[Federal Register Volume 59, Number 7 (Tuesday, January 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-393]


[[Page Unknown]]

[Federal Register: January 11, 1994]


_______________________________________________________________________

Part II





Federal Trade Commission





_______________________________________________________________________



16 CFR Part 453



Funeral Industry Practices; Final Amended Trade Regulation Rule
FEDERAL TRADE COMMISSION

16 CFR Part 453

 

Funeral Industry Practices Trade Regulation Rule

AGENCY: Federal Trade Commission.

ACTION: Final amended trade regulation rule.

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SUMMARY: The Federal Trade Commission issues final amendments to the 
Funeral Industry Practices Trade Regulation Rule (hereafter ``the 
Rule'' or ``the original Rule''), pursuant to the review mandated by 
Sec. 453.10 of the Rule. That provision required that the Commission 
initiate a rulemaking amendment proceeding no later than four years 
after the effective date of the Rule to determine whether the rule 
should be amended or terminated.

EFFECTIVE DATE: The amended Rule will become effective on July 19, 
1994.

ADDRESSES: Requests for copies of the amended Rule and the Statement of 
Basis and Purpose should be sent to Public Reference Branch, room 130, 
Federal Trade Commission, 6th Street and Pennsylvania Avenue, NW., 
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Matthew Daynard, Division of Service 
Industry Practices (202-326-3291), or Carol Jennings (202-326-3010) or 
Sally Forman Pitofsky (202-326-3318), Division of Marketing Practices, 
Bureau of Consumer Protection, Federal Trade Commission, Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: The amended Rule retains the Rule's primary 
itemization, price and other disclosure requirements, without major, 
substantive modification; expressly prohibits non-declinable fees (such 
as so-called ``casket handling fees'' or ``basic facilities fees'') 
charged in addition to the non-declinable fee for basic services of 
funeral director and staff; deletes the affirmative telephone 
disclosure requirement, but retains the obligation to give price and 
other information to consumers who request it over the telephone; and 
contains a series of changes to the original Rule in the nature of 
fine-tuning and technical revisions designed to make the Rule more 
effective and to facilitate compliance.1
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    \1\ In this document, references made to material contained in 
the rulemaking record, and references to particular, oft-cited 
documents in the record, are made in the footnotes using the 
following abbreviations:
    Tr.--The transcript of the public hearings (Vol. I-III).
    HX--Exhibits presented and accepted into the record at the 
hearings.
    R--Materials submitted by the Commission staff or interested 
parties, or placed on the record by the Presiding Officer. 
References to documents in this written (``R'') portion of the 
rulemaking record show the category in which the document was 
placed, the document number, and the internal page number of the 
document on which the cited reference appears. The reference number 
for the rulemaking record itself is 215-66.
    R-B-5--The Commission's official publication of the Rule and the 
SBP, referred to above.
    R-N-1--Bureau of Consumer Protection, Federal Trade Commission, 
Funeral Industry Practices, Mandatory Review (16 CFR Part 453): 
Final Staff Report to the Federal Trade Commission With Proposed 
Amended Trade Regulation Rule, June 1990 (hereafter cited as the 
``Staff Report'' in text, ``SR'' in notes).
    R-O-1--The Presiding Officer's July 1990 Report (``POR'').
    R-A-1--The Commission's Notice of Proposed Rulemaking (``NPR'') 
initiating the review proceeding (53 FR 19864, May 31, 1988).
    R-B-2--Market Facts, Inc., Report on the Survey of Recent 
Funeral Arrangers (1988) (the FTC-sponsored study of 1,004 consumers 
who arranged funerals between Dec. 1986 and June 1987, hereafter 
cited as the ``Replication Study'' in the text, or ``RS'' in notes).
    R-B-3--Office of Impact Evaluation, Bureau of Consumer 
Protection, Federal Trade Commission, Market Facts--Washington, and 
Dr. J. Paul Peter, University of Wisconsin, Baseline and Follow-up 
Studies for Evaluating the Effect of the Federal Trade Commission's 
Funeral Home Industry Trade Regulation Rule: Final Report, July 1982 
(The FTC-sponsored study and follow-up of 1,200 consumers who 
arranged funerals between Nov. 1980 and May 1981, hereafter cited as 
the ``Baseline Study'' in the text, or ``BLS'' in notes).
    HX-122--February 1989, FTC Bureau of Economics staff report 
analyzing expenditure, selection and compliance data from the 1988 
Replication Study (hereafter cited as the ``BE Report'').
    HX-66--1988 study, sponsored by the American Association of 
Retired Persons and conducted by the Gallup Organization, of 675 
consumers who arranged funerals between April 1987 and Oct. 1988 
(hereafter cited as the ``Gallup Study'').
    HX-108--Statement of Rebecca Ayers, National Research, Inc., 
presenting the results of a national study of 500 funeral directors.
    R-B-6--1985 FTC Staff publication assisting funeral providers in 
Rule compliance (hereafter cited as the ``Compliance Guidelines'').
    R-M-9--Proposed Findings of Fact, Conclusions of Law, and 
Recommended Decision jointly submitted by the National Funeral 
Directors Association and the National Selected Morticians.
    R-M-11--Proposed Findings of Fact, Conclusions of Law, and 
Recommended Decision submitted by the American Association of 
Retired Persons.
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STATEMENT OF BASIS AND PURPOSE

