Request for Comments Concerning Trade Regulation Rule on Funeral Industry Practices

SUMMARY: The Federal Trade Commission (the ``Commission'') is

requesting public comments on its Trade Regulation Rule on Funeral

Industry Practices (``the Funeral Rule'' or ``the Rule''). The

Commission requests comments about the overall costs and benefits of

the Rule and its overall regulatory and economic impact as a part of

its systematic review of all current Commission regulations and guides.

Also requested are comments on whether the Rule should be modified to

broaden its scope to include non-traditional providers of funeral goods

or services; revise or clarify the prohibition on casket handling fees;

or prohibit non-declinable funeral fees. All interested persons are

hereby given notice of the opportunity to submit written data, views

and arguments concerning the Rule.

DATES: Written comments will be accepted until July 12, 1999.

ADDRESSES: Written comments should be identified as ``16 CFR Part 453''

and submitted to: Secretary, Federal Trade Commission, Room H-159, 600

Pennsylvania Ave., NW, Washington, DC 20580. The Commission requests

that commenters submit the original plus five copies, if feasible. To

enable prompt review and public access, all written comments should

also be submitted, if possible, in electronic form. To submit in

electronic form, provide the comment on either a 5\1/4\'' or a 3\1/2\''

computer disk. The disk should be labeled with the commenter's name and

the name and version of the word processing program used to create the

document. (Programs based on DOS or Windows are preferred. Files from

other operating systems should be submitted in ASCII text format).

Alternatively, the Commission will also accept comments submitted to

the following E-Mail address: ``[email protected]'' Individual members

of the public who will be filing comments need not submit multiple

copies and need not submit their comments in electronic form.

All comments will be placed on the public record and will be

available for public inspection in accordance with the Freedom of

Information Act, 5 U.S.C. 552, and the Commission's Rules of Practice,

16 CFR 4.11, during normal business days from 8:30 a.m. to 5 p.m., at

the Public Reference Room, Room 130, Federal Trade Commission, 6th

Street and Pennsylvania Avenue, NW Washington, DC 20580. In addition,

comments will be posted on the Internet at the FTC's web site:

``www.ftc.gov''.

Notification of interest in the Public Workshop-Conference should

be submitted in writing to Mercedes Kelley, Division of Marketing

Practices, Federal Trade Commission, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Myra Howard, (202) 326-2047, or

Mercedes Kelley, (202) 326-3665, Division of Marketing Practices,

Bureau of Consumer Protection, Federal Trade Commission, Washington, DC

20580.

SUPPLEMENTARY INFORMATION: The current request for comments on the

Funeral Rule is part of the Commission's regulatory review program

which has been implemented to review Rules and guides periodically. The

regulatory review program seeks information about the costs and

benefits of the Commission's Rules and guides and their regulatory and

economic impact. The information obtained will assist the Commission in

identifying Rules and guides that warrant modification or rescission.

A. Background

The Commission adopted the Trade Regulation Rule entitled Funeral

Industry Practices (the ``Funeral Rule'') on September 24, 1982. It

became fully effective on April 30, 1984.1 The essential

purposes of the Funeral Rule were to ensure that consumers receive

information necessary to make informed purchasing decisions, and to

lower existing barriers to price competition in the market for funeral

goods and services.2 Subsequently, the Funeral Rule was

amended as a result of a regulatory review and amendment proceeding

that began on December 9, 1987.3 The Commission published

the amended Funeral Rule on January 11, 1994.4 The

amendments to the Rule took effect July 19, 1994.

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\1\ The Rule had two effective dates. The portions of the Rule

that prohibit certain oral or written representations became

effective on January 1, 1984. 48 FR 45537. The remainder of the Rule

(the portions imposing affirmative obligations on funeral providers)

became effective on April 30, 1984.

\2\ 47 FR 42260.

\3\ 52 FR 46706.

\4\ 59 FR 1592.

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The Rule, as it stands today, specifies that it is an unfair or

deceptive act or practice for a funeral provider to: (1) Fail to

furnish consumers with accurate price information disclosing the costs

of each funeral good or service used in connection with the disposition

of dead bodies; (2) require consumers to purchase a casket for direct

cremations; (3) condition the provision of any funeral good or service

upon the purchase of any other funeral good or service; or (4) embalm

the deceased for a fee without authorization. The Rule also specifies

that it is a deceptive act or practice for funeral providers to

misrepresent the legal or local cemetery requirements for: (1)

Embalming; (2) caskets in direct cremations; (3) outer burial

containers; or (4) any other funeral good or service, and to

misrepresent that cash advance purchases are the same as the cost to

the funeral provider when such is not the case. The Rule sets forth

preventive requirements in the form of price and information

disclosures to ensure funeral providers avoid engaging in the unfair or

deceptive acts or practices described above.

