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UNITED STATES In the Matter of: Request for Comments Concerning the Trade COMMENTS SUBMITTED BY INTERNATIONAL CEMETERY AND FUNERAL
ASSOCIATION August 10, 1999 Introduction The International Cemetery and Funeral Association (ICFA) respectfully submits these comments concerning the Trade Regulation Rule on Funeral Industry Practices (the Funeral Rule) pursuant to the Request for Public Comments as published by the Federal Trade Commission (FTC) in the May 5, 1999 issue of the Federal Register. The ICFA is a nonprofit trade association founded in 1887 and currently has over 5500 members located primarily in the United States, and in 28 foreign countries. The Association represents members of the funeral service, interment, and memorialization industries who promote consumer choices, prearrangement, and open competition. The ICFA has participated in the FTC Funeral Rule proceedings at various levels since the 1970s and has cooperated with FTC staff in handling consumer inquiries and complaints through the Cemetery Consumer Service Council, an industry-sponsored consumer assistance organization. In the following sections, the ICFA will respond to selected issues raised by the FTC in its Request for Comments and, where relevant for an understanding of these issues, will review the history of the Funeral Rule. Numbered Issues in FTC Request for Public Comments "(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 Funeral Rule coverage? Are consumers being harmed by the current limitation on the scope of the Rule's coverage? A. What definition should be used to delineate those entities and individuals subject to the Funeral Rule? B. What are the costs and benefits of broader definitions?"
Since the FTC first published the proposed Funeral Rule in 1975, this proceeding has been a focal point for variety of concerns, major and minor, involving the funeral service, interment, and memorialization industries. The historical record demonstrates that the Funeral Rule is limited in its purpose and was designed as a remedial measure for specific activities involving unfair and deceptive practices. According to one treatise, prior to enacting a trade regulation rule the FTC must decide whether "substantial evidence exists in the rulemaking record for the factual proposition underlying the determination that certain conduct is unfair or deceptive. Next, [the FTC] asks four additional questions: 1.) is the conduct prevalent, 2.) does it create significant harm, 3.) will the proposed rule reduce that harm, and 4.) will the benefits of the rule exceed its costs?"(1) (Emphasis added, language in brackets added). Shortly after the initiation of the last Funeral Rule review proceeding, in April 1988, the FTC staff reviewed the basis for Rule amendment: The APA (Administrative Procedures Act) requires that an administrative agency provide a reasoned analysis for adopting, modifying or rescinding a regulation. Under Magnuson-Moss rulemaking, the Commission is similarly limited in its discretion to modify or rescind existing trade regulation rules. Thus, under the APA and section 18(e)(3)(A) of the FTC Act, the existence of a duly promulgated rule reflects the status quo. Hence, the Commission is required to demonstrate that any changes (revocation or amendment) in the settled course of action (the Funeral Rule) must be based upon substantial evidence in the rulemaking record and must be accompanied by a reasoned explanation. (Parenthesis in the original; footnotes omitted).(2) Therefore, expansion of Funeral Rule coverage to "non-traditional members," as referenced in Issue No. 22 above, must be based on the existence of abuses by these sellers that are prevalent, and that are prevented, remedied, or in some way addressed by the Rule. Calls for Rule expansion based on claims of "fairness" and "a level playing field" fail to meet the legal criteria for amendment.
The Funeral Rule, in its present form, is largely the product of the 1970s which preceded the advent of "plain language" legal documents. If drafted in today's regulatory environment, the type of entity covered under the Rule would probably be described simply as "a funeral home, sometimes called a mortuary." Instead, the FTC staff of two decades ago invented a term never used by the public or by the industry - "funeral provider" - and developed a convoluted three-part definition to explain what it meant: "A 'funeral provider' is any person, partnership or corporation that sells or offers to sell funeral goods and funeral services to the public." "'Funeral goods' are the goods which are sold or offered for sale directly to the public for use in connection with funeral services." "'Funeral services' are any services which may be used to: 1) care for and prepare deceased human bodies for burial, cremation or other final disposition; and 2) arrange, supervise or conduct the funeral ceremony or the final disposition of deceased human bodies." In other words, a funeral provider under the current definition is a funeral home, sometimes called a mortuary. If it were the intention of the Commission at the time of enactment to include other types of entities, such as crematories that sell urns directly to the public, the definition could have been easily augmented to specifically say just that. Instead, the rulemaking record leading up to the enactment of the Funeral Rule in 1984 repeatedly stressed that only funeral homes were the focal point of the proceedings. The record also showed persuasively that the Commission was well aware of the existence of other sellers, "non-traditional members," who sold competing goods and services. For example, an August 1975 memorandum from FTC Staff to the Commission stated:
By 1980, the FTC staff was considering proposed guides by various funeral director trade associations, including the National Funeral Directors Association (NFDA), to expand the definition of "funeral provider" to include cemeteries and, in fact, all sellers of funeral goods or funeral services. In a November 1980 memorandum, FTC staff discussed the difficulties of such a proposal, "For example, it is our understanding that the Guides (or at least some provisions in them) would apply to cemeteries which sell outer burial containers because such outer burial containers could be labeled 'funeral goods,' as defined.... Literally applied, this would require cemeteries who only sold outer burial containers to give out a general price list, even though they have virtually none of the items listed on it.(4) Later, FTC staff recommended "that the Commission reject NFDA's proposed definition for several reasons. First, it is our position that Section 19 of the 1980 Improvements Act authorizes the Commission to promulgate a rule covering only those who provide both funeral goods and funeral services. ...[T]he NFDA definition is so broad that it could potentially cover casket manufacturers, memorial societies, all cemeteries, and even the relatives or friends of a purchaser who make the funeral arrangements on his or her behalf."