I. Introduction

A. Overview of the Original Rule

    The Commission promulgated the original Rule on September 24, 1982, 
making it fully effective on April 30, 1984.2 The Commission's 
decision to promulgate the Rule was appealed, and was subsequently 
affirmed in Harry & Bryant Co. v. FTC.3 The Funeral Rule declares 
it an unfair or deceptive act or practice for funeral providers to: (1) 
fail to furnish price information to funeral consumers; (2) require 
consumers to purchase items they do not desire to buy; and (3) embalm 
deceased human remains for a fee without authorization. The Rule 
further declares it a deceptive practice for funeral providers to 
misrepresent: (1) the necessity for embalming, caskets for cremation, 
and grave vaults or grave liners; (2) legal and cemetery requirements; 
(3) preservation and protection capabilities of funeral goods and 
services; and (4) cash advance charges for items arranged for by the 
funeral provider on the consumer's behalf.
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    \2\ The Rule had two effective dates. Those portions of the Rule 
that prohibit certain oral or written representations became 
effective on January 1, 1984. 48 FR 45537 (Oct. 6, 1983). The 
remainder of the Rule--the portions imposing affirmative obligations 
on funeral providers--became effective on April 30, 1984. Id. The 
effective date of Sec. 453.3(b)(1)(ii) of the Rule was changed from 
January 1, 1984 to April 30, 1984. 49 FR 564 (Jan. 5, 1984).
    \3\ 726 F.2d 993 (4th Cir. 1984), cert. denied, 469 U.S. 820 
(1984). The Court held that the Funeral Rule did not, as alleged, 
exceed the Commission's authority under Secs. 5 and 18 of the FTC 
Act and did not violate funeral directors' First Amendment rights of 
commercial free speech.
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    To prevent those practices and to correct consumers' 
misimpressions, the Rule contains several remedial requirements. The 
Rule requires that funeral providers: (1) Disclose written price 
information by means of a General Price List (``GPL''), Casket Price 
List (``CPL''), and an outer burial container price list (``OBC-PL'') 
to persons who inquire in person about funeral arrangements or the 
prices of funeral goods and services (Secs. 453.2(b)(2)-(4));4 (2) 
Give purchasers a written statement, after they have selected funeral 
goods and services, containing the prices for each of the items 
selected, the total price for the funeral arrangements selected, price 
estimates or actual costs, if known, for cash advance items, and any 
legal, cemetery or crematory requirements that compel the purchase of 
any items or services for the particular funeral (Sec. 453.2(b)(5));
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    \4\ The Rule permits providers to incorporate the information 
from the casket and outer burial container price lists in the 
general price list. This combined list also must be offered to 
persons who inquire in person about funeral arrangements or the 
prices of funeral goods and services.
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    (3) Affirmatively disclose to telephone callers who inquire about 
funeral ``terms, prices or conditions'' that price information is 
available over the telephone (Sec. 453.2(b)(1)(i));
    (4) Disclose specific price information over the telephone to 
persons who call and request it (Sec. 453.2(b)(1)(ii));
    (5) Make truthful representations about legal and other 
requirements that compel the purchase of particular items or services 
(Sec. 453.3));
    (6) Allow consumers to select and purchase only those goods and 
services they desire (rather than offering goods and services only in 
predetermined packages) (Sec. 453.4(b));
    (7) Seek express approval before embalming the deceased for a fee 
(Sec. 453.5));
    (8) Make truthful representations about the preservative and 
protective value of funeral goods and services (Sec. 453.3(e));
    (9) Disclose that they charge a fee for obtaining cash advance 
items, if that is the case (Sec. 453.3(f)); and
    (10) Make unfinished wood boxes or alternative containers available 
for direct cremation, if the provider offers direct cremation 
(Sec. 453.4(a)(2)).
    The Commission in its 1982 Statement of Basis and Purpose stated 
that the essential purpose of the Rule is to lower barriers to price 
competition in the funeral market and facilitate informed consumer 
choice.5 The Rule thus seeks to ensure that consumers have access 
to sufficient information to permit informed purchase decisions, that 
consumers are not required to purchase items they do not want and are 
not required by law to purchase, and that misrepresentations are not 
used to influence consumer purchase decisions.6
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    \5\47 FR 42260 (Sept. 24, 1982), R-B-5 (hereafter cited as 
``SBP'').
    \6\47 FR 42260 (Sept. 24, 1982), R-B-5.
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    The staff on July 9, 1985 issued Final Compliance Guidelines to 
assist providers in their efforts to comply with the Rule.7 
Following an initial period where the Commission sought principally 
through educational efforts to encourage industry compliance, the 
Commission to date has obtained thirty-six consent orders and one 
litigated order in thirty-seven completed federal district court 
actions filed against individual providers regarding various violations 
of the Rule.8
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    \7\R-B-6 (50 FR 28062).
    \8\U.S. v. Troy Suggs Funeral Home, No. CA3-87-1258-G (N.D. 
Tex., May 20, 1987); FTC v. Crane Rhoton Services Corporation, No. 
CA-3-87-1545-T (N.D. Tex., June 13, 1988); U.S. v. Ware Crest, Inc., 
No. CA4-88-437-K (N.D. Tex., July, 11, 1988); U.S. v. Horton Co. 
Morticians, No. 88-1828 (D.D.C., July 11, 1988); U.S. v. Simon 
Funeral Chapel, No. 88-874PA (D. Or., August 3, 1988); U.S. v. 
Manning Funeral Chapel, Inc., No. 88-4085 (D. Idaho, August 26, 
1988); U.S. v. Funeral Corporation Texas, No. CA4-8929 E (N.D. Tex., 
January 11, 1989); FTC v. Niday Funeral Home, Inc., No. H-88-2808 
(S.D. Tex., November 1, 1989); U.S. v. Errington Memorial Chapel, 
No. 89-0640M (D.N.M., August 16, 1989); U.S. v. Turner Funeral Home, 
Inc., No. 89-5217 (E.D. Pa., July 21, 1989); U.S. v. Eddy's Funeral 
Home, No. 89-593 (D. Nev., September 14, 1989); FTC v. Dudley M. 
Hughes Funeral Co., 710 F. Supp. 1524 (N.D. Tex. 1989), appeal 
dismissed, 891 F.2d 589 (5th Cir. 1990); U.S. v. Vail-Holt Funeral 
Homes, No. NA90-57-C (S.D. Ind., May 11, 1990); U.S. v. J.D. & M. 
Investment, Inc., No. 90-C-476-J (D. Utah, May 30, 1990); U.S. v. 
Allen Funeral Home, Inc., No. IP-90-1430-C (S.D. Ind., June 8, 
1990); U.S. v. Fitzhenry's Funeral Home, No. CV-N-90-282-BRT (D. 
Nev., June 25, 1990); U.S. v. Striffler Community Funeral Homes, No. 
90-1809 (W.D. Pa., November 5, 1990); U.S. v. Moore Funeral Homes, 
Inc., No. 90-C-965-C (N.D. Okla., November 14, 1990); U.S. v. Wetzel 
and Son, Inc., No. 91-2562 (E.D. Pa., April 24, 1991); U.S. v. Peake 
Memorial Chapel, Inc., No. CV91-637-RE (D. Or., July 5, 1991); FTC 
v. Perkins Funeral Home, Inc., No. 391-CV-00556-JAC (D. Conn., 
September 25, 1991); U.S. v. McGann & Son Funeral Home, No. 91-C-
6517 (N.D. Ill., October 30, 1991); U.S. v. Goble's Fortuna 
Mortuary, No. C-91-3883-SC (N.D. Cal., November 26, 1991); U.S. v. 
Wilhelm Funeral Home, Inc., No. S-91-3152 (D. Md., November 6, 
1991); U.S. v. Restland Funeral Home, Inc., No. 3-91CV-2576-G (N.D. 
Tex., filed December 3, 1991) (in litigation); U.S. v. Scala 
Memorial Home, Inc., No. 91-5679 (D.N.J., December 30, 1991); U.S. 
v. Montrose Valley Funeral Home, Inc., No. 92-Z-645 (D. Colo., April 
6, 1992); U.S. v. Douglass-Marsh, Inc., No. 92-30004-F (D. Mass., 
January 6, 1992); U.S. v. Higgins Funeral Home, Inc., No. 92-10100S 
(D. Mass., February 19, 1992); U.S. v. Elliston Funeral Home, No. 
92-C-4294 (N.D. Ill., July 6, 1992); U.S. v. J.M. Posey and Sons, 
Inc., No. CA3: 92-2221-17 (D.S.C., August 17, 1992); U.S. v. John 
Harold Davis, No. 92-1046-CIV-ORL-22 (M.D. Fla., November 13, 1992); 
U.S. v. Valley of the Temples Mortuaries, Ltd., No. 92-0073 (D. 
Haw., December 1, 1992); U.S. v. Memorial Guardian Plans, Inc., No. 
92-2967-MlBro (W.D. Tenn., November 25, 1992); U.S. v. Macias 
Mortuary Services, No. C93-0193 (N.D. Cal., January 26, 1993); U.S. 
v. Meyer Funeral Home, Inc., No. 1-93-CV-10010 (S.D. Iowa, March 25, 
1993); U.S. v. C.A. Anderson Funeral Parlors, Inc., No. C93-1939-EFL 
(N.D. Cal., June 11, 1993); and U.S. v. Ronald W. Brown d/b/a/ 
Comisky-Roche Funeral Home, No. C93-2819-WHO (N.D. Cal., July 29, 
1993).
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B. The Amended Rule

    The Commission, in promulgating the amended Rule, seeks to increase 
the Rule's potential benefits to consumers by clarifying its 
requirements and reducing actual or potential compliance burdens on the 
funeral industry. Such action should increase provider compliance with, 
and consumer understanding of, the Rule's disclosure and other 
obligations. Based on the record in this proceeding, the Commission has 
concluded that the low levels of industry compliance with, and consumer 
awareness of, the Rule do not permit a full cost-benefit analysis of 
its impact, because the analysis does not capture the full effects of 
the Rule had there been greater compliance. Despite this finding, the 
Commission has determined from the record evidence that the Rule is 
providing pro-competitive and informational benefits to consumers that 
outweigh its costs to providers, and that those benefits, but not 
costs, are likely to increase over time as Rule compliance and consumer 
awareness of their rights under the Rule increase. The Commission has 
further concluded that the record in this proceeding does not contain a 
sufficient basis to overturn the Rule's presumptive validity as a 
legally promulgated rule.
    The Commission has concluded, however, that clarifying amendments 
to the price disclosure and ``unbundling'' provisions of the Rule are 
necessary to clarify that it shall be an unfair or deceptive practice 
to impose non-declinable fees in addition to the one for ``basic 
services of funeral director and staff,'' permitted under 
Sec. 453.2(b)(4)(iii)(C). These amendments effectively eliminate the 
imposition of so-called ``casket handling fees'' as separate non-
declinable fees charged to consumers who purchase caskets from non-
funeral home sources.9 The Commission has determined that these 
fees serve to frustrate the Rule's basic ``unbundling'' requirement by 
penalizing consumers who decline caskets sold by the funeral home and 
instead purchase them from third party sellers. The emergence of third-
party casket sellers, and consequently, those fees, have developed in 
the market since the Rule's promulgation.
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    \9\To the extent that these fees include a charge for provider 
overhead that is not allocated to other items offered for sale, the 
amended Rule does not prohibit their inclusion in the non-declinable 
services fee permitted under Sec. 453.2(b)(4)(iii)(C).
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    The Commission further has concluded that repeal of the affirmative 
telephone disclosure requirement (Sec. 453.2(b)(1)(i)) is warranted 
because its costs outweigh its actual and potential benefits. The 
record evidence indicates that the affirmative telephone disclosure is 
an inartful and unnecessary signal to consumers about the availability 
of price information. The Commission has determined that the Rule's 
other price disclosure provisions are adequate, and that this provision 
is unlikely to provide substantial additional benefits to consumers. 
Record evidence indicates that the Rule is contributing now to 
increased consumer ``price-sensitivity'' that results in some consumer 
shopping for lower-cost providers and services. Consumers who call to 
first arrange a date and time for a funeral service, however, or who 
request the removal of remains, likely expect an empathetic response, 
and may be seriously offended by the uninvited offer to discuss prices. 
Some consumers in that circumstance are likely to interpret the 
affirmative disclosure as an indication of an unwarranted provider 
concern with the consumer's ability to afford services. The provision's 
likely inability to benefit consumers does not justify the imposition 
of such undue awkwardness and potential offense in what is otherwise an 
extremely delicate business, social and personal transaction. The 
Commission has concluded that the integrity of the Rule's price 
disclosure requirements will be maintained by retention of the 
requirement to provide price and other readily-available information 
over the telephone on request.
    The Commission further has adopted a variety of minor, ``fine-
tuning'' amendments in light of the evidence on industry compliance. 
Those amendments are designed to clarify the Rule's requirements and 
reduce actual or potential compliance burdens in order to increase 
provider compliance with, and consumer understanding of, the Rule's 
disclosures. Those amendments, which do not alter providers' basic 
obligations or consumers' rights under the Rule, concern the timing of 
giving the general price list and other disclosure requirements, the 
casket and outer burial container price list disclosures, and the 
general ``unbundling'' provision.
    Finally, the Commission has adopted several technical Rule 
amendments that are necessary to correct inconsistencies or unnecessary 
language in certain Rule provisions, or to complement other recommended 
amendments.10
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    \1\0Little, if any, systematic or otherwise reliable evidence in 
the record documents industry-wide deceptive or unfair practices 
concerning Rule-related issues by cemeteries, crematories that do 
not sell funeral goods, or other sellers of funeral goods or funeral 
services not presently subject to the Rule. Therefore, the 
Commission has declined to expand the Rule to cover such entities, 
as recommended by some rulemaking participants. See R-N-1 (SR) at 
109-121 for a full discussion of the evidence on this issue.
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C. Background of this Proceeding

