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Funeral industry is hit with casket-pricing suit |
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Written by DeadGirl
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Wednesday, 04 May 2005 |
May 04, 2005
By John R. Wilke
Consumer advocates filed suit against three of the biggest funeral-home chains and the leading U.S. casket maker, alleging they conspired to keep prices high and shut out casket discounters such as Costco and the online retailers that have sprung up in recent years.
The lawsuit, filed Monday in federal court in San Francisco, charges that the companies engage in price-fixing and sell caskets for as much as six times their wholesale cost.
High funeral costs have long been a target of consumer complaints, but the lawsuit represents a significant new challenge to the industry. The suit, filed on behalf of a consumer group and six families who say they were overcharged for caskets, seeks to be certified as a class-action, representing millions of casket buyers. If the court grants class-action status, the companies could face huge potential damages for overcharges going back to 2001, under current antitrust law. Casket sales in the U.S. totaled about $3 billion last year.
Funeral costs have been rising in recent years, and now average about $6,000, despite pressure from the growing popularity of less-expensive cremation, industry analysts say. In response to rising prices -- and to federal rules meant to encourage competition -- there are a growing number of discounters such as Internet-based funeraldepot.com, as well as Costco Warehouse Corp., which sells caskets for as little as $950. At funeral homes, coffins typically cost at least twice that, and are the largest single component of funeral costs.
Named in the suit are the top three chains, controlling more than 2,100 funeral homes, including industry leader Service Corporation International; Alderwoods Group Inc., and Stewart Enterprises Inc. The suit also names as a co-conspirator Hillenbrand Industries Inc.'s Batesville Casket Co. unit, which is by far the nation's largest casket maker with nearly half the U.S. market.
The suit also charges that the funeral-home chains flout federal rules intended to protect consumers. The rules permit people to buy caskets from anyone (or even build their own if they wish) while prohibiting funeral directors from charging extra to customers who choose to do so. But the suit alleges that funeral homes discourage such purchases by offering sham discounts for package deals that include caskets, while boosting prices for individual services, such as embalming, if a customer decides to buy a casket elsewhere.
The suit was filed by a law firm, Constantine Cannon, that has taken on big industries before. Last year it won settlements valued at more than $4 billion from Visa International Inc. and MasterCard Inc. for rules that forced the nation's retailers to pay stiff fees for handling branded debit cards.
Bob Biggins, president-elect of the National Funeral Directors Association, rejects the lawsuit's claims of conspiracy and says casket pricing is a minor issue in funeral services. "Whether you are a family-owned firm or a publicly traded corporation, the funeral is not about the casket," he said. "It's about the services and care provided to families in their hour of greatest need."
The association, which represents 22,000 funeral directors across the country, is also named as a co-conspirator in the suit, a claim Mr. Biggins rejects. "The NFDA never gets involved in pricing; it's completely contrary to our mission," he said in an interview Tuesday.
Mr. Biggins, who operates a funeral home in Rockland, Mass., said that funeral directors want consumers to have choices. "At the same time, we have to be responsible business people, and run a profitable business to stay viable in today's economy," he said.
A spokeswoman for Batesville declined to comment Tuesday, saying the company hadn't yet seen the suit. Officials from SCI and Stewart declined to comment. Chaya Cooperberg, a spokeswoman for Alderwoods, said such claims are "without merit."
In the lawsuit, the families claiming to have been overcharged paid from $2,200 to as much as $7,395 for caskets. "For years, funeral homes have conspired to artificially inflate casket prices," said Joshua Slocum, executive director for the lawsuit's lead plaintiff, the Funeral Consumers Alliance, a nonprofit group based in South Burlington, Vt.
While the lawsuit doesn't name a specific figure, it estimates overcharges at "hundreds of millions, if not billions of dollars" since 2001, the statute of limitations under antitrust law. Any damages awarded by the court could then be tripled under the same law, if the suit is successful.
The suit alleges that funeral directors routinely coordinate their pricing and have engaged in an illegal group boycott of manufacturers who deal with discounters. It also claims that Batesville, the casket maker, has agreed to go along even though it is against its interests to turn away alternative distributors. Indeed, the suit quotes one supplier as saying that "distributing through wholesale clubs (such as Costco) would be a violation of the industry's unwritten tradition." The suit also says funeral directors pressed manufacturers, including Batesville, to avoid advertising their prices in order to keep customers in the dark about lower-cost alternatives.
Discount sellers such as Internet retailers and Costco promise fast delivery, directly to funeral homes, once a coffin order is placed. An executive at Costco (which isn't a party to the suit) declined to comment.
The funeral industry's response to discounters underscores the way the business has been transformed in recent years. In many cities, the mom-and-pop, locally owned funeral home is becoming rare; national funeral-service conglomerates such as SCI, Alderwoods and Stewart have bought up thousands of these local businesses. And individual funeral directors have formed powerful trade groups that lobby in Washington and state capitals.
In the years since the Federal Trade Commission imposed rules on the industry, these lobbies have succeeded in getting some state legislatures to limit casket sales to licensed funeral directors. These laws have repeatedly been opposed by the FTC and overturned by the courts in recent years.
In one instance, when striking down a Tennessee statute in 2002, an appeals court used strong language -- saying the statutes "come close to striking us with the force of a five-week-old dead fish," and are "nothing more than an attempt to prevent economic competition." The statutes can lead to casket markups by funeral directors to as much as sevenfold, the court found.
In Mississippi, a federal court invalidated a similar law in 2000, calling caskets "nothing more than a glorified box" requiring no special skills or state license to sell.
The Pitfalls of Pricing a Funeral
Consumers have a number of rights when arranging a funeral.
The Federal Trade Commission enforces a "Funeral Rule" that lays out consumers' rights, which are outlined at www.ftc.gov/bcp/conline/pubs/services/funeral.htm.
Consumers are entitled to see a price list at the beginning of any discussion of arrangements.
It's advisable to pick up price lists from several funeral homes to compare pricing and options.
Ask to see a complete casket price list before viewing caskets. Sometimes, less costly caskets won't be on display for viewing in a funeral home's showroom.
Families have the right to pick and choose the items they want in a funeral from the itemized price lists. It's not required to purchase a preset package
A funeral home isn't permitted to refuse service to a client who prefers to buy a casket from outside the funeral home. Nor can a handling fee be levied.
Source: FTC, consumer-rights advocates
http://www.post-gazette.com/pg/05124/498919.stm
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