(5) Still later, in 1988, the Bureau of Consumer Protection Staff Report cited above expressed continuing concern involving statutory restrictions in expanding the Funeral Rule's coverage. "Staff notes that Congress' decision in 1980 to limit the coverage of the Rule to providers who sell both funeral goods and funeral services serves as an additional caution in considering any expansion of the Rule's coverage in this way." (Emphasis in the original).(6) Nevertheless, FTC staff pursued allegations of cemetery abuses addressed by the Funeral Rule in the subsequent review proceedings that began in December 1987. On reviewing the record in 1991, the FTC staff "concluded that the record evidence does not show that those entities (cemeteries, crematories that do not sell funeral goods, and other sellers of only funeral goods or only funeral services) engage in the types of abuses addressed by the Rule - failure to disclose prices, forced bundling of goods and services, and misrepresentations about the need to purchase, or capabilities of, their funeral goods or services." (7) (Language in parenthesis added). In sum, the FTC's own rulemaking record amply demonstrates that funeral homes were the focus of the proceedings, that serious abuses by funeral homes justified the promulgation of the Funeral Rule, and that various factors, including the lack of documented abuses by other sellers, precluded extending the Funeral Rule to cemeteries and to other entities. Recent media stories have cited advocates of Rule expansion as claiming that the current definition of "funeral provider" contains a "loophole" because it does not extend to all sellers. However, a review of the record confirms that the limitation was intentional and based upon sound considerations. III Evidence of Consumer Harm by Limiting the Rule's Coverage While past Funeral Rule proceedings have found no substantial evidence of consumer harm from entities that are not currently included with the scope of the Funeral Rule's coverage, the ICFA does not claim that no consumer complaints exist involving cemeteries and other sellers. Instead, the operational differences between the various industries explain why the potential for Rule-related consumer problems from cemeteries and other sellers are significantly diminished when compared to funeral homes covered under the Rule. For example, FTC staff observed the "apples and oranges" differences among cemeteries, crematories that do not sell funeral goods, and other sellers of only funeral goods or only funeral services, when compared to funeral homes: The staff noted that the services generally provided by those sellers are not comparable to funeral home services because they do not include a similar wide variety of different services and goods that are "packaged" into a single "funeral." The failure to itemize goods and services that is the primary practice addressed by the Funeral Rule is thus not apparent in those industries, at least in the same magnitude, as it is in the funeral home industry.(8) Thus, as discussed in the ICFA's comments to Issue No. 23 below, the mere fact that an entity is selling an outer burial container or a casket to the public should not automatically trigger coverage under the Funeral Rule. Instead, the focal point for the new FTC inquiry should center on abuses specifically addressed by the Rule, not on whether a certain type of product is sold. In an effort to track both the volume and types of consumer cemetery complaints, and to have the opportunity of informally resolving many of them where possible, the ICFA has served as administrator for the Cemetery Consumer Service Council (CCSC) since 1979. The CCSC is an industry sponsored consumer assistance organization where industry members volunteer their time and experience to answer inquiries and to mediate complaints involving cemeteries. Each year the CCSC publishes an activity survey of inquiries and complaints received, a breakdown of the types of complaints and inquiries, and the number resolved. The CCSC also works with state cemetery boards, consumer protection agencies, and the Better Business Bureaus, all of which provide referrals to the CCSC. The Consumer's Resource Handbook, a U.S. Government publication that is circulated to public libraries and consumer assistance agencies throughout the nation, also lists the CCSC. Activity survey data for 1997, the latest year for which statistics are available, indicate that a total of 113 complaints and inquiries were processed by the CCSC. Of that number, 93 were resolved. Six complaints and inquiries were pending at the beginning of the year while 14 remained at year's end. These figures were based on responses provided by 22 of the 38 state CCSC committees. Of the various types of complaints and inquiries received, 34 dealt with improper cemetery maintenance, 30 dealt with deceptive or questionable sales practices, 10 with Truth-in-Lending matters and other contractual issues, 24 with cemetery rules and regulations, and another 11 with a variety of other issues including simple inquiries into cemetery practices.(9) According to the U.S. Census Bureau, there are in excess of 2 million deaths annually in this country, translating into 2 million funerals and burials of one kind or another, and making the total complaints generated by consumers to CCSC insignificant. The most recent annual CCSC survey results are characteristic of the volume and nature of consumer cemetery complaints that the organization has received over the last twenty years and are notable for their lack of relevance to Funeral Rule-related abuses. As observed in 1991 by FTC staff in conjunction with its review of consumer complaints filed by AARP, CCSC, and others:
In an effort to corroborate the findings of the CCSC and previous findings by FTC staff, earlier this year the ICFA filed a Freedom of Information Act request with the FTC seeking access to any complaints involving cemeteries that were filed with the Commission during the last four years. It should be noted that the ICFA's request was not limited to "consumer" complaints alone. In response, the FTC staff stated, "A search of the Commission's records and discussions with knowledgeable staff failed to locate any records that are responsive to your request." (11) (Emphasis added). In order to place this response into perspective, a recent FTC news release stated that the agency had received a total of 60,000 consumer complaints in 1998.