1. The Commission's Findings in 1982
    The Commission required this unique review to determine, at an 
early date: (1) Whether the Rule is operating as expected in reducing 
barriers to price competition and increasing informed consumer choice, 
or whether some modification is necessary to facilitate those benefits; 
and (2) whether there is a need to continue the Rule after it has had 
an opportunity to work in the marketplace; termination would be 
considered if increased competition has largely corrected the problems 
addressed by the Rule.11
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    \1\1R-B-5 (Statement of Basis and Purpose) at 42261, 42299.
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    The Commission determined, however, that the Rule's effects on the 
funeral market may be evidenced more slowly than in other industries 
due to factors it found unique to the funeral transaction.\12\ One of 
those factors was that many consumers would not have exposure to the 
Rule-required price lists and other provisions for many years because 
purchases of funerals are infrequent. Unlike other situations, 
consumers also are unusually susceptible to influence from the funeral 
director's advice because of the unique combination of emotional 
stress, lack of experience and information, and tight time constraints. 
The Commission predicted as a result that the initial stimulus for 
price competition would likely come from existing or new providers that 
begin to advertise and otherwise compete on the basis of price. The 
Commission concluded that it could not say how quickly the Rule's 
competitive impact would begin to be felt in light of traditional 
industry constraints on price competition and barriers to entry.
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    \1\2 Id. at 42299.
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    The Commission nonetheless predicted that the Rule could provide 
economic benefits for consumers in various ways.13 Should greater 
price competition emerge, for example, the Rule could reduce or hold 
stable actual prices and overall consumer expenditures for funerals. 
This would most likely result from increased consumer price-
sensitivity, which might lead some consumers to shift from higher to 
lower-priced providers. Expenditures could also be reduced as consumers 
decline items previously required in packaged funerals, and as unfair 
or deceptive acts or practices that induced consumer purchases decline. 
Finally, the Commission determined that mandatory price itemization was 
warranted even if some consumers knowingly chose to buy more goods and 
services than they would have under package-only pricing. The purpose 
of the Rule is to enhance consumer choice.
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    \1\3 Id. at 42297.
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    The Commission finally determined that, while competition induced 
by the Rule could reduce price levels, mandatory itemization presented 
opportunities for providers to voluntarily raise prices.14 
Providers could choose to raise itemized prices or the price for the 
lowest-priced funeral, for example, in order to increase profits or 
account for increased consumer declinations of certain items. The 
Commission reasoned, however, that itemization does not require those 
results because it does not preclude traditional industry pricing 
methods, such as package pricing and ``graduated recovery'' of 
proportionately more overhead from higher-priced funerals. The 
Commission further concluded that providers may not be able to raise 
prices simply to recoup lost revenue or increase profits as price 
competition increases under the Rule.
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    \1\4Id. at 42296-42298.
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2. The Mandatory Review Proceeding
    The Commission on December 9, 1987 published an Advance Notice of 
Proposed Rulemaking (hereafter ``ANPR'') describing the planned review 
of the Funeral Rule.15 The ANPR notified the public that the 
Commission intended to conduct the rulemaking, and solicited public 
comments on many of the key Rule-related issues. The ANPR contained 44 
questions concerning consumer and funeral provider experiences, the 
scope of the Rule, compliance, various Rule provisions, regulatory 
flexibility and the paperwork burden imposed by the Rule. The majority 
of the commenters16 recommended retention of the Rule. Funeral 
director trade groups recommended repeal or, in the alternative, 
substantial modification and expansion of the Rule to cover other 
sellers, such as cemeteries.
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    \1\552 FR 46706.
    \1\6Over 350 persons responded to the request for public 
comment, including 131 consumers, 134 funeral directors, 46 memorial 
societies, and approximately 20 trade associations and related 
industries.
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    Following a review and assessment of the comments, the Commission 
on May 31, 1988 published a Notice of Proposed Rulemaking (hereafter 
``NPR'') initiating this review proceeding.17 The Commission in 
the NPR established a schedule for three public hearings to be held in 
Washington, Chicago, and San Francisco, and requested comment on a 
number of questions set out in the notice. In all, 189 individuals and 
groups submitted written comments, including two funeral directors, 
five cemetery/crematory/third-party casket seller groups or 
individuals, six funeral director trade associations, 147 consumers, 27 
consumer/memorial society groups, one federal official and one state 
group.
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    \1\7R-A-1 (53 FR 19864).
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    During the public hearings,18 testimony was received from 
sixteen funeral directors, five monument builders, one vault seller, 
sixteen cemeterians/cremationists, one individual who provides business 
and consulting services to industry members, seven state officials, 
twenty consumer advocates, nine consumers/ clergy/counselors, and eight 
economists/survey experts or consultants (one economist testified 
twice).
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    \1\8Based on requests from interested parties who wished to 
question witnesses at the public hearings, the Presiding Officer 
designated four groups for that purpose: (1) The Consumer Interest 
Group, including the American Association of Retired Persons and the 
Continental Association of Funeral and Memorial Societies; (2) the 
Funeral Director Group, including the National Funeral Directors 
Association and the National Selected Morticians (that group also 
included William Pierson, the owner of the Hursen Funeral Home, the 
Illinois Funeral Directors Association, and the Conference of 
Funeral Service Examining Boards; (3) the Crematory and 
Prearrangement Group, including the Cremation Association of North 
America and the Pre-Arrangement Association of America; and (4) the 
Special Cemetery Group, including the American Cemetery Association. 
The Presiding Officer established the last group for the limited 
purpose of conducting examination on whether the Rule should be 
expanded to include cemeteries. See R-A-37.
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    In April 1989, Rebuttal Submissions were filed by the staff, the 
Cremation Association of North America (``CANA''), the Monument 
Builders of North America (``MBNA''), the National Funeral Directors 
Association (``NFDA'') and National Selected Morticians (``NSM'') 
(joint rebuttal), the American Cemetery Association (``ACA''), the 
American Association of Retired Persons (``AARP'') and the Pre-
Arrangement Association of America (``PAA''). In response to a request 
from the Presiding Officer, those groups other than the staff also 
filed Proposed Findings of Fact, Conclusions of Law and Recommended 
Decision in May 1989.
    In addition to all of the testimonial and written information just 
described, the record contains three national surveys of actual funeral 
arrangers, conducted in 1981, 1987 and 1988. The 1981 Baseline Study 
(or ``BLS'')19 was conceived as a benchmark for later comparison 
with the 1987 Replication Study (or ``RS'').20 Conducted for the 
Commission, these studies examined: (1) Consumer purchasing behavior 
and expenditures for funerals; (2) consumer knowledge of the funeral 
market; and (3) industry practices and prices. By comparing the results 
of the two studies, inferences could be drawn about the Funeral Rule's 
impact on the funeral market. The Bureau of Economics Report of 
February 198921 contains that comparative analysis. The Gallup 
Organization conducted the third, and most recent, study of funeral 
arrangers for the AARP.22 Viewed together, those three empirical 
surveys represent the most reliable and comprehensive systematic data 
available on consumer experiences under the Rule in shopping for and 
choosing funeral goods and services, and of industry Rule 
compliance.23
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    \1\9R-B-3, supra n. 1.
    \2\0R-B-2, supra n. 1.
    \2\1HX-122.
    \2\2The Gallup Study, HX-66, supra n. 1.
    \2\3With respect to the BLS, however, the 1982 rulemaking staff 
concluded from its review of a telephone validation study that the 
BLS data were subject to qualification and differing interpretation 
in four specific areas where the data appeared to conflict with 
evidence already on the original record--consumers' receipt of 
telephone price information, written itemized price information and 
itemized statements, and requests for permission to embalm. See R-B-
70 (Memorandum from Funeral Rule Staff to Commission, ``Impact 
Evaluation Survey, Funeral TRR,'' July 15, 1982). The Commission in 
its comparative analysis of the Baseline and Replication study data 
does not rely on the Baseline data in those four areas.
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    In addition to these empirical studies, statistical data and 
testimony presented by Mr. Wendell Hahn of the Federated Funeral 
Directors of America (hereafter ``FFDA''), an independent firm that 
provides financial and business consulting services to some 1,500 
independent funeral homes in 30 states, representing about 10% of all 
funerals per year, afforded evidence on changes in funeral home costs 
of operation and prices under the Rule. A 1988 national survey of 500 
funeral directors presented by the AARP provided similar 
evidence.24 A 1987 survey of state laws regulating the funeral 
transaction is also part of the record, as is the 1984 survey of NFDA 
members regarding changes in provider practices under the Rule. The 
record further contains two national opinion surveys concerning 
consumers' views about, and knowledge of, various Rule requirements, 
and five other surveys of cemeterians, cremationists, monument builders 
and memorial societies conducted by interested groups on specific, 
Rule-related issues.
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    \2\4Ayers, HX-108, supra n. 1.
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    The rulemaking staff and Presiding Officer published their 
respective Reports in June and July 1990, summarizing the record 
evidence and recommending, with minor differences, retention of the 
Rule, repeal of the affirmative telephone disclosure, prohibition of 
separate non-declinable fees, in addition to the non-declinable fee for 
basic services of funeral director and staff, such as so-called 
``casket handling fees,'' and the adoption of several ``fine-tuning'' 
amendments.25 In response to the Presiding Officer's published 
invitation,26 forty-nine groups and individuals submitted comments 
on those reports by November 1, 1990.27
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    \2\5See R-N-1 (SR) and R-O-1 (POR).
    \2\655 FR 30925 (July 30, 1990).
    \2\7The commenters included 22 consumer organizations (19 local 
funeral and memorial societies, the CAFMS--two comments, the 
National Consumers League, and the AARP); three individual 
consumers; 12 funeral industry trade associations, including five 
state funeral director associations (California, Illinois, Michigan, 
North Carolina and South Carolina), the Funeral Director Services 
Association of Chicago, the ACA, the CANA, the PAA, the MBNA, the 
Casket Manufacturers Association, and the NFDA and NSM) (joint 
comment); five individual funeral directors; two casket 
manufacturers or distributors; one cemetery/third-party casket 
seller, one economist, and two funeral industry financial 
consultants, including the FFDA.
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    On June 20, 1991, the Bureau of Consumer Protection forwarded its 
final recommendations to the Commission on this review proceeding. The 
rulemaking staff continued the major recommendations contained in its 
1990 Report, and, together with the Bureau of Economics staff, jointly 
recommended a separate amendment concerning the disclosures that are 
necessary whenever the fee for ``services of funeral director and 
staff'' is incorporated in the price of caskets offered for 
sale.28 The Bureau of Economics concurred with all of the 
rulemaking staff's recommendations concerning substantive Rule 
provisions.29
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    \2\8BE also recommended a clarifying change to the definition of 
``services of funeral director and staff,'' in which the rulemaking 
staff concurred.
    \2\9The Office of the Director, Bureau of Consumer Protection, 
favored a limited review by the Bureau of the amended Rule to 
measure its impact, in particular the prohibition of ``casket 
handling fees.'' See Memorandum from Gerald Caplan, Deputy Director, 
Bureau of Consumer Protection, to the Commission, June 20, 1991 at 
5. The Bureau of Economics recommended the inclusion of a future and 
final mandatory review of the Rule under the rulemaking procedures 
of section 18 of the FTC Act. See Memorandum from Peter Vander Nat, 
Bureau of Economics, to the Commission, August 26, 1991 at 3. The 
Commission has not adopted either recommendation, but has scheduled 
the Funeral Rule for a mandatory ``notice and comment'' review in 
1999, in accordance with its ten-year review schedule adopted for 
all Commission rules and guides. See 58 FR 11554 (Feb. 25, 1992).
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    On November 21, 1991, representatives of the NFDA, NSM, AARP, CANA, 
ACA, MBNA and PAA made oral presentations to the Commission concerning 
this review proceeding. On January 28, 1993, after reviewing the 
rulemaking record as a whole, the Commission voted unanimously to 
retain and amend the Rule, incorporating all of the substantive changes 
recommended by the rulemaking staff and the Bureau of Economics.