B. Issues for Comment

This review is part of a regularly scheduled review which generally

seeks information about the costs and benefits of the Commission's

rules and guides and their regulatory and economic impact. The

information obtained will assist the Commission in identifying aspects

of the Funeral Rule that warrant modification or rescission.

Accordingly, the Commission is generally soliciting comments on, among

other things, the economic impact of and the continuing need for the

Funeral Rule; possible conflict between the Rule and state, local, or

other federal laws; and the effect on the Rule of any technological,

economic or other industry changes.

There are a number of other material issues on which the Commission

is also seeking comment. The Commission recognizes that change is

occurring in the funeral industry at a rapid pace and that several

issues have arisen since the Rule was amended in 1994 which may warrant

additional modification or rescission of the Funeral Rule.

First, the Funeral and Memorial Societies of America (``FAMSA''),

has requested that the Commission consider making a number of

amendments and additions to the Rule. Among these are: (1) The

elimination of any non-declinable fee; (2) the addition of four items

to the required itemization on the General Price List--namely, the

price for private viewing without embalming, the price for body

donation to a medical school, the price for the cremation process

itself,\5\ and the price for rental

[[Page 24251]]

caskets; (3) a requirement that the cost of the cremation process be

included in the charge for an immediate or ``direct'' cremation; (4) a

requirement that any mark-up on cash advance items be disclosed with

the actual amount to be charged; and (5) that the scope of the Rule be

expanded to bring cemeteries, monument dealers, and casket sellers

within coverage of the Rule.\6\

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\5\ Despite the fact that Sec. 453.1(g) of the Rule defines

``direct cremation'' as ``a disposition of human remains by

cremation (i.e., `a heating process which incinerates human

remains,' Sec. 453.1(e)), without formal viewing, visitation, or

ceremony with the body present,'' FAMSA suggests that some funeral

providers may charge a fee for the actual cremation of a body that

may not be reflected on the General Price List item price for a

``direct cremation'' under Sec. 453.2(b)(4)(ii)(C).

\6\ September 24, 1997 FAMSA letter.

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Second, members of Congress, industry representatives, and members

of the general public have expressed concerns about the changing nature

of the industry and the competition between traditional providers of

funeral services and the non-traditional providers.

1. The Definition of ``Funeral Provider''

The Funeral Rule applies only to ``funeral providers.'' \7\ The

Rule defines a funeral provider as ``any person, partnership or

corporation that sells or offers to sell funeral goods and funeral

services to the public.'' \8\ Accordingly, persons that sell or offer

to sell only funeral goods or only funeral services are not considered

``funeral providers.'' In other words, the non-traditional members of

the funeral industry, such as cemeteries and casket retailers, do not

meet the definition of ``funeral provider'' and are thus not subject to

the Rule's provisions. The Commission considered expanding the

definition of funeral provider in the mandatory review that culminated

in the 1994 amended Rule. At that time, the non-traditional sellers had

only just begun to enter the market for funeral goods and services.

Accordingly, the Commission determined not to expand coverage to other

segments of the funeral industry at that time. Since then the

Commission has stayed abreast of the increased entry of non-traditional

entities into the sale of both funeral goods and services. As

competition has been increasing in the sale of caskets and other

funeral goods and services, the Commission believes that it is time to

reconsider whether it would be in the public interest to expand the

coverage of the Funeral Rule to include non-traditional providers of

funeral goods and services. Therefore, the Commission solicits comments

on whether it is now desirable to revise the Rule's definition of

``funeral provider.''

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\7\ 16 CFR 453.1(i).

\8\ Id. (Emphasis added). 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.'' 16 CFR 453.(1)(h)&(j).

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2. Casket Handling Fees Clarification

Section 453.4(b)(2)(i)(A) of the Rule mandates a specifically-

worded disclosure informing the consumer that ``(y)ou may choose only

the items you desire.'' The general purpose of this provision is to

make it possible for consumers to freely select funeral goods and

services. In other words, consumers should pay for only those goods and

services they select. Funeral providers are required to ``unbundle''

their offerings and allow for selection of individual funeral goods and

services.