(12) IV Consumer Surveys Media reports have highlighted incidents of misconduct by funeral homes, cemeteries, crematories and other sellers that are indefensible and, not surprisingly, already illegal under state and federal laws. However, these anecdotal reports fail to convey any pattern of conduct or overall experience level of consumers in general towards the allied industries. With the U.S. Census Bureau reporting 2.3 million deaths in the United States during 1998, the number of consumers who have had first-hand experience with funeral homes, cemeteries, and other sellers for the 5,500 burials or other forms of dispositions made each day provides an ample sampling base for survey purposes. Survey data collected in recent years persuasively show that consumers, under the solemn circumstances involved, have a positive perception of the industries and a notable lack of complaints. For example, a 1995 study was conducted by the University of Kansas Medical Center on Aging (funded through an AARP grant) among families that experienced the death of a loved one, age 50 or older, within the previous five months. Of the 163 families surveyed, one-third had no previous experience with funeral homes while 46 percent had no previous experience with cemeteries. Asked whether they were treated with respect, dignity, and concern at the funeral home, 94 percent said that they were "treated very well."(13) Other aspects of the University of Kansas study corroborate earlier findings made by the Wirthlin Group in two industry-sponsored telephone surveys. A benchmark national survey conducted in 1990 polled 1,000 consumers on their experience with and attitudes toward the industry. Sixty-five percent had positive remarks about industry members while only 11 percent mentioned anything negative.(14) The Wirthlin Group conducted a follow-up national telephone survey in 1995 among 1,000 consumers and found, among other things, that 68 percent of those surveyed in the 1995 poll had positive remarks about industry members while only 15 percent had negative remarks. (15) Wirthlin has been commissioned by the Funeral and Memorial Information Council, a coalition of national industry trade associations, to conduct an updated survey for publication in January 2000. More recently, the ICFA commissioned a telephone survey by Walker Information in 1997 of consumers who had preplanned and prepaid either their funeral or burial arrangements. A total of 400 interviews were conducted of purchasers in the Indianapolis, Indiana area, equally divided between cemetery and funeral home consumers. Asked, "How satisfied were you with the prearrangements that were made?", 94 percent of cemetery and 97 percent of funeral preplanners were either satisfied or very satisfied with the plans. (A more extensive discussion of the Walker Information survey results follows in response to Issue No. 30).(16)
The ICFA does not have specific data on the costs to businesses should the Funeral Rule be extended to these entities. However, funeral home members of the ICFA report that costs associated with staff training, paperwork, and record keeping incurred in Funeral Rule compliance are passed along to consumers, pursuant to general business cost accounting practices, as reflected in the retail pricing. In the absence of widespread complaints remedied by the Funeral Rule, the ICFA believes that any increase in prices due to Funeral Rule compliance would yield little or no corresponding benefits to consumers. Summary to Comments on Issue No. 22: While the ICFA is aware that some consumer complaints involving cemeteries may be brought to the attention of the FTC during this Funeral Rule review proceeding, the key issue should focus on whether any of the problems, whether documented or alleged, would be prevented, remedied, or otherwise addressed by the Funeral Rule. In the absence of consumer harm and with the existence of consumer surveys documenting a high level of satisfaction, the ICFA respectfully urges that the Funeral Rule is an inappropriate regulatory vehicle to extend to cemeteries and to other sellers. Furthermore, such extension without a reasonable basis for finding actual widespread abuses would violate the Commission's own rules of procedures. Assuming the Commission decides to retain the Funeral Rule, the ICFA strongly recommends a revised plain language definition description of the entities covered by the Rule, that is funeral homes and mortuaries, and the deletion of the term "funeral provider" to eliminate both the confusion and the administrative complexities that the use of this term has created. "(23) Should non-traditional providers of funeral goods and services be subject to only certain provisions of the Funeral Rule?
In some respects, Issue No. 23 is simply a restatement of Issue No. 22. Should the Funeral Rule be extended to other sellers, many of its provisions would be irrelevant for purposes of compliance by these sellers. The fact that the Rule was geared for funeral homes becomes readily apparent when it is reviewed for potential application to other entities. The FTC staff , in its Statement of Basis and Purpose for the Funeral Rule, "unambiguously established that funeral director practices were the focus of the rulemaking proceedings."(17) As a practical matter then, the Rule should not be extended to other sellers based on the types of goods and services sold but, if at all, on the basis of documented abuses by sellers that are addressed by the Rule. To quote FTC staff, "Briefly stated, the Rule having been duly promulgated is presumptively valid, and may be changed or repealed based upon a reasoned analysis supported by reliable, substantial evidence in the rulemaking record taken as a whole."(18) I The Level Playing Field Of the sixteen funeral goods and funeral services listed in the Funeral Rule, only one item, outer burial containers, are commonly sold by both funeral homes and cemeteries (casket sales are discussed below). As cited previously in our response to Issue No. 22, the FTC staff was well aware, even in the 1970s, that funeral homes and cemeteries both commonly sold outer burial containers. This activity is neither "a new development" nor has it been used by the Commission as justification for extending the Rule to anyone selling outer burial containers. Nevertheless, even where the same type of product is offered, there is an important distinction which precludes direct competition between cemeteries and funeral homes. Many cemeteries sell outer burial containers on a prearranged basis whereas funeral homes will tend to sell this merchandise at a later point in time, at-need, that is, at the time of death.(19) Moreover, funeral homes do not typically offer goods and services traditionally sold by cemeteries such as lots, columbarium niches for cremated remains, mausoleum crypts, markers and monuments, grave opening and closing services, or ancillary services relating to grave and marker maintenance and repair. This distinction is important in view of the claim advanced that all sellers are not competing on "a level playing field." Unfortunately, this allegation ignores the important fact that funeral homes and cemeteries function on two different playing fields, providing substantially different goods and services, sold at different points in time, under different contractual terms and conditions, to the public. In addition, consumers tend to have a substantially different relationship with a cemetery than with a funeral home. A typical funeral home consumer transaction involves a relationship lasting only a few days during which time the remains are prepared, viewed and brought to the cemetery for interment or other form of disposition. By contrast, a consumer's relationship with a cemetery is an ongoing one that can last for decades. Stated another way, cemeteries are unique among all forms of businesses because they must service what they sell forever.