II. Basis for the Amended Rule

A. The Legal Standard for Amending the Rule

    Section 18(d)(2)(B) of the FTC Act states that ``[a] substantive 
amendment to, or repeal of, a rule promulgated under subsection 
(a)(1)(B) shall be prescribed, and subject to judicial review, in the 
same manner as a rule prescribed under such subsection.''30 Thus, 
the standard of judicial review for amendment to, or repeal of, a 
section 18 rule is identical to that for any rule prescribed pursuant 
to section 18. Upon judicial review, a section 18 rule may be set aside 
if it is ``arbitrary, capricious'' or otherwise not in accordance with 
law upon any of the grounds set forth in the Administrative Procedure 
Act (APA) at 5 U.S.C. 706(2)(A)-(D), or if the factual determinations 
upon which the rule is based are not supported by ``substantial 
evidence'' in the rulemaking record as a whole.31
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    \3\0The Commission's rulemaking standards applicable to 
promulgation and amendments of a Section 18 rule require a 
preponderance of reliable evidence. See Statement of Basis and 
Purpose, Credit Practices TRR, 49 FR 7740 (March 1, 1984).
    \3\115 U.S.C. 57a(e)(3); Consumers Union of the United States, 
Inc. v. FTC, 801 F.2d 417, 422 (D.C. Cir. 1986).
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    In their Proposed Findings, funeral director groups assert that the 
current rulemaking is subject to the same standards and procedures as a 
de novo rulemaking. Therefore, they appear to contend that the 
Commission must support any decision, including the retention of the 
Funeral Rule, on a new administrative record compiled afresh.32
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    \3\2R-M-9 (NFDA/NSM) at 213-214. The NFDA/NSM further suggest 
that any change in the Rule's requirements (other than repeal) must 
be based on new evidence that current practices are unfair or 
deceptive, in accordance with the Commission's regulatory authority. 
Id. at 220-221. The amended Rule, however, except as noted, covers 
no other new acts, practices, or sellers of funeral goods or 
services. Moreover, the Commission concludes that the NFDA/NSM 
position is inaccurate. The Commission when it promulgated the Rule 
determined that the covered practices were unfair or deceptive, as 
the Rule states. The Rule, however, also contains many ``preventive 
requirements'' designed to remedy those practices. Those preventive 
requirements may be modified without an entirely new record, as 
discussed in the accompanying text. As the Commission stated in 
mandating this review, one of its purposes was to determine whether 
the Rule is operating as expected in reducing barriers to price 
competition and increasing consumer choice, or whether some 
modification is necessary to facilitate those benefits. R-B-5 (SBP) 
at 42299.
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    This view is incorrect. A decision to retain any portion of the 
current Rule may be based upon evidence gathered during the original 
rulemaking and the Commission's subsequent enforcement experience, as 
well as evidence adduced during the current rulemaking. Indeed, to the 
extent that nothing supplements evidence from the initial rulemaking, 
there is a presumption that the existing rule should be 
retained.33
---------------------------------------------------------------------------

    \3\3See Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. 
Co., 463 U.S. 29, 42 (1983).
---------------------------------------------------------------------------

    As discussed elsewhere in this Statement of Basis and Purpose, the 
Commission has evaluated the relative costs and benefits of the Rule, 
industry compliance, the Rule's effect on competition and consumer 
awareness, and a number of other factors, to determine whether to 
retain, amend, or repeal the Rule. In making that determination, the 
Commission has taken into account, among other things, the comments 
received in this rulemaking as well as the record established in the 
original rulemaking proceeding and the Commission's experience in 
enforcing the existing Rule. The Commission believes that its decision 
to retain certain provisions of the Rule while supplementing or 
amending others, as described in this Statement of Basis and Purpose, 
comports with the legal standards discussed earlier governing Section 
18 rules.

