In the latest development in the various governmental reviews of the funeral sector, the Competition and Markets Authority (CMA) has announced that it is proposing to refer the funerals market to an independent CMA panel for a full-scale market investigation.
This follows a six month market study by the CMA (on which we blogged here) into the "at need" funerals market. The CMA has not been looking at pre-paid funerals, which are the subject of a separate inquiry by the Treasury.
What are the CMA's concerns?
The CMA's market study has now found that the market for at-need funerals is not functioning properly, and that this has led to more than 10 years of above-inflation price increases for funeral director services and cremation services, which is not justified by cost increases or improvements to the quality of the service being provided. Crematorium fees have increased by an average of 84% over the last ten years, more than three times the rate of inflation.
In particular the CMA drew attention to large price differentials in local markets which indicated that customers were not shopping around, which it attributed in part to the distressed (and therefore vulnerable) position that customers for funerals are in. A lack of online pricing information and a lack of standardisation and transparency in what is or is not included in a funeral "package" were also highlighted.
The CMA's market study noted that the industry's financial projections assume continuing above-inflation increases in costs in the future, in order to meet expectations for profits and shareholder dividends.
The CMA's interim report, which covers these and other issues in more detail, is available here.
What remedies could the CMA impose?
If the CMA panel concludes that any market features are having an adverse effect on competition, it can issue legally binding orders to remedy the situation. Some remedies the CMA has suggested it is considering include:
- Requiring funeral directors to make their price lists available online, to a standardised format;
- Requiring hospitals, hospices, care homes and registrars to provide bereaved families with information on local funeral directors (including a price list to a standardised format);
- Recommending that the government introduce licensing of funeral directors and/or a statutory code of practice;
- Recommending the creation of a funerals regulator, with the power to inspect premises and revoke licences;
- Imposing price controls; and/or
- Requiring divestment where two or more crematoria in a given area are owned by the same operator (the CMA does not foresee that any divestment of funeral director businesses will be necessary).
The CMA is inviting the public, customers and those involved in the industry to submit their views on whether it should proceed to a full market investigation. The deadline for responses to this is 5pm on Friday 4 January. Details on how to respond can be found on the CMA's market study page here.
Other (Scottish) developments promised to be in the offing
As we have noted in previous updates, the Scottish Government has produced a "Funeral Costs Plan", which includes an action point to publish guidance on funeral costs. There was a commitment to publish this guidance by December 2018, and it is possible that it will be informed by the CMA's provisional concerns. We will continue to monitor the position and will produce further updates in due course.
We are happy to support anyone who has been approached by the CMA or would otherwise like to make representations on the proposed market investigation, as well as any business, local authority or other stakeholder that would just like to better understand the process and/or discuss how an investigation could affect them.
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