When the Rule was amended in 1994, Sec. 453(b)(2)(i)(A) was

augmented by the addition of Sec. 453.4(b)(1)(ii), which specifies that

it is an unfair or deceptive practice for funeral providers to:

Charge any fee as a condition to furnishing any funeral goods or

funeral services to a person arranging a funeral, other than the

fees for: (1) Services of funeral director and staff, permitted by

Sec. 453.2(b)(4)(iii)(C); (2) other funeral services and funeral

goods selected by the purchaser; and (3) other funeral goods or

services required to be purchased, as explained on the itemized

statement in accordance with Sec. 453.3(d)(2).

Therefore, funeral providers are prohibited from charging any fee that

is not for the services of the funeral director, or the items selected

by the consumer. Placing such a limitation on permissible fees was

specifically intended, in part, to prohibit a funeral provider from

charging consumers a fee for using a casket purchased from some source

other than that funeral provider. The Commission, in amending the Rule,

determined that ``substantial `casket handling fees' are imposed on

consumers by a significant proportion of providers wherever third-party

casket sellers exist, and, as a result, frustrate the Rule's

`unbundling' requirements and result in the reduction of potential

competition.'' 9 The Commission found that some providers

implemented casket handling fees ``because of their competitive

reluctance to shift overhead costs and profit from the casket mark-up

to professional services fees,'' while other providers used handling

fees as a ``direct response to third'party competition.'' 10

The Commission determined that ``the Rule should require providers to

recoup costs and profits lost to third-party casket sales in ways that

do not violate the intent of the Rule's `unbundling' provision.''

11

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\9\ 59 FR at 1604.

\10\ Id.

\11\ Id.

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Since the amendment of the Rule, the Commission is aware that some

funeral providers may employ certain practices that may undermine the

benefit to consumers and to competition intended by the Rule's

unbundling provisions. Although the Rule limits permissible fees, it

does not regulate the prices that funeral providers may charge, nor

does it prohibit the offering of funeral packages.12 Neither

the Commission nor staff hitherto has interpreted the Rule to prohibit

the offering of such packages at a discount--that is, offering

combinations of funeral goods and services which, if purchased

together, are offered at a lower price in aggregate than if the

consumer was to purchase each good and service individually. Even

though the Third Circuit has noted that the Commission, in drafting its

casket handling fee prohibition, drew a distinction between a direct

``fee'' and a ``discount,'' 13 as a practical matter, the

distinction between a ``fee'' as it is used by the Rule, and a

``discount'', as offered by funeral providers, may be blurred. For

example, the prices of itemized goods and services (appearing on the

General Price List) may in some instances be inflated to the point of

fictitiousness. Thus, virtually all consumers would choose to purchase

``discount packages,'' resulting in a situation where the discount

package represents the de facto prices for the goods and services. Such

a scenario may restrict consumer choice in a manner that frustrates the

intended purpose of the Rule. Further, some members of the funeral

industry have alleged that because such ``discount packages'' are often

conditioned on the purchase of a casket, these packages are

artificially constructed by certain funeral providers in order to

eliminate competition in casket sales.

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\12\ ``You [the funeral provider] may still offer funeral

packages, as long as they are offered in addition to, not in place

of, itemized prices.'' Complying with the Funeral Rule, a Business

Guide Produced by the Federal Trade Commission (``Compliance

Guide'') at p. 24.

\13\ Pennsylvania Funeral Dirs. Ass'n., Inc. v. FTC, 41 F.3d 81,

90 (3rd Cir. 1994) (noting that ``the FTC distinguishes direct

handling fees from offering discounts to people who buy caskets from

the funeral home'').

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As a result of the differing views that have emerged in the funeral

industry with respect to the reach of the casket handling fee

prohibition and its effect on certain types of discount packaging, the

Commission is concerned about the effectiveness of the casket handling

fee prohibition. Even at the time of the 1994

[[Page 24252]]

Funeral Rule amendment, the Commission staff report reflected a level

of uncertainty regarding funeral packages as they relate to the casket

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handling fee prohibition when it stated:

Of course, enforcement issues might arise if, as a result of

those package prices, consumers' choices were being restricted or

additional fees above the itemized cost of caskets or services were

being assessed.14

\14\ Final Staff Report, at 39 n. 76.

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Accordingly, the Commission specifically seeks comments on the

casket handling fee prohibition, its effectiveness, and the impact it

has had on consumers and funeral providers.

3. Non-declinable Fees Currently Allowed Under

Sec. 453.2(b)(4)(iii)(C)(1) or (C)(2)

As noted above, the only fee that funeral providers can require

consumers to pay under the Funeral Rule is the fee for ``basic

services.'' The ``basic services fee'' is defined as the charge for the

services of the funeral director and staff.15 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. Revision of the ``General Price List''

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\15\ 16 CFR 453,1(p). The Compliance Guide, at 15, explains,

``this basic services fee should include services that are common to

virtually all forms of disposition or arrangements (offered), such

as conducting the arrangements and coordinating the arrangements

with the cemetery, crematory, or other third parties. The basic

services fee should not include charges related to other items that

must be separately listed on the General Price List and that the

customer may decline to purchase.''

