggest that funeral directors should not be able to charge for furnishing these services. The basic services fee is an appropriate way of handling these items, since they are common to most funerals.
The alternative would be for the funeral home to impose a separate charge for each and every one of these items, which would unnecessarily complicate the transaction for the consumer and make comparison shopping more difficult. Imposing one fixed fee for all of these services is the simplest and most consumer-friendly way to charge for these professional services. It is superior to the hourly fee arrangement used by most other professionals (e.g., lawyers, accountants, architects, etc.), since the cost is fixed and not subject to variation based on time. It also serves to enhance competition by making comparison shopping easier.
To our knowledge, consumers have rarely raised objections or questions relating to the existence of a basic services fee. The one group we know of which has criticized the concept of a nondeclinable fee has generally questioned the propriety of allowing funeral homes to pass their overhead costs along to their customers, and has suggested that this has resulted in increased prices. These criticisms are based on unsound logic and a fundamental misunderstanding of the nature and purpose of the basic services fee. The primary purpose of that fee is to allow funeral homes to impose one fixed fee for those services which are commonly provided to most customers and are not included in the 15 items otherwise identified on the General Price List. It is a fee for services rendered, not merely a mechanism for recovering overhead costs. Although some consumers may not utilize all of those services, the Rule allows a funeral home to provide different fee arrangements for certain limited types of services, including direct cremations, immediate burials, forwarding of remains and receiving remains. A funeral provider can therefore structure its pricing in such a way that purchasers of these limited services are not compelled to pay for services which are not applicable to their transaction. The Rule's current provisions thus provide a fair, simple and easy to understand method of charging for professional services. This promotes comparison shopping, thereby enhancing competition rather than providing funeral homes with a means of increasing prices.
It is a fundamental reality of business that goods and services are priced in a manner which allows the seller to recoup its overhead and make some level of profit beyond that. The FTC recognized this when it amended the Funeral Rule in 1994 to allow funeral providers to include a reference to overhead in describing their basic services fee. This disclosure may be somewhat unusual, since most businesses do not call attention to the issue of overhead when disclosing their prices. However, we do not believe this reference in a funeral home's basic services fee disclosure is causing any significant degree of confusion, and it is certainly no basis for eliminating the concept of a nondeclinable basic services fee. Funeral homes are free to avoid any reference to overhead in describing their basic services fee if they believe it is confusing to their customers.
(5) Does the Rule overlap or conflict with other federal, state or local laws or regulations?
There is considerable overlap between the Rule and state laws, as well as some degree of direct conflict. Numerous states have laws which are similar or identical to the Rule (for example, Texas, Florida, Kansas, Ohio, California, Arizona and Wisconsin). Some states, including New York and Minnesota, have adopted laws which are at least partially in conflict with the Funeral Rule.
(17) What difficulties, if any, are providers of funeral goods and services experiencing in complying with the Rule?
The Rule's requirements pertaining to the timing of distribution for the General Price List results in situations where a funeral director must provide a client family with a General Price List under inappropriate circumstances when the family has no desire for price information. The result can be an awkward, insensitive and oftentimes very upsetting encounter which provides no useful information to the family. We advocate changing this requirement to provide that the General Price List must be distributed only when a consumer inquires about prices, but in any event, prior to the time the consumer begins selecting merchandise or services.
Also, there is a need for guidance from the FTC concerning the rights and obligations of funeral homes with respect to acceptance, delivery and liability when dealing with a third party casket provider.
(18) How has the National Funeral Directors Association's Funeral Rule Offenders Program ("FROP") affected compliance with the Rule, if at all?
We believe that FROP is a positive and effective means of promoting compliance with the Funeral Rule and should be continued.
(21) Should the requirement that itemized price lists be given to consumers at the beginning of discussions about funeral arrangements be modified? If so, how? What would be the relative costs and benefits of such a modified provision?
Yes, that requirement should be modified. See response to Question 17 above.
(22) Should the Commission expand the definition of "funeral provider" in order to bring non-traditional members of the funeral industry within the scope of the Funeral Rule's coverage? Are consumers being harmed by the current limitation of the scope of the Rule's coverage:
SCI does not believe the Rule should be expanded to cover cemeteries. There is ample regulation of the cemetery industry already, both state and federal (See Response to Question No. 1 above and Exhibits "A" and "B"), and no compelling need for additional regulation by the FTC. Moreover, the problems which the Rule was intended to address (i.e., failure to disclose prices; forced bundling of goods and services; misrepresentations about the need to purchase, or the capabilities of, various funeral goods and services) generally are not prevalent in the cemetery industry. In our experience, most consumer complaints involving cemeteries relate to matters which have nothing to do with the Funeral Rule (such as maintenance problems or interment mistakes) and/or are adequately addressed under existing state and federal laws (such as questionable or deceptive selling practices).
In addition, there is an effective industry sponsored problem-solving mechanism known as the Cemetery Consumer Service Council. This organization is available to address consumer complaints involving cemeteries and successfully resolves the vast majority of complaints it receives. SCI cemetery customers are notified of the existence of this organization through a disclosure contained in the cemetery's consumer contracts.
(26) Have the 1994 amendments been effective in prohibiting casket handling fees? If so, what benefits or costs have resulted from these amendments?
The 1994 amendments have been effective in prohibiting casket handling fees. This prohibition has benefited casket sellers which are not licensed funeral homes. There has been a noticeable proliferation of such businesses since the Rule was amended in 1994.
(27) How widespread is it for funeral providers to offer substantial discounts on funeral packages that include a casket from the funeral home?
Package pricing does not result in any restriction of consumer choices. To the contrary, it results in more consumer choices. Consumers are given the opportunity to select an option which will result in a discount from the funeral home's regular prices. This practice is a form of volume discounting, and is common in many industries (for example, "value meals" at fast food restaurants, option packages on automobiles, vacation packages, etc.).
If some funeral homes are engaging in abuses by artificially inflating their itemized prices, this can be dealt with under existing laws. Federal and state deceptive trade practice laws prohibit artificial markups. It is our belief that such artificial markups in the funeral industry are uncommon, since it would be contrary to the funeral home's best interest to engage in that practice. This is because many shoppers look at itemized prices when making comparisons and inflated prices will result in lost business opportunities.
Package pricing is pro-consumer because it results in more options and the availability of a discounted price. There is no legitimate justification for restricting the ability of funeral homes to offer these volume discount programs, which are common business practices in numerous other industries.
(28) Should the requirement for a General Price List be modified? If so, how?
SCI believes there is no compelling need to modify the Rule's requirements concerning the content of the General Price List. Under the Rule's current provisions, merchandise or services not offered by a funeral home need not appear in its General Price List. If the funeral home offers merchandise or services in addition to the 16 items required to be disclosed on the General Price List, the funeral home is free to add those items to its General Price List. Thus, the Rule is sufficiently flexible to accommodate the different offerings of various funeral providers.
(30) Are there widespread unfair or deceptive practices occurring with respect to the prearrangement of and prepayment for funerals by consumers? What are those practices? How could these practices be remedied? Are these remedies within the Commission's authority and jurisdiction? Would the benefits to consumers likely to result from such remedied outweigh the likely costs to funeral providers or other industry members?
Although the funeral industry is not immune from deceptive sales practices, we do not believe such problems are widespread. To the extent such problems occur, there are federal and state deceptive trade practice laws already in existence to address such problems, as well as administrative agencies to enforce those laws. In addition, almost all states have laws regulating preneed funeral transactions.