Funeral Industry Anticompetitive

May 15, 2013

Morbid though it may be, there are special interests in the funeral industry that attempt to distort the free market. When monks in Louisiana started selling coffins for half the state average, a state cartel of funeral home owners, acting under the auspices of the Louisiana State Board of Embalmers and Funeral Directors, blocked the monks from selling their coffins by enforcing onerous regulations. Similar legislation or regulations exist in many states, creating a nationwide system of overpriced funerals and caskets, says Eric Boem, a reporter for the Franklin Center for Government and Public Integrity.

In order to continue selling their caskets, the Louisiana monks would have had to build a funeral parlor with room for 30 people, a display room for at least six caskets, an arrangement room and an embalming room, as well as hire a funeral director and pay a full-time salary.

  • After a failed petition to the state legislature, the monks sued in court and a panel of federal judges upheld a lower court's ruling in favor of monks saying that it was because of funeral homes that consumers were overpaying for funerals.
  • In almost every single state, regulations exist that are designed to protect funeral homes from open competition and lower prices.

Because there are no repeat customers in the funeral industry and no shortage of customers, there are few competitive forces that would drive prices down. Despite the high costs of a funeral, most grieving consumers do not comparison shop when it comes time to choose their funeral home.

  • Additionally, many funeral homes go overboard with Mercedes hearses, $5,000 caskets and enormous Victorian homes.
  • Slowly, a few entrepreneurs are attempting to pry open the funeral industry by offering more affordable funeral services.

One new funeral home in Minnesota caters no-frills funerals to those of modest means. The affordable funeral model has been so successful that the entrepreneur wants to expand, but he faces similar parlor and embalming room requirements that must be overcome.

  • Slowly, the funeral home industry's stranglehold on the burial market is weakening as courts are ruling that the various requirements dictated by unelected panels of licensed funeral directors are anticompetitive.
  • While regulations have been struck down in Pennsylvania, Louisiana and Minnesota, many more still exist that keep funeral prices sky high.

Source: Eric Boem, "Grave Robbers: Anti-Competitive Regulations for the Dead," Foundation for Economic Education, May 7, 2013.

 

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