Australian Funeral Industry Comes Under Fire From ACCC
Australia’s funeral home industry has come under fire from the Australian Competition and Consumer Commission(ACCC), the country’s consumer watchdog organization. In their 2020 report, the ACCC trained its sights on the funeral industry, citing the “potential for unconscionable conduct” in a business that serves customers at a particularly vulnerable time.
According to the ACCC, the industry has been an area of concern for some time, but the agency only recently had the resources to investigate more thoroughly. Chairman Rod Sims said the funeral industry tops their list this year, and that “the sector has long provoked consumer complaints.” In addition to rapidly rising costs that far outstrip inflation, studies have uncovered other unethical practices from bundling late fees with administrative costs to, in a particularly shocking case, faking client deaths to cash out funeral bonds.
Industry under fire for “information asymmetry” and monopoly
Consumers shopping for funeral services are particularly vulnerable to predatory business practices. Grieving and inexperienced with the industry, buyers can easily fall prey to inflated prices, hidden fees, and unnecessary upselling. Because most buyers make these choices at a time when they’re not interested in shopping around, a lack of transparency and accessible price lists can lead to “egregious” lapses in consumer protection.
Some funeral homes insist that they’d rather not post their prices online due to the sensitive nature of their services. Consumer advocates argue that this makes it difficult for families to shop around and compare prices in a time-sensitive situation. A 2017 study from the University of Sydney found that funeral homes that listed their prices online saved their customers anywhere from $1,000-$1,500 on some products. Most big funeral home brands do not post their prices online.
Dominated by just two companies, the Australian funeral industry leaves little room for independent funeral homes and fair market competition. A hugely powerful player, InvoCare controls 40% of the country’s market.
Another issue facing Australian consumers is the significant disparity between regulations in different Australian states. Consumer groups are lobbying for improved nationwide regulations, arguing that consumers unfamiliar with these laws and regulations can be easily taken advantage of.
In the U.K., funeral costs vastly outpace inflation
The Australian investigation comes on the heels of a similar inquiry in the U.K. Last year, the British funeral industry also came under fire in a major investigation by the Competition and Markets Authority(CMA), citing inflated costs and a lack of transparency. With funeral costs rising at rates three times higher than inflation, consumer advocates insist this amounts to “taking advantage of grieving families.” The CMA cited “misleading and deceptive practices; hidden fees; misrepresentations about products; charging fees for no service; unfair contract terms; complex product bundling; misuse of market power; inflated prices; and anti-competitive conduct by blocking new market entrants.”
The U.K. inquiry pointed to two high-cost items. The funeral director’s service fee, often not itemized, can add up to as much as 40% of the total cost. This fee includes transportation, preparation of the body, and other administrative costs. The other high-ticket item, caskets, are marked up by anywhere from 300% to 1000%.
Pre-need plans and funeral insurance, which sometimes amount to little more than low-yield life insurance plans, also fell under the CMA’s scrutiny. An official public consultation opened in 2018 expressed the government’s concern that the self-regulatory framework currently in place doesn’t do enough to protect consumers and asked for public feedback on this issue.
ACCC: Consumers need more choice, more clarity
Because most consumers don’t have any experience with purchasing funeral services and products until the time they need them, consumer groups insist that these unique circumstances call for particularly stringent regulations. Recommendations for future improvements include more consumer choice, clear and accessible information, and transparency in pricing and fee disclosure.
The ACCC, Australia’s leading consumer watchdog organization, promotes competition and fair trade. Their aim is to ensure that businesses and individuals comply with Australian laws, particularly those related to consumer protection and fair trade. The agency promised “targeted action” to improve consumer protections in the funeral industry, making it a key enforcement priority for this year.
Other areas of concern for the ACCC in 2020 include competition in digital platforms, pricing of essential services like energy and telecommunications, and misleading claims on food products.