(20) Since the Funeral Rule's amendment in 1994, the number of retailers selling caskets other than funeral homes has been reported as steadily rising in some states. The ICFA is not aware of exact numbers, but our impression is that relatively few cemeteries sell caskets other than those already operating in tandem with a funeral home. Among cemeteries selling caskets independently of a funeral home affiliation, these sales tend to be made on a prearranged basis similar to outer burial containers and do not directly compete with funeral home casket sales which tend to be at-need. Research indicates that a number of states impose restrictions on who may sell caskets. Almost one-third of the states prohibit the sale of caskets by cemeteries: Alaska, Arizona, Arkansas, Georgia, Louisiana, Massachusetts, New Jersey, New Mexico, New York, North Carolina, Oklahoma, South Carolina, Tennessee, Utah, Virginia, and Washington. Among the remaining states, cemeteries selling caskets appear to be few and far between except where noted above. II Jurisdictional Issues Extension of the Funeral Rule, even in a limited manner, to cemeteries would raise serious jurisdictional issues concerning the status of nonprofit entities under FTC regulation. According to the FTC Act, the Commission has authority over "persons, partnerships, or corporations" and defines "corporation" to include "any company...or association, incorporated or unincorporated, without shares of capital or capital stock or certificates of interest, except partnerships, which is organized to carry on business for its own profit or that of its members." (21) (Emphasis added). Unlike funeral homes, there exist a variety of cemetery organizations including privately owned entities either for-profit or nonprofit (organized under Internal Revenue Code 501(c)(13)), religious cemeteries (included under IRC 501(c)(3)), municipal cemeteries, and fraternal cemeteries. According to the Internal Revenue Service, "There are reported to be between 75,000 to 100,000 cemeteries in the United States. Most of these are tax exempt organizations."(22) In addition, some states prohibit for-profit cemeteries: Connecticut, Massachusetts, Maine, New Jersey, New York, and Wyoming.(23) During the previous Funeral Rule review, the Presiding Officer observed "the fact that so many cemeteries are either publicly owned by municipalities or privately owned by religious and presumably non-profit organizations would pose jurisdictional problems for the Commission."(24) Due to these factors, extension of the Funeral Rule to the relatively small group of cemeteries remaining would be inconsistent, confusing to the public, and again demonstrates why the Rule is an inappropriate regulatory vehicle to apply to cemeteries. Summary to Comments on Issue No. 23: Extension of the Funeral Rule to sellers other than funeral homes should be based on documented abuses, not on the types of products offered for sale. Due to the vastly different goods and services sold to the public by funeral homes and cemeteries, sold at different points in time, these entities actually function on two different "playing fields." Since the vast majority of cemeteries are nonprofit, few cemeteries would be subject to FTC jurisdiction in any event. For these reasons, the types of goods or services sold should not determine whether the Funeral Rule is extended to cemeteries and other sellers. "(30) Are there widespread unfair or deceptive practices occurring with respect to the prearrangement and pre-payment for funerals by consumers? What are these 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 remedies outweigh the likely costs to funeral providers or other industry members?" Issue No. 30 is phrased to suggest that only the practices of funeral homes are its focus. However, the ICFA will respond on a more generalized basis to cover the funeral service, interment, and memorialization industries. I. Determining the Types and Extent of Unfair or Deceptive Practices At this time, the U.S. General Accounting Office (GAO) is conducting an investigation along the lines described in Issue No. 30 at the request of the Senate Special Committee on Aging and the Senate Government Affairs Permanent Subcommittee on Investigations. We understand that the GAO report will be available in the Fall of this year and, depending upon the recommendations contained, Congressional hearings may follow. In the meantime, the ICFA offers the following observations. To date, the main source for reporting misconduct involving unfair or deceptive practices relating to Issue No. 30 comes from the media. Much of the recent reporting was conducted on an anecdotal basis with no apparent effort to establish whether the incidents are widespread or isolated. The fact that most of the reported instances are already prohibited under existing state and federal laws, either through specific industry-related laws or under general business statutes, was also ignored by the media. Based on this biased reporting, members of the public probably are not aware that most of the acts are already against the law. For example, it is already illegal to sell a cemetery lot to more than one customer; it is already illegal to disinter human remains in order to resell the grave, or to rebury the remains without authorization from the next of kin. It is already illegal to unethically dispose of cremated remains. It is already illegal to invest or withdraw and spend trust funds in violation of the trust agreement, the contract with the consumer, or state law. These violations, few and far between, seem to comprise the majority of the incidents reported in the media. The misconduct also violates the ICFA Code of Ethics which is subscribed to by the 5500 members of this Association.(25) As discussed previously, the ICFA has endeavored to determine the extent of unfair or deceptive practices in the allied industries. A Freedom of Information Act request to obtain data on cemetery-related complaints filed with the Federal Trade Commission during the last four years failed to produce any records.(26) Inquiries and complaints submitted to the Cemetery Consumer Service Council, an industry-sponsored consumer assistance organization, average between 100 to 150 annually. (27) Therefore, placed in an overall context of an average 2 million deaths reported in the U.S. each year by the Census Bureau, the documented instances of wrongdoing are less than one-tenth of one percent, a statistical equivalent of zero. Not only is there scant evidence of widespread unfair or deceptive practices, there is evidence that consumers generally feel positive about making prearrangements. The previously mentioned study by the Wirthlin Group found that consumers generally have a positive view of prearrangement. Three out of four believed that prearranging their own funeral or burial made good sense and over half, 53 percent, already owned cemetery property. More than one in four had already preplanned their own funeral and over half of that number had prepaid them. Sixty-five percent had positive remarks about industry members while only 11 percent mentioned anything negative.