B. Overall Costs and Benefits of the Rule

1. Repeal vs. Retention: Participants' Views
    The vast majority of rulemaking participants supported the Rule's 
retention, or its expansion to cover other sellers. Of the 189 NPR 
commenters and 83 public hearing witnesses, only eight unequivocally 
advocated repeal of the Rule.34 Two participants suggested repeal 
as an alternative, if the Commission declined to make various 
substantive amendments; two advocated repeal because, in their view, 
existing state laws were deemed adequate to protect consumers.35
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    \34\Those eight were: The NFDA (R-G-6, R-M-9); the Funeral 
Directors Service Association of Chicago (R-G-5)(repeal or sunset); 
Mr. Ninker, funeral director (R-G-1); the Conference of Funeral 
Service Examining Boards (R-J-1); the National Concrete Burial Vault 
Association (R-E-2); Mr. Hahn, FFDA, Tr. Vol. II, 674-675, 678 
(because he believes the marketplace will not change significantly 
as a result, even though the Rule has made providers more aware of 
their cost components and those few consumers who are interested 
more aware of funeral prices); Mr. Yurs, funeral director, Tr. Vol. 
II, 554; and the Illinois Funeral Directors Association (R-G-2).
    \35\Those four include: The NSM (R-G-3; R-M-9 at 224) (repeal 
unless major amendments are adopted as proposed and a ``sunset'' 
date is mandated); the NYS Funeral Directors Association (R-G-4) 
(Rule is redundant to New York law); Mr. Hocker, President, NFDA, 
Tr. Vol. III, 1399, 1400, 1444-1445 (NFDA advocates repeal, but his 
personal objections are limited to three areas--affirmative 
telephone disclosure, GPL timing and distribution, and prior 
permission to embalm; otherwise, the Rule has educated consumers 
about the funeral process and many providers say they are not overly 
burdened by the Rule); and Mr. Farrow, Exec. Dir, Texas Funeral 
Service Commission, Tr. Vol. III, 550-551, 573 (Rule is unnecessary 
in light of Texas funeral law, which is patterned after the Rule and 
benefits consumers).
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    The NFDA, the largest association of funeral industry firms, was 
the major proponent of repeal,\36\ asserting that repeal is warranted 
because the Rule has imposed significant costs but failed to provide 
its promised benefits of increased competition and altered patterns of 
consumer behavior. According to the NFDA, the evidence shows that 
consumers in selecting funeral providers and types of funeral service 
still place a higher importance on social, moral and practical factors 
(such as provider reputation and quality of service) than they do on 
price.\37\ The NFDA concluded that the evidence logically demonstrates 
that consumers under the Rule spend no less for funeral arrangements, 
comparison shop no more, and purchase no fewer items and no different 
types of service than they did before the Rule. The NFDA asserted that 
the Rule has imposed various monetary costs on providers that have been 
passed on to consumers in the form of higher prices, as well as non-
monetary costs that interfere with providers' ability to give caring, 
quality service. The NFDA thus concluded that the Rule should be 
repealed in its entirety because its costs outweigh its benefits.\38\
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    \36\One issue raised during the proceedings was whether 
individual members of the NFDA or other trade groups agree that the 
Rule warrants repeal. Several surveys and other evidence introduced 
into the record indicated that many funeral directors may not wholly 
agree with the NFDA view. See, e.g., HX-32 (American Funeral 
Director magazine survey asked its funeral director readers ``How 
would you recommend that the NFDA deal with the Funeral Rule during 
the forthcoming Review?'' 70% responded that the Rule should be 
accepted as is or partially modified, 12% suggested substantial 
modification, and 20% repeal; 88% of firms represented by respondent 
funeral directors were NFDA members); See also, Hocker, President, 
NFDA, Tr. Vol. III, 1400 (many funeral directors say they are not 
overly burdened by the Rule); Hunter, President, NSM, Tr. Vol. I, 
790-791 (majority of NSM members do not advocate repeal; parts of it 
have been very helpful); Ayers, HX-108 at 3 (68% of 500 funeral 
directors surveyed agreed that the Rule's required information was 
beneficial to consumers).
    \37\However, the NFDA suggested that price plays a greater role 
in consumers' selections of individual items involved in the 
funeral, such as caskets and outer burial containers. R-M-9 at 20.
    \38\See, e.g., R-G-6 (Comment on the NPR) at 5-7, 35, 114-121 
and R-M-9 (Proposed Findings) at 216-220, 224.
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    In contrast to the NFDA's view, the AARP provided the most vigorous 
support for retention of the Rule.\39\ The AARP advocated that a 
decision to repeal the Rule must be founded on substantial evidence 
demonstrating that: (1) The acts and practices addressed by the Rule 
are no longer prevalent; (2) the harm resulting from those practices 
has been removed; (3) repeal would not permit the return of that harm; 
and (4) the benefits of repeal exceed the costs of continuing the Rule. 
According to the AARP, those questions cannot be answered, and the 
Rule's full impact cannot be assessed, because the record evidence 
reveals unacceptably low levels of industry compliance and consumer 
awareness of the Rule's provisions. Because the Rule's full impact 
cannot be gauged, the AARP concluded, repeal is unwarranted. The AARP 
further asserted that the evidence indicates that the Rule has not 
increased funeral providers' costs, funeral prices, or consumer 
expenditures, but has begun to provide a variety of consumer benefits. 
The AARP thus further concluded that, although the Commission need not 
meet a specific evidentiary burden to retain the Rule, such evidence 
exists to support the conclusion that the Rule's benefits exceed its 
costs.\40\
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    \39\The other major participants in the rulemaking proceeding 
and consumer groups that addressed the issue all supported retention 
as well. These groups included the PAA, CANA, CAFMS, and Consumers 
Union.
    \40\R-M-6 (Comment) at 10, 12-14 and R-M-11 (Proposed Findings) 
at 85-95, 144-145.
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2. Costs and Benefits Compared
    The Commission has concluded, based on its review of the rulemaking 
record viewed as a whole, that the Rule warrants retention because its 
actual and potential benefits to consumers outweigh its costs to 
providers, and that those benefits are likely to increase over time as 
the Rule continues to operate. The Commission finds that, at the time 
of this review:
    (1) The Rule has not been effective in the funeral market for a 
sufficient period to permit a full assessment of its benefits;
    (2) The market is increasingly price-sensitive for the selection of 
funeral providers, types of service, and individual goods and services, 
particularly caskets, when price and options information is readily 
available during the selection process;
    (3) Despite a documented, low overall compliance level, pro-
competitive and informational benefits attributable in part to the Rule 
appear to be manifesting in the market and are likely to increase over 
time;
    (4) The Rule overall imposes minimal compliance burdens on 
providers that do not significantly raise their business costs or 
prices, or reduce consumers' satisfaction with the funeral services 
they receive; and
    (5) Most states have not adopted laws similar to the Rule in scope 
and coverage, and such action is not likely in the near future.
    a. Levels of compliance/price competition/consumer Awareness. The 
evidence in the record indicates, at the time of this review, a low 
level of industry compliance with the Rule. Systematic, empirical data 
from two independent surveys--the Commission-sponsored, 1987 
Replication Study and the 1988 Gallup Study conducted for the AARP--
show that 36% of funeral providers simultaneously complied with the 
Rule's two key requirements to give consumers a general price list 
(``GPL'') and an itemized final statement of goods and services 
selected.\41\ Using the more comprehensive Replication Study results, 
that overall compliance level dropped to 31% when misrepresentation 
provisions about the necessity for embalming and caskets for cremation 
are added to the analysis,\42\ and to 9% when the GPL timing 
requirement is viewed strictly and several other Rule provisions are 
considered.\43\ Most rulemaking participants opined, when asked, that a 
30% level of compliance would be insufficient to assess adequately the 
Rule's benefits.\44\
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    \41\HX-122 (BE Report) at 25-27; R-M-5 (Staff Rebuttal 
Statement) at 25, Table 7. Looking at these obligations 
individually, 23% of RS providers gave consumers the GPL--the key 
price disclosure document required by the Rule--at the outset of 
arrangements discussions as required, and 62% gave consumers who 
purchased a funeral on an item-by-item basis a properly itemized 
final statement. See HX-122 at Table VIII, p.20 and Table X, p.24.
    \42\Id. at 26.
    \43\R-M-5 (Staff Rebuttal) at 27, Table 8; R-B-2 (Replication 
Study/Market Facts Report) data tapes. In the BE analysis (HX-122), 
RS respondents were considered to have been the beneficiaries of 
``compliance'' with respect to receipt of the GPL if they reported 
its receipt after discussions had begun but before selection of a 
casket or other container. BE staff, at the rulemaking staff's 
request, re-computed the compliance index using the Rule's 
definition of when a GPL must be given to consumers --``upon 
beginning discussion either of funeral arrangements or of the 
selection of any funeral goods or funeral services.'' The result was 
that compliance with four of the Rule's provisions fell from 31% to 
15% (timely receipt of the GPL and a properly-itemized statement, 
and no misrepresentations about the necessity for embalming and 
caskets for cremation). Overall, simultaneous compliance continued 
to drop from a ``high'' of 29% (using the most stringent BE 