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4. Revision of the ``General Price List''

The Commission also seeks comments on revisions, additions or

deletions that should be made to the required disclosures for the

``General Price List'' (as described in Sec. 453.2(b)(4)), including

those advanced by FAMSA, as described above.

C. Request for Comment

The Commission is interested in receiving data, surveys and other

empirical evidence to support comments submitted in response to this

Notice. Without limiting the scope of issues it is seeking comment on,

the Commission is particularly interested in receiving comments and

supporting data on the following questions:

(1) Is there a continuing need for the Funeral Rule?

(a) What benefits, if any, has the Rule provided to purchasers of

funeral goods and services?

(b) Has the Rule imposed costs on purchasers?

(2) What changes, if any, should be made to the Rule to increase

the benefits of the Rule to purchasers?

(a) How would these changes affect the costs the Rule imposes on

the funeral providers subject to its requirements?

(3) What significant burdens or costs, if any, including costs of

compliance, has the Rule imposed on funeral providers subject to its

requirements?

(a) Has the Rule provided benefits to such funeral providers?

(4) What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on funeral providers subject to its

requirements?

(a) How would these changes affect the benefits provided by the

Rule?

(5) Does the Rule overlap or conflict with other federal, state, or

local laws or regulations?

(6) Since the Rule was issued, what effects, if any, have changes

in relevant technology or economic conditions had on the Rule?

(7) What significant burdens or costs, if any, including costs of

compliance, has the Rule imposed on small funeral providers subject to

its requirements?

(a) How do these burdens or costs differ from those imposed on

larger funeral providers subject to the Rule's requirements?

(8) To what extent are the burdens or costs that the Rule imposes

on small funeral providers similar to those that small funeral

providers would incur under standard and prudent business practices?

(9) What changes, if any, should be made to the Rule to reduce the

burdens or costs imposed on small funeral providers?

(a) How would these changes affect the benefits of the Rule?

(b) Would such changes adversely affect the competitive position of

larger funeral providers?

(10) How, if at all, has the Rule affected the relative number of

consumers who contact more than one funeral home before deciding which

one to use?

(11) How, if at all, has the Rule benefitted consumers by:

(a) Alerting consumers to the importance of price information and

ensuring that they obtain such information at the critical point of

choosing a provider?

(b) Providing information about different purchase options?

(c) Protecting consumers from injurious misrepresentations?

(d) Requiring authorization prior to embalming?

(e) Prohibiting providers from conditioning the purchase of a

wanted item on the purchase of an unwanted item?

(12) How have prices changed (in total and for specific funeral

goods and services) since the Rule was amended in 1994? To what extent,

if at all, are these changes attributable to the Rule?

(13) Have the relative prevalence of: (a) Ground burials; (b)

cremations; (c) above-ground entombment; or (d) other dispositions,

increased or decreased since the Rule was amended in 1994? To what

extent, if at all, has the Rule influenced these changes?

(14) How, if at all, since the Rule was amended in 1994, have the

following factors changed?

(a) The number, size, and type of providers of funeral goods and

services in the industry?

(b) The ability of new providers, both traditional and non-

traditional, to enter the industry?

(c) What types of non-traditional entrants have appeared in the

industry, and how are they different from traditional providers?

(d) Mergers and other types of consolidation in the funeral

industry?

(e) Profits of funeral industry members?

(15) How, if at all, has the Rule affected the cremation industry?

Should the Rule be amended to include within its scope unfair and

deceptive practices by crematories, if any?

(16) To what extent are providers of funeral goods and services

complying with the Rule overall, and with each of its component

requirements?

(17) What difficulties, if any, are providers of funeral goods and

services experiencing in complying with the Rule?

(18) How has the National Funeral Directors Association's Funeral

Rule Offenders Program (``FROP'') affected compliance with the Rule, if

at all?

(19) Do consumers who receive itemized price information at the

inception of the arrangements conference tend to spend less on funerals

than those who receive such information later?

(20) Do consumers who make pre-need arrangements spend less on

funerals than those who do not? If so, why? Does receiving price

information at the inception of a pre-need arrangements conference

contribute to decreased spending? Does it encourage or facilitate

comparison shopping?

(21) Should the requirement that itemized price lists be given to

[[Page 24253]]

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?

(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 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?