(28) A follow-up national telephone survey conducted by the Wirthlin Group in 1995 among 1,000 consumers found, among other things, that 80 percent believed that prearrangement was a good idea. However, the survey indicated that only 24 percent had actually prearranged their funeral or burial plans. As in the 1990 survey, just over half of that number, 58 percent, had prepaid them.(29) As previously cited in response to Issue No. 22, the ICFA commissioned a telephone survey by Walker Information in 1997 of 400 consumers who had pre-planned and prepaid either their funeral or burial arrangements. The purpose of the survey was to measure whether customers found their prearranged purchases to be beneficial. Seventy-five percent of cemetery preplanners rated the experience as excellent or very good. Only three percent rated the experience poor. Among funeral preplanners, the rating of excellent and very good climbed to 81 percent, with only 1 percent finding the experience poor. Asked whether they would recommend making cemetery/funeral prearrangements to others, 89 percent of cemetery preplanners and 84 percent of funeral preplanners said that they definitely or probably would. With respect to the reasons for preplanning cemetery or funeral arrangements, 81 percent and 80 percent, respectively, felt that prearrangement "eases the loss of a loved one" while 67 percent and 68 percent, respectively, agreed that "it saves money." In response to the question, "How satisfied were you with the prearrangements that were made?", 94 percent of cemetery and 97 percent of funeral preplanners were either satisfied or very satisfied with the plans.(30) II Remedies Within the Commission's Authority and Jurisdiction With regard to prearrangement and pre-payment, the Federal Trade Commission is currently authorized to regulate many aspects of these transactions. For example, telemarketing calls, an important resource for identifying consumer interest, are regulated by the FTC through its Telemarketing Sales Rule.(31) Many states also enforce their own telemarketing laws that regulate various aspects of these sales.(32) Often overlooked with respect to telemarketing is the fact that prearrangements are rarely sold by telephone. Instead, the phone call is used merely to establish a mutually convenient time for a possible in-person meeting. At the federal level, without the Funeral Rule, the FTC is empowered to investigate and prosecute businesses, including funeral homes and cemeteries, for engaging in misleading and deceptive sales practices under Section 5 of the FTC Act.(33) In addition, the FTC's Cooling Off Period for Door-to-Door Sales Rule effectively counters high pressure sales tactics by providing consumers with cancellation rights for sales made in the home or away from the seller's principal office within three business days.(34) The ICFA continues to alert and educate its members to the existence and amendments of these laws in order to promote full compliance with them. (A more extensive discussion of federal laws regulating cemeteries and funeral homes follows in response to Issue No. 5). In addition, the FTC enforces a series of Guides regulating certain types of sales practices that apply to prearrangements and pre-payment. For example, the Bait Advertising Guide(35) protects consumers against sellers who offer a product or service as a pretext for selling them a higher priced item. The Debt Collection Guide(36) regulates deceptive methods to obtain payment of amounts owed to businesses and is enforced in conjunction with the Fair Debt Collection Practices Act.(37) The Guide Concerning Use of the Word "Free" and Similar Representations(38) regulates such offers including gifts, bonuses and "without charge" services. The Guides Against Deceptive Advertising of Guarantees(39) regulate use of claims such as "Satisfaction or Your Money Back," lifetime guarantees, and the disclosure of warranty and guarantee provisions. Most importantly, the Guide Against Deceptive Pricing(40) regulates claims of "bargains," "sale," "reductions" and similar promotional terms. This includes advertising a reduction in the seller's former price only if that earlier price is the actual, bona fide price at which the item or service was offered for sale to the public on a regular basis for a reasonably substantial time period. The majority of states regulate the trusting aspects of pre-payments and insurance-funded prearrangements are one of the most extensively regulated areas of consumer protection.(41) III Costs vs. Benefits The ICFA does not have specific data on the costs to businesses should additional regulations be enacted pursuant to the issues raised in Issue No. 30. However, some costs would undoubtedly be generated that would be passed along to consumers in the retail pricing. In the absence of documented widespread unfair or deceptive practices, the additional training, paperwork, and record keeping requirements of new regulations would be an unjustified burden to impose on businesses and would yield little or no corresponding benefits to consumers. Summary to Comments on Issue No. 30: The upcoming GAO report on prearrangement and pre-payment practices will be examined in due course. In the meantime, published media reports of unfair or deceptive practices are anecdotal and fail to establish anything more than marginal occurrences. Reported acts of misconduct are usually illegal under existing state and federal laws. The FTC already has an arsenal of statutes, trade regulations, and guides to prosecute and enforce deceptive or unfair sales practices including the FTC Act, the Telemarketing Sales Rule, the Cooling Off Period for Door-to-Door Sales Rule, the Guide Against Deceptive Pricing, and the Bait Advertising Guide, among others. In view of the regulatory framework already in place at the federal and state levels, additional costs and compliance burdens imposed on businesses would be unjustified and of little benefit to the public. "(5) Does the Rule overlap or conflict with other federal, state, or local laws or regulations?" The ICFA is willing to defer to state regulators in addressing certain aspects of Issue No. 5. However, we believe that this issue provides the opportunity of discussing the many existing laws at the state and federal levels regulating cemeteries and funeral homes. An examination of this area is essential in determining whether the Funeral Rule should be amended especially in view of the claims by some industry critics that there are few or even "no laws" regulating the allied industries.