compliance index, which added receipt of the GPL ``in writing'' to 
the four requirements stated above) to a ``low'' of 9% as other Rule 
provisions were added to the analysis.
    \44\See R-N-1 (SR) at 51-56, notes 200-207.
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    In addition to the relatively low level of overall industry Rule 
compliance, the rulemaking record demonstrates that funeral providers 
have not provided the initial stimulus for ``increased competition'' on 
the basis of price considered necessary by the Commission. The few 
funeral home entrants that aggressively compete on price, documented in 
the record, appear to be former, more traditional funeral directors who 
reentered the market as ``discount'' providers, and who are considered 
to be ``mavericks'' by the funeral industry as a whole. More 
traditional funeral homes, by industry representatives' own admission, 
generally do not price advertise or otherwise compete on the basis of 
price.\45\ The record further indicates that funeral providers show 
little support for unfettered competition in the sale of pre-need 
funeral services,\46\ and that many affirmatively attempt to discourage 
potential price competition from third-party cemeteries and other non-
funeral home retailers who sell caskets on a pre-need basis, by 
imposing so-called ``casket handling fees,'' averaging $300-$500 per 
funeral on consumers who patronize those sellers.\47\
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    \45\R-G-6 (NFDA/NSM Comment) at 5, 109-110, 113-114; R-M-9 
(NFDA/NSM Proposed Findings) at 8-9, 31, 17-19, 199-200, 202-204; 
Krause, Tr. Vol. II, 12-13 (majority of Wisconsin providers do not 
compete); R-M-7 (PAA Rebuttal) at 21 (entry in the funeral market is 
virtually unheard of without a prior affiliation with a funeral home 
or cemetery, or the entrant is chain-related).
    \46\The testimony of various funeral directors and cemeterians 
indicates that funeral providers as a group have supported state 100 
percent pre-need ``trusting'' laws. The major impact of a ``100 
percent'' trusting requirement--all moneys received from the 
consumer for a pre-need purchase must be placed in trust until the 
time of need--is to leave the pre-need seller without current funds 
to pay for the expenses associated with pre-need sales, such as an 
active sales force. See, e.g., Krause, Tr. Vol. II, 8, 13, 31, 34; 
Starks, Tr. Vol. II, 362-363, 367; Graf, Tr. Vol. II, 593, 649; 
Nelson, Tr. Vol. II, 180; and Barr, Kansas state representative/
cemeterian, Tr. Vol. III, 1513.
    \47\Record evidence concerning the widespread existence and 
effects of so-called ``casket handling fees'' is fully discussed in 
Section II.C.3, infra.
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    Finally, the empirical data and record testimony documents that a 
majority of consumers exhibit low levels of awareness concerning their 
rights under the Rule\48\ and funeral prices and service options,\49\ 
as a result of a general lack of ``visibility'' of the Rule and of 
readily-available, comparative price information.\50\ Other empirical 
evidence indicates that consumers' ``experience'' with funerals is low 
by any measure\51\ and that, regardless of their level of experience, 
consumers are not ``familiar'' with the funeral transaction.\52\ Most 
rulemaking participants concluded that the documented low levels of 
overall industry compliance and consumer knowledge, viewed together, 
indicate that the Rule has not been in place long enough to adequately 
assess its impact on the funeral market.\53\
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    \48\Messer, trade embalmer, R-F-60 at 1; Carlson, author/
lecturer, HX-22 at 7; Blake, Memorial Society of Door County, 
Wisconsin, Tr. Vol. II, 1119; Rouillard, Calif. Rural Legal 
Assistance Foundation (``CRLAF''), Tr. Vol. III, 1343-1344); Rev. 
Wasielewski, Inter-Faith Funeral Information Committee, Phoenix, Tr. 
Vol. III, 1619; Klein, consumer member, New York State Funeral 
Directing Advisory Board (``NYSFDAB''), Tr. Vol. II, 1060 (consumers 
don't expect a GPL at the beginning of arrangements or know that 
it's required); Botimer, Phoenix funeral director, Tr. Vol. III, 
1283; Barr, Kansas state representative, Tr. Vol. III, 1537; 
Klugman, President, California Fed'n of Funeral and Memorial 
Societies, Tr. Vol. III, 924, 931; Rev. Bell, Inter-Faith Ministries 
of Wichita, Tr. Vol. III, 232, 247-248; Clark, Ark. A.G., Tr. Vol. 
III, 38; Rev. Dr. Biddle, Tr. Vol. III, 312, 337 (even ``informed'' 
consumers are unaware); Elvig, California State Cemetery Board, Tr. 
Vol. III, 439; Dr. Reveley, former funeral director, Tr. Vol. III, 
879; Showalter, Tr. Vol. II, 105; Neel, Pittsburgh funeral director/
cemeterian, Tr. Vol. I, 631; and CAFMS, R-H-12 (Comment) at 2.
    \49\Hennessy, FDSA, Tr. Vol. II, 994; Showalter, Tr. Vol. II, 
105, 107, 126-127 (consumers do not have basic knowledge to 
discriminate between products and services or know what to ask, or 
that a funeral is an item that one can price-shop for); SW Florida 
Funeral and Memorial Society, R-F-64 at 6 (purchase/embalming 
options and availability of published price data); Neel, funeral 
director/cemeterian, R-E-1 at 1; Carlson, author, Tr. Vol. I, 516, 
524 (consumers are dissatisfied when they learn that they had a 
choice); Nelson, PAA, Tr. Vol. II, 228, 233 (especially the less 
expensive options); Prof. Sommer, Center for Consumer Research, Tr. 
Vol. III, 617, 624, 628-629 (local or national prices because no 
published price data/prices); Schwarcz, focus group, Tr. Vol. III, 
460 (embalming option); Blake, memorial society, Tr. Vol. II, 1109, 
1119, 1131 (cremation options/declination options); Wertheimer, 
NAEL, Tr. Vol. III, 964 (consumers blame their inexperience for lack 
of knowledge); Clark, Ark. A.G., Tr. Vol. III, 38; Buchanan, 
President, CAFMS, Tr. Vol. III, 1107; Dr. Biddle, Tr. Vol. III, 347; 
Klein, NYSFDAB, Tr. Vol. II, 1066, 1082 (don't' know what to ask 
over the phone/memorial societies exist to increase consumers' 
awareness of funeral options); Graf, cemeterian, Tr. Vol. II, 625 
(don't know they can move the remains if they wanted to); Snyder, 
CU, Tr. Vol. III, 1261; Botimer, funeral director, Tr. Vol. III, 
1284, 1289, 1311 (price variance); Rev. Wasielewski, Tr. Vol. III, 
1620, 1634-1635 (casket prices/price variance); Bejarno, funeral 
consumer, Tr. Vol. III, 1588, 1597 (price variance); and Dr. 
Reveley, former funeral director, Tr. Vol. III, 898 (cremation 
options). But see, Yurs, funeral director (for NFDA), Tr. Vol. II, 
559 (consumers with prior experience will have some idea of funeral 
costs); and Hahn, Federated Funeral Directors of America (``FFDA''), 
Tr. Vol. II, 709 (consumers are no more aware of prices because they 
don't price shop).
    \50\Although not uncontroverted by the rulemaking staff and 
funeral industry representatives, the results of two national, 
consumer opinion surveys indicated that: (1) When asked whether they 
were ``familiar with the FTC's Funeral Rule and what it requires,'' 
90 percent of the 782 respondents aged 45 and above surveyed in the 
first of these ``Excel'' surveys said ``no'' and 10 percent answered 
``yes;'' and (2) when asked whether each of several declarative 
statements about funeral director obligations and funeral consumer 
rights was ``required by federal law or not,'' a majority (54 
percent-75 percent) of the 916 consumer-respondents aged 21 and over 
said that, to the best of their knowledge, federal law does not 
require the rights and obligations actually mandated by the Funeral 
Rule, or said that they do not know. See McFadden, HX-8 at 3 and 
Exhibit B, Table 001; Soulas, HX-76 at 3. The ``McFadden'' survey 
results also provided evidence that older consumers aged 65 or over 
are significantly less likely to be aware of the Rule's protections 
than are younger consumers aged 18-34. HX-8 at Exhibit B, tables 
002-004, 006-007.
    \51\Thirty-six percent of the RS respondents reported that they 
had no prior experience arranging funerals; another 30 percent said 
that they had participated in planning arrangements once before, and 
the remaining third said they had done so twice before or more. R-B-
2 at III-9, Table III-7. Because the RS surveyed recent funeral 
arrangers, however, and not the general public, the level of 
respondents' prior experience may not be representative of the 
population as a whole. The Commission found, for example, that, at 
the time it promulgated the Rule, about 50 percent of the adult 
population had never arranged a funeral and another quarter had done 
so only once. See R-B-5 (SBP) at 42265.
    \52\The Bureau of Economics staff performed an analysis of the 
RS data to determine whether there was any link between respondents' 
degree of experience in making funeral arrangements (Question 10. of 
the study) and their level of knowledge about the funeral 
transaction (Question 55 asked whether embalming is required by law 
and whether a sealed casket/vault preserves remains indefinitely). 
BE staff divided respondents into two categories--those with 
arrangements experience prior to the one surveyed and those without 
such prior experience. BE staff then performed a statistical test to 
determine whether there was any relationship between those two 
categories and their answers to Question 55. BE staff found no 
relationship between the degree of respondents' reported prior 
experience and their level of knowledge. See R-N-1 (SR) at n. 124. 
In addition to BE's statistical test, the RS results show that 50 
percent and 42 percent, respectively, of the RS respondents, all of 
whom had arranged a funeral at least once, reported incorrectly that 
embalming was always required as a public health measure and that a 
sealed casket/vault preserves remains for an indefinite time. R-B-2 
at Table III-54, p. III-85.
    \53\See R-N-1 (SR) at notes 115, 200-207; R-O-1 (POR) at 48-49, 
223-224.
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    b. Market price-sensitivity. Consumers' demand for funerals, of 
course, is price inelastic. Record evidence indicates, however, that 
consumers' selections of individual funeral providers, overall types of 
funeral service, and individual funeral goods and services are price-
sensitive.
    Consumers value available price information in selecting a funeral 