(23) Should non-traditional providers of funeral goods and services

be subject to only certain provisions of the Funeral Rule?

(a) If so, to which provisions should they be subject?

(24) Does the prohibition on more than one non-declinable fee

reduce barriers to competition and increase consumer choice?

(a) Has this prohibition been effective to ensure that consumers

can choose and pay for only the individual goods and services that they

desire?

(b) Has this prohibition been effective to protect consumers' right

to decline unwanted goods and services?

(c) What are the benefits conferred upon consumers or competition

by this prohibition?

(d) What costs or other burdens has this provision imposed upon

providers of funeral goods and services?

(25) What new fees, prices, goods or services have emerged in the

sale of funeral goods and services, since the Rule was amended in 1994?

(26) Have the 1994 amendments been effective in prohibiting casket

handling fees? If so, what benefits or costs have resulted from these

amendments?

(27) How widespread is it for funeral providers to offer

substantial discounts on funeral packages that include a casket from

the funeral home?

(a) To what extent does such discounting tend to restrict

consumers' choices?

(28) Should the requirement for a General Price List be modified?

If so, how?

(a) Are there any new fees, prices, goods or services which should

be added to the General Price List requirements?

1. Should the Rule require that the price of private viewing

without embalming be included on the General Price List?

2. Should the Rule require that the price of donating a body to a

medical school be included on the General Price List?

3. Are the Rule's requirements (Sec. 453.2(b)(4)(ii)(C)) to

disclose on the General Price List the price for direct cremation

effective to prevent deception regarding the amount a consumer will pay

to have a funeral provider dispose of a body by cremation? Should the

Rule also include an express requirement that the disclosed price of

``direct cremation'' include the actual price to have a body cremated?

4. Should the Rule require that the price of renting a casket in

connection with a cremation be included on the General Price List?

(b) Are there any fees, prices or services which should be deleted

from the General Price List?

(c) Are there any other revisions that should be made to the

current provisions in the General Price List?

(d) For any change made in response to this question, what, if any,

would be the costs and benefits to consumers and to funeral providers?

(29) The Rule applies to both pre-need and at-need funeral

arrangements. Should pre-need and at-need consumers be treated

differently? If so, why?

(c) Can a funeral provider readily distinguish between a pre-need

and an at-need customer or will this complicate compliance with the

Rule?

(30) Are there widespread unfair or deceptive practices occurring

with respect to the pre-arrangement of 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?

D. Invitation to Comment

In reviewing the Funeral Rule, Commission staff will consider all

comments submitted by July 12, 1999. Comments submitted will be

available for public inspection in accordance with the Freedom of

Information Act (5 U.S.C. 552) and Commission regulations, on normal

business days between the hours of 8:30 a.m. and 5 p.m. at the Public

Reference Section, Room 130, Federal Trade Commission, 600 Pennsylvania

Avenue, NW, Washington, DC 20580. In addition, comments will be placed

on the Internet at the FTC's web site: http://www.ftc.gov>.

E. Public Workshop Conference

Commission staff will conduct a Public Workshop Conference to

discuss written comments received in response to this Request for

Comments. The purpose of this conference is to afford Commission staff

and interested parties a further opportunity to openly discuss and

explore issues raised during the Rule Review, and, in particular, to

examine publicly any areas of significant controversy or divergent

opinions that are raised in the written comments. Commission staff will

consider the views and suggestions made during the conference, in

conjunction with the written comments, in formulating its final

recommendation to the Commission concerning the review of the Funeral

Rule.

Commission staff will select a limited number of parties, from

among those who submit written comments and express an interest in

participating in the workshop conference, to represent the significant

interests affected by the Rule Review. These parties will participate

in an open discussion of the issues. It is contemplated that the

selected parties might ask and answer questions based on their

respective comments. In addition, the conference will be open to the

general public. Members of the general public who attend the conference

may have an opportunity to make a brief oral statement presenting their

views on issues raised in the Rule Review. Oral statements of views by

members of the general public will be limited to a few minutes in

length. The time allotted for these statements will be determined on

the basis of the time allotted for discussion of the issues by the

selected parties, as well as by the number of persons who wish to make

statements.

Written submissions of views, or any other written or visual

materials, will not be accepted during the conference. The discussion

will be transcribed and the transcription placed on the public record.

The conference will be held in the fall. A forthcoming announcement

will provide the exact date(s) and location. Parties interested in

participating must notify the Commission staff by July 12, 1999.

List of Subjects in 16 CFR Part 453

Funerals, Trade practices.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-11260 Filed 5-4-99; 8:45 am]

BILLING CODE 6750-01-P