Members of the funeral service, interment, and memorial industries are subject to most of the same laws governing businesses in general. The following list of federal laws and regulations affecting cemetery and funeral home operations is not intended to be exhaustive but provides a detailed overview of the regulatory framework already in place: U.S. Dept. of Treasury/IRS
U.S. Dept. of Labor/OSHA
Equal Employment Opportunity Commission
U.S. Environmental Protection Agency
Federal Trade Commission
U.S. Dept. of Veterans Affairs
Federal Communications Commission
Federal Reserve Board
Statutes Also Providing Private Enforcement
A number of these statutes and regulations focus on consumer protection issues such as Truth in Lending, the Telephone Consumer Protection Act, and all of the FTC provisions. Other laws, such as the Sherman Antitrust Act and the Robinson-Patman Act, also protect consumers by prohibiting anti-competitive business practices. Therefore, claims that cemeteries or funeral homes are "unregulated" at the federal level are insupportable. II State Regulation The specific regulation of cemeteries and funeral homes has historically occurred at the state level. In an increasing number of states, businesses must comply with federal and state laws covering the same issue. For example, cemeteries and funeral homes in Florida are subject to the FTC's three-day "Cooling Off" Rule in addition to the state's 30-day "Cooling Off" period for prearrangements. Common sense may dictate that sellers should simply observe the longer time frame but, in fact, they must comply with the requirements of both state and federal laws. In 1997, after a two-year effort, the ICFA published a Survey of State Cemetery and Mortuary Laws and Regulations with the cooperation of many state funeral and cemetery boards. Due to the volume of continuous amendments by state legislatures, the survey became outdated almost as soon as it was published. Efforts to keep the survey updated proved difficult and an entirely new survey is now in development following the mid-year adjournment of many state legislatures. The ICFA Survey(42) nevertheless demonstrates the extent of state regulation affecting the allied industries. We believe that state level regulation is more effective and more efficient than similar federal regulation because cemetery and funeral home consumer transactions are local in nature. No doubt selected states should consider additional regulation or enforcement on given issues but, overall, 48 states have laws regulating cemeteries and 49 states have laws regulating funeral homes. Since the ICFA has no wish to clutter the Rulemaking record in this proceeding with unnecessary paper, we simply offer to provide FTC staff on request with copies of all relevant states laws, numbering approximately 10,000 pages, and a summary of citations to those laws, numbering approximately 30 pages, in order to physically demonstrate the fallacy of oft-repeated claims that there are "no laws" regulating the allied industries. The ICFA has also published a series of model guidelines to encourage states to enact pro-active legislation promoting sound business practices and consumer protection. The Model Guidelines for State Laws and Regulations(43) were initially published in October 1998 as a series of 14 detailed issue papers summarizing various topics and providing principles for drafting legislation. The ICFA also commissioned an economic study of minimum prepaid trust deposit requirements and a consumer satisfaction survey to accompany the Guidelines. Individual guidelines include Prepaid Contracts, Endowment Care Trust Funds, Insurance-Funded Prearrangements, Cemetery and Funeral Home Combinations, Prepaid Contract Trust Funds, Alternatives to Trusting - Financial Instruments, Authorization to Control Final Disposition, and Cure Period for Violations, among others. A Glossary of Terms was also developed. Subsequently, an additional seven guidelines were published in June 1999 that include the following topics: Solicitation, Consumer Guarantee Fund, Conversion of Prepaid Contract Trust Funds to Insurance, Criteria for Establishing a New Cemetery, Memorial Sales and Installation, Record Keeping Requirements, and Handling Human Remains in Conjunction with Final Disposition. A third set of guidelines is currently in development and may be published before the end of the year. The guidelines are intended to help raise the level of debate concerning proposed state legislation from a largely anecdotal basis to one in which statistical and actuarial data will add substance to the discussions. The guidelines are advisory in nature and set out concepts rather than precise statutory language. The ICFA does not recommend codifying the various guidelines into law as a whole. Instead, the guidelines are intended as a series of options to be selectively chosen by interested parties to address particular concerns. The ICFA has made copies of the Model Guidelines available at no charge to all state cemetery and funeral directors associations, state regulatory boards, the North American Cemetery Regulators Association, all the national trade associations belonging to the Funeral and Memorial Information Council, selected consumer advocacy organizations, and others. Finally, as previously documented under our comments to Issues No. 22 and 23, there has been no substantial evidence of consumers encountering difficulty in obtaining price information from cemeteries and other sellers not presently covered under the Funeral Rule, such disclosure being the primary focus of the Rule. The model guideline for Prepaid Contracts endorses the use of price itemization in making prearrangements and, in addition, the ICFA Code of Ethics requires that the Association's 5500 members should give consumers "useful and accurate price information" as a condition of membership in the Association.