home and in making specific funeral arrangements, particularly when 
they receive the price information early in selecting funeral goods and 
services. With respect to the selection of a provider, 52% of NSM 
survey respondents in the years 1983-1988 said that they considered 
price ``very important'' in their funeral home selection, although 
other factors appeared to be more important; only 19% considered price 
unimportant.\54\ Similarly, ``low-cost'' funeral homes, where they 
exist, have increased their business substantially in recent years as a 
direct result of their competitive pricing practices.\55\ Regarding the 
selection of specific goods and services, many consumers are purchasing 
competitively-priced caskets from third-party sellers when they are 
available,\56\ are increasingly choosing the significantly less-
expensive cremation alternative,\57\ are purchasing significantly fewer 
caskets and requesting embalming for cremation less frequently than in 
1981,\58\ and are declining items that used to be included in funeral 
``packages.''\59\ Replication Study consumers who received price 
information early in the transaction spent $252 less for their specific 
arrangements than those who did not get that timely information;\60\ 
the earlier consumers received price information, the more likely they 
were to consider the information important to their choices in making 
funeral arrangements.\61\
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    \54\The analysis is based on R-J-11, NSM Summary sheets, 
Question 1.f. See also, R-M-5 at 7-8. The NSM Survey results are 
remarkably similar to those of the RS concerning the importance of 
price. That data indicate that 56% of the survey respondents 
reported that the cost of funeral arrangements was ``very'' or 
``somewhat'' important in their decision to select the funeral home 
they used; 15% reported that cost was somewhat or very unimportant. 
R-B-2 at Table III-28, p. III-39, and data tapes.
    \55\Botimer, Tr. Vol. III, 1269, 1325 (based on the surveys his 
firm conducts, 85% of his clients choose his funeral home because of 
its low prices); Peebles, Tr. Vol III, 1551-1552 (the majority of 
his customers come to his funeral home because of its competitive 
prices); Heffner, HX-33 at 11 and Ex. T (annual funeral calls at the 
firm he recently purchased have increased 400% as a result of his 
discount price advertising); and Showalter, Tr. Vol. II, 130 (two 
discount funeral homes have captured 10% of the market in Phoenix, 
even though there are some 50 homes in that area, because they offer 
``traditional'' funerals for less than $1,200).
    \56\See R-N-1 (SR) at 124-127.
    \57\The BE analysis showed that cremation selections increased 
from 11% in 1981 to 14% in 1987, and that the average cremation cost 
to 1987 respondents was about one-third of the cost of open-casket 
funerals ($1,054 vs. $2,818). HX-122 at Table II, p. 6, Table III, 
p. 7. BE staff noted that the close similarity of the survey results 
to cremation statistics provided by the CANA suggests that the BLS 
and RS are representative of the national population. Id. at n. 9.
    \58\Thirty-four percent of cremation buyers in 1981 also 
purchased caskets, and 35 percent bought embalming services; those 
selections dropped in 1987 to 19% (caskets) and 25% (embalming). R-
B-3 (BLS) at Table 3, p. 23; R-B-2 (RS) at Table III-44, p. III-71 
(caskets) and Table III-42, p. III-67 (embalming). Similarly, CANA 
member surveys indicate a reduction in the purchase of caskets for 
cremation from 22% to 17% between 1983 and 1987, a reduction which 
the CANA attributed to the Rule. See Kelsey, Tr. Vol. II, 310-312, 
Purdy, Tr. Vol. III, 158.
    \59\Hahn, FFDA, Tr. Vol. II, 684-685.
    \60\HX-122 (BE Report) at 37 and Table XI, p. 38 (variable noted 
as ``pinferly'').
    \61\Seventy-six percent of consumers who received price 
information ``at the beginning'' of arrangements discussions said 
that price information was very or somewhat important; 75% said so 
when they got price information ``before casket selection;'' 62% who 
reported that they received such information ``when finalizing 
arrangements'' said that it was very or somewhat important at that 
time; 67% said so when they got the information ``after decisions 
had been made;'' and 53% said so when there was ``no discussion of 
price.'' In the first three periods above, 41%, 31%, and 22% of 
respondents, respectively, said that price information was ``very'' 
important. The analysis is based on consumers' answers to RS 
questions 27 (when price information was first received) and 
35(c)(5) (importance of price information in arranging the funeral). 
R-B-2 at APPENDIX: Questionnaire, and data tape. See also, R-M-5 
(Staff Rebuttal) at 6-7.
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    c. Pro-competitive/informational benefits. Despite the 31% overall 
industry compliance level with four of the Rule's key requirements\62\ 
and the lack of price competition among funeral homes, competitive and 
informational benefits that are at least partially attributable to the 
Rule have begun to manifest in the funeral market. Testimonial evidence 
establishes that the Rule's ``unbundling'' and price disclosure 
provisions have encouraged third-party casket sellers and low-cost 
funeral homes to enter the market and have helped them compete,\63\ in 
part because the GPL and telephone disclosure requirements permit non-
industry entities to gather and publish comparative price data.\64\ 
Many consumers have used that data to select those lower-cost funeral 
providers and purchase caskets from third-party sellers where they 
exist.
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    \62\Those four requirements are: to give consumers a timely 
general price list (Sec. 453.2(b)(4)) and itemized statement of 
goods and services selected (Sec. 453.2(b)(5)), and to refrain from 
misrepresenting the necessity for embalming and caskets for 
cremation (Sec. 453.3(a) and 3(b), respectively).
    \63\Radovich, PAA, Tr. Vol. III, 1026, 1029 (virtually no third-
party casket sellers existed before the Rule; casket retailers owe 
their existence primarily to the enactment of the Funeral Rule, 
which effectively allows the consumer to use a casket from an 
outside source); Drozda, Tr. Vol. II, 894 (``Sale of caskets through 
cemeteries is a relatively recent innovation. Prior to the enactment 
of the Funeral Rule in 1984, we were hardly aware of any cemeteries 
that sold caskets on their own because of the difficulty in 
obtaining a funeral home which would accept them and provide funeral 
services'').
    \64\Memorial society members, journalists and others testified 
that collecting comparative funeral price data was, at best, a 
difficult task before the Rule. See, e.g., R-N-1 (SR) at 86-88.
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    Other testimonial evidence presented by the FFDA, which provides 
financial and accounting services to 1,500 independent funeral home 
clients in 30 states, indicates that the Rule--through the availability 
of the GPL--has raised the industry's ``price consciousness,'' which 
may be partly responsible for the tempering of price increases in 
recent years.\65\ Mandatory itemization may have helped retard the 
growth of funeral prices and consumer expenditures, a goal fully 
intended by the Commission.\66\ Statistical data provided by the FFDA 
and the Replication Study, and analyzed by an economist for the AARP 
and the BE staff, also establish that, although overall prices and 
consumer expenditures for funerals increased since 1981 by more than 
the general price level (the ``CPI-U''), which includes all goods and 
services, the increase was comparable to the increase in service prices 
(the ``CPI-US,'' which excludes medical services); that is, compared to 
other service industries,\67\ funeral prices and expenditures in the 
period 1981-1987 did not increase above the rate of inflation.\68\ In 
1988, expenditures and prices for funeral services increased by even 
less than the rate of inflation for the general economy (the ``CPI-
U'').\69\
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    \65\Hahn, FFDA, Tr. Vol. II, 678 (funeral homes refrained from 
increasing prices for professional services even more than they did 
because of the GPL).
    \66\See R-B-5 (SBP) at 42297.
    \67\The funeral home industry is classified by the U.S. Dept. of 
Commerce in the standard industrial classification scheme (SIC) as a 
``service'' industry, because, like other service industries, it 
sells services as well as goods.
    \68\See R-N-1 (SR) at 76, 79-80. Even if overall industry 
compliance were higher and consumer expenditures still remained 
unchanged, the level of expenditures is not the sole test of the 
Rule's benefits. As the BE staff stated in its report, expenditures 
may rise as a result of price increases related to funeral homes' 
fixed costs that are not associated with any costs of Rule 
compliance. The record evidence indicates, in fact, that Rule 
compliance has not significantly increased funeral providers' costs 
or prices, that consumer expenditures and funeral prices, when 
compared to other service industries, have not increased above 
inflation, and that an industry ``price consciousness'' induced by 
the availability of the GPL may have tempered price increases. If 
the Rule's only benefit were to increase informed consumer choice 
(without imposing substantial costs on industry), regardless of 
whether some chose to spend more for their arrangements than they 
would have without the Rule, that benefit would likely justify 
retention of the Rule because other consumers would have the right 
to choose to spend less. The Commission in its 1982 SBP for the Rule 
so stated the Rule's purpose. The record evidence in fact indicates 
that many consumers will purchase fewer funeral items or less-
expensive services as a result of informed choice.
    \69\See Funeral Service Insider, March 20, 1989, at 2.
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    In addition to these benefits, record evidence discussed above 
suggests that the Rule has helped increase consumers' awareness of 
prices and service options as factors to consider in making funeral 
purchase decisions. Many consumers choose low-cost funeral homes and 
caskets competitively offered by third-party providers, and consumers 