(44) Summary to Comments on Issue No. 5: Evaluating whether the Funeral Rule overlaps or conflicts with other laws requires an examination of the extensive framework of federal and state laws and regulations already in effect. Since cemetery and funeral home consumer transactions are local in nature, it is more efficient to regulate them at the state level. The ICFA has circulated a series of model guidelines to promote effective state legislation and regulation in areas that may require attention to ensure accountability and consumer protection. Language in the model guidelines and in the ICFA Code of Ethics provide for price disclosure and itemization. "(6) Since the Rule was issued, what effect, if any, have changes in relevant technology or economic conditions had on the Rule?" "(14) How, if at all, since the Rule was amended in 1994, have the following factors changed? ...... (d) Mergers and other types of consolidation in the funeral industry?" The ICFA has retained Ronald G.E. Smith, professor emeritus of Economics from Hunter College in New York City, to provide an analysis of the issues raised in Numbers 6 and 14. Professor Smith will submit his comments to the FTC under a separate cover. Non-declinable Fees Currently Allowed "The 'basic services fee' is defined as the charge for the services of the funeral director and staff. The effect of this definition is to permit funeral directors to charge one, and only one, non-declinable fee to cover the basic services of the funeral director and staff. The Commission solicits comments on the efficacy of this provision in ensuring consumers the greatest amount of choice with respect to goods and services. The Commission also seeks comment on the effect of this provision upon funeral providers, and upon competition among them." The ICFA anticipates efforts by at least one organization to push for the repeal of the non-declinable basic services fee during this review proceeding. For example, an industry critic has been quoted as claiming that the fee is the price a consumer has to pay to hear a sales pitch, suggesting a serious misunderstanding of the nature and purpose of the fee. In fact, the basic services fee makes the price itemization of individual funeral goods and services meaningful, promotes competition among sellers, and facilitates price comparison among consumers. The basic services fee enables a funeral home to impose one flat charge for furnishing general services provided by the funeral director and staff that are common to most funerals, but are not among the 16 items otherwise contained in the General Price List. These general services may include, but are not necessarily limited to, arranging and planning the funeral, coordinating arrangements with the cemetery or crematory, obtaining permits and death certificates, and placing obituary notices. Alternatively, if the funeral home charged a separate fee for each and every one of these items, it could unnecessarily complicate the consumer transaction and make comparison shopping more difficult. The FTC has permitted the basic services fee as means of recovering that portion of a funeral home's operating expenses that are not directly related to individual goods or services. Prior to the advent of the Funeral Rule in 1984, this distinction made little practical difference because consumers tended to purchase all funeral goods and funeral services from the funeral home, especially at-need, and prearrangements were rarely marketed by funeral homes.(45) Thus, whether operating expenses were apportioned among various items or charged as a separate fee made little difference to the bottom line. With the reported increase in alternate sources for funeral goods, especially caskets, other than funeral homes, and with the increase in cremation rates and direct dispositions, many of the items sold by funeral homes must be priced as "stand alone" merchandise to effectively compete with the prices charged by other sellers. The basic services fee allows funeral homes to segregate general overhead and operating expenses from the overhead directly associated with individual goods and services to enable consumers to accurately comparison shop. The ICFA welcomes the opportunity to examine data submitted to the FTC by proponents of repealing the basic services fee. We believe that the principles of cost accounting support the allocation of these expenses as a fee separate from the pricing of individual funeral goods or services, and we concur with the Commission's historic approach in allowing the non-declinable fee to be assessed. Without the ability to charge this fee, the ICFA believes that funeral homes will be forced into a competitively disadvantaged position whereby the prices of their funeral goods and services will be overstated to account for a proportionate amount of other operating expense that is unrelated to the item offered for sale. Memorial Sales and Installation Practices Although not listed among the issues in the FTC Request for Public Comments, the ICFA understands that at least one organization will urge the FTC to amend the Funeral Rule to include cemetery sales and installation practices on markers, memorials and monuments. This issue was examined during the previous Funeral Rule review proceedings and the record at that time contained various allegations of cemetery misconduct such as charging excessive fees when a third party, such as a monument retailer, installed a memorial in the cemetery. However, the FTC staff concluded "that the record evidence fails to show that these practices are widespread, or that current industry guidelines and federal court decisions prohibiting most of the alleged practices do not sufficiently address any remaining problems."(46) The President Officer of the Funeral Rule review expressed concern regarding potential harm from certain practices but concluded that "this does not mean that the Rule should be extended to encompass cemeteries" and he found the "reasons advanced by the Commission staff for not (recommending extension of the Rule to cemetery memorial practices) are persuasive." (Language in parenthesis added).(47) In addition, the issues involved have been addressed by no less than three federal circuit court decisions.(48) The most recent decision in this trilogy by the 8th Circuit Court of Appeals in Baxley DeLamar Monuments, Inc. v. American Cemetery Association, et al., 938 F.2d 846 (1991), held that each cemetery's memorial practices must be judged on a case-by-case basis taking into account the cemetery's market share and the extent to which its property is unique, if at all, from that of other cemeteries in the area. The Baxley decision strongly suggests that cemetery memorial sales and installation practices do not lend themselves to the broad-brush approach of trade regulation rulemaking. The ICFA has also co-sponsored with the Monument Builders of North America (MBNA) voluntary Recommended Guidelines to avoid disputes between retail monument dealers and cemeteries.(49) The ICFA and MBNA also operate a joint committee to review and mediate complaints between monument retailers and cemeteries. The Joint Committee handles on the average one or two complaints annually. The ICFA welcomes the opportunity to examine and comment upon data received by the FTC during the current proceeding regarding cemetery memorial sales and installation practices. Notification of Interest in Public Workshop Conference The International Cemetery and Funeral Association hereby confirms its notification to the Federal Trade Commission, made under a separate cover, of its interest in being selected as a participant in the planned Public Workshop Conference for an open discussion of the issues involved in this rulemaking review. Conclusion For the reasons discussed above, the Funeral Rule is presumptively valid in its current form. In the absence of widespread Rule-related abuses by other sellers, the ICFA strongly advocates no amendments to the Funeral Rule. Due to the local nature of funeral-related consumer transactions, regulation and enforcement efforts are more effectively handled at the state level. There already exists an extensive statutory framework regulating the allied industries and a combination of continuing oversight, model guidelines, and cooperation through industry self-regulation, address any outstanding concerns. Respectfully submitted, Irwin W. Shipper, CCE ICFA Exhibits (Note: On this electronic version, the exhibits and appendices have been omitted due to the fact that most of the documents exist only in a hard copy format. An original and five copies of the exhibits and appendices have been filed with the Federal Trade Commission.) Endnotes: 1. Peter C. Ward, Federal Trade Commission: Law, Practice and Procedure. New York: Law Journal Seminars-Press (1999) Chap. 13, page 20. 2. FTC Bureau of Consumer Protection Staff Report, April 1988, R-B-1 at 20-21. (Attached as Exhibit No. 1) 3. Memorandum from the FTC Division of Special Projects, Bureau of Consumer Protection to the Commission, dated August 20, 1975, at pages 9-10. (Attached as Exhibit No. 2) 4. Memorandum from FTC Staff Attorneys Funeral Rule Project to the Commission, dated November 28, 1980, at pages 3-4. (Attached as Exhibit No. 3) 5. Memorandum from FTC Attorneys, Division of Professional Services to the Commission, dated June 26, 1981, at page 12. (Attached as Exhibit No. 4) 6. FTC Staff Report, April 1988, at pages 128-129, citing Section 19(c)(1)(A) of the 1980 Federal Trade Commission Improvements Act, 57 U.S.C. 57a. (Attached as Exhibit No. 5) 7. Final FTC Staff Recommendations, May 28, 1991, at pages 16-17. (Attached as Exhibit No. 6) 8. Id. At 17. 9. Cemetery Consumer Service Council Activity Survey Results and Press Release for the years 1990 through 1997. (Attached as Exhibit No. 7). 10. FTC Staff report, dated May 28, 1991, at page 17.(See Exh. 6) 11. FTC Staff letter to ICFA General Counsel, dated May 3, 1999. (Attached as Exh No. 8) 12. FTC News Release, "Now Consumers Can Tell It To The FTC - Toll-Free," dated July 7, 1999. (Attached as Exh. No. 9) 13. Funeral Related Options and Costs, A Guide for Families. The Funeral Information Project, Center on Aging, University of Kansas Medical Center. Kansas City, 1996, at page 11. (Attached as Exhibit No. 10) 14. American Attitudes and Values Affected by Death and Death Care Services, prepared by The Wirthlin Group, McLean, VA, 1990. (Attached as Appendix A) 15. 1995 Study of American Attitudes Toward Ritualization and Memorialization, prepared by The Wirthlin Group, McLean, VA, 1995. (Attached as Appendix B) 16. Preplanning for Funeral and Cemetery Needs, prepared by Walker Information, Indiapolis, 1997. (Attached as Appendix C) 17. Final FTC Staff Report, Bureau of Consumer Protection, June 1990, at 109. (Attached as Exhibit No. 11) 18. Id. at 2. 19. Ronald G.E. Smith, The Death Care Industries in the United States, McFarland & Co., 1996, at page 332. 20. Id. at pages 166-167. 21. The FTC Act, 15 U.S.C. §§ 44, 45(a)(2). 22. U.S. Department of the Treasury, Internal Revenue Service, Market Segment Specialization Program, Mortuaries, at 7-4. (Attached as Exhibit 12) 23. ICFA Survey of State Cemetery and Mortuary Laws and Regulations. (Attached as Exhibit No. 13) 24. Report of the Presiding Officer, July 1990, at 143. (Attached as Exhibit No. 14) 25. ICFA Code of Ethics, No. 4 (Attached as Exhibit No. 15) 26. FTC Staff Letter to ICFA General Counsel, dated May 3, 1999.(See Exh. No. 8) 27. Cemetery Consumer Service Council Activity Surveys and Press Releases for the years 1990 through 1997. (See Exh. No. 7) 28. American Attitudes and Values Affected by Death and Death Care Services, prepared by The Wirthlin Group, McLean, VA, 1990. (See Appendix A) 29. 1995 Study of American Attitudes Toward Ritualization and Memorialization, prepared by The Wirthlin Group, McLean, Va, 1995. (See Appendix B) 30. Preplanning for Funeral and Cemetery Needs, prepared by Walker Information, Indianpolis, 1997. (See Appendix C) 31. 16 C.F.R. § 310 32. Direct Marketing Association White Paper on Telemarketing Issues, dated June 1999, at pages 51-88. (Attached as Exhibit No. 16) 33. 15 U.S.C. §§ 41-58 34. 16 C.F.R. § 429 35. 16 C.F.R. Part 238. 36. 16 C.F.R. Part 237 37. 15 U.S.C. § 1692 38. 16 C.F.R. Part 251 39. 16 C.F.R. Part 239 40. 16 C.F.R. Part 233 41. ICFA Survey of State Cemetery and Mortuary Laws and Regulations. (See Exh. No.13) 42. ICFA Survey of State Cemetery and Mortuary Laws and Regulations. (See Exh. No. 13) 43. ICFA Model Guidelines for State Laws and Regulations with attached economic study, consumer survey and 21 guidelines is attached as Appendix D. 44. ICFA Code of Ethics, No. 4. (See Exh. No. 15) 45. Ronald G.E. Smith, The Death Care Industries in the United States, McFarland & Co., Inc., 1996, at pages 214, 332. 46. Final FTC Staff Recommendations, dated May 28, 1991, at page 17. (See Exh. No.6) 47. Report of the Presiding Officer, dated July 1990, at pages 142-143. (See Exh. No. 14) 48. The first two decisions are Moore v. Jas. H. Matthews & Co., 550 F.2d 1207 (9th Cir. 1977) and Rosebrough Monument Co. v. Memorial Park Assn., 666 F.2d 1130 (8th Cir.), cert. denied, 457 U.S. 1111 (1982), later appeal, 736 F.2d 441 (8th Cir.), cert. denied, 469 U.S. 981 (1984). 49. International Cemetery and Funeral Association - Monument Builders of North America Recommended Installation Guidelines, published 1986, revised 1998. (Attached as Exh. No. 17) |