who chose cremation in 1987 purchased fewer caskets and embalming than 
in 1981. Finally, that evidence indicated that consumers now decline 
items once included in packaged funerals, and increasingly choose less-
expensive cremation alternatives.\70\
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    \70\Although the record evidence supports the conclusion that 
the Rule facilitates consumers' choice of cremation, the degree to 
which the Rule has affected the cremation rate is unclear from the 
record evidence. The NFDA suggested that the Rule has not played an 
important role in the steadily increasing cremation rate, because 
the increase began in the early 1970s and is based primarily on 
changing social and moral values, as well as on the wishes of the 
deceased, and not on price concerns. The CANA and the AARP, in 
contrast, asserted that the Funeral Rule proceedings, which also 
began in the early 1970s, as well as the Rule itself, substantially 
increased publicity about the cremation alternative, and that many 
consumers do choose cremation based on price and other 
considerations. The CANA also provided evidence that the marketing 
of cremation options has dramatically increased since the Rule's 
inception. See R-N-1 (SR) at 68-71.
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    Other empirical evidence indicates that, since 1981, the proportion 
of consumers who receive price information early in the funeral 
transaction, and use that information to spend less for their 
arrangements, has increased by 7%.\71\ Consumer purchases of 
``unneeded'' caskets and embalming for cremation have decreased,\72\ as 
have provider misrepresentations about casket requirements,\73\ and the 
accuracy of consumers' knowledge regarding casket for cremation and 
embalming requirements and the preservative value of sealed caskets has 
increased slightly.\74\ The great majority of rulemaking participants 
expressed the view that the actual and potential Rule benefits just 
enumerated will tend to increase over time, as compliance with, and 
consumer awareness of, the Rule increases.\75\
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    \71\HX-122 (BE Report) at 15 and Table VI, p. 14.
    \72\That data show that, in 1981, 18% and 11% of ``direct 
cremation'' purchasers, respectively, appear to have bought 
embalming services and caskets that were unnecessary, because the 
body is not present during the service (making embalming 
unnecessary) and is not buried (making a casket unnecessary). In 
1987, those figures declined to 9% (unneeded embalming) and 2% 
(unneeded caskets), respectively. See R-M-5 (Staff Rebuttal) at 9; 
R-B-2 (RS) and R-B-3 (BLS) data tapes. The decline in unneeded 
casket purchases is statistically significant.
    Record data also indicate that those arguably ``unneeded'' 
casket purchases occurred in many cases as a result of funeral 
director misrepresentations. Those data show that in all but one 
case, in instances where cremation was selected, consumers purchased 
a casket when told that one was required--8 of 9 instances in 1981, 
and 2 of 2 in 1987. Id.
    \73\Seven percent of those 1987 RS respondents who purchased 
cremations said that the providers they used represented that a 
casket was required, as opposed to 26% of 1981 cremation buyers. See 
R-B-2 at IV-8; R-N-1 (SR) at 39, n. 149. The 26% figure may be 
somewhat overstated, however, because, unlike the RS, the 1981 BLS 
question did not include a response category permitting the 
compliant statement that an unfinished wood box (an alternative 
container that is arguably a type of casket) was required. Eleven 
percent of the 1987 RS respondents answered the question that way.
    \74\In 1981, 19% of BLS respondents thought that caskets were 
required for cremation (vs. 13% in 1987); 61% said that embalming 
was always required (vs. 50% in 1987); and 60% in 1981 believed that 
a sealed casket preserved remains for an indefinite time (vs. 42% in 
1987). See R-B-3 (BLS Report) at Table 9, p. 32; R-B-2 (RS Report at 
Table III-54, p. III-85.
    \75\See R-N-1 (SR) at notes 116, 200-207.
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    Although not directly related to pro-competitive and informational 
benefits, other empirical evidence based on the Replication Study data 
and BE staff's compliance indices indicates that the proportion of 
consumers reporting satisfaction with their arrangements steadily 
increases as simultaneous provider compliance with the Rule's 
provisions increases.\76\ That evidence indicates that compliance with 
the Rule benefits consumers and funeral providers by increasing 
consumer satisfaction with funeral service, and that the level of 
satisfaction might continue to increase if compliance with the Rule 
were greater.
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    \76\See HX-125. The analysis demonstrated that, although 
``satisfaction'' is over 80% even when consumers report no 
compliance with individual measures, the proportion of satisfied 
consumers increases steadily as compliance with the Rule increases.
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    d. Costs to providers. While the Rule has begun to provide benefits 
to consumers, empirical evidence demonstrates that its requirements 
have not been a significant contributing factor to increases in funeral 
home costs of doing business or funeral home prices, or to any 
reduction of overall consumer satisfaction with funeral services. 
Funeral provider groups, however, asserted that the Rule has imposed on 
providers a variety of increased costs, most notably for personnel as a 
result of a 23-minute average increase in the duration of the 
arrangements conference, and for business expenses such as printing, 
accounting and legal services. These costs, those groups said, have 
been passed on to consumers in the form of higher prices, particularly 
for professional services.\77\
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    \77\See, e.g., R-M-9 (NFDA/NSM) at 62-76, 89-96 and McChesney, 
HX-126-A at 52-53, 86-89.
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    Statistical business expense data for the years 1977-1987 presented 
by the FFDA,78 and analyzed by an economist for the AARP, 
indicates that funeral home costs arguably most related to the Rule 
(such as legal, accounting and consulting costs) have increased at 
lower rates than other expenses (such as depreciation and casket 
cost),79 and that overall cost increases have resulted more from a 
general increase in all business expenses than from a dramatic increase 
in any one expense category.80 Mr. Hahn of the FFDA further 
testified that the Rule has played a very minor role in business 
expense and price increases,81 which he and other witnesses 
attributed generally to inflation and individual funeral home business 
decisions.82
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    \7\8Federated Funeral Directors of America (FFDA) processes 
records from 1,500 funeral home clients in 30 states that conduct 
about 181,000 funerals a year, representing just under 10% of all 
deaths. FFDA is the largest company of its type in the country. 
Hahn, Tr. II, 662-663.
    \7\9Dr. Barnow, speaking on behalf of the AARP, reported that 
his review of the FFDA data showed that accounting, consultants and 
legal costs were responsible for 2.6% of the real increase in 
overall funeral home costs since 1981, whereas depreciation and 
casket cost respectively accounted for 14.9% and 9.3% of the real 
increase in costs. See Dr. Barnow, HX-118 at 14 and Exhibit 2, 
pp.12-13. Dr. Barnow further stated that increased compliance would 
not substantially increase the Rule's costs, because there are no 
identifiable, major costs imposed by the Rule now on providers. Tr. 
Vol. I, 880, 883.
    \8\0HX-118 at 14. Dr. Berry, an economist and industry observer 
appearing on his own behalf, agreed that the Rule has not had a 
significant influence on funeral home costs. Tr. Vol. I, 151.
    \8\1Tr. Vol. II, 681, 683-85, 689-90.
    \8\2Id. at 678-80, 683, 688-689, 709; R-C-7 (American Funeral 
Director magazine interview with Mr. Hahn) at 3; Pierson, R-D-1 at 
2; Ninker, R-G-1 at 3; Davis, Illinois FDA, R-G-2 at 1; Botimer, Tr. 
Vol. III, 1292; and FDSA of Chicago, R-G-5 at 25;; Krause, Tr. Vol. 
II, 24; and Longmire, R-D-2 at 5; see also, R-N-1 (SR) at 83, n. 402 
and McChesney, HX-126-A at 53, which contains the following quote 
from Business Trends Analysts: 
    When first proposed, many believed the Funeral Rule would lower 
funeral and cremation service prices because lower-priced options 
would be made known to the consumer. However, when put into effect, 
the Funeral Rule caused funeral directors to examine their costs. In 
doing so, many realized that they had been ``giving away'' some 
services. In effect, funeral directors became more business-oriented 
as a result of the FTC rulings, and found that they could actually 
raise prices.
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    Further record analysis of the FFDA statistical data by BE staff 
indicates that funeral homes' personnel expenses appear to have 
increased very slightly since 1984, but that personnel expense as a 
proportion of overall business expense has not significantly changed in 
many years, including the period covered by the Rule. Similar analysis 
shows that salary expense as a proportion of personnel cost has 
likewise remained stable.83 Mr. Hahn of the FFDA testified that 
significant changes in those areas should have occurred if the Rule 
were significantly increasing funeral homes' personnel costs.84
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    \8\3See HX-50 (BE Personnel Expense Data Analysis).
    \8\4Tr. Vol. II, 688.
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    e. State Regulation of Funeral Providers. The rulemaking record 
finally documents that most individual states favor the continued 
existence and strong enforcement of the Funeral Rule to protect funeral 
consumers, rather than reliance on the states to adopt comprehensive, 
state-specific legislation. A 1987 staff survey of the states' funeral 
industry statutes, regulations and rules revealed that ten states have 
incorporated the Rule by reference into their laws or adopted 
provisions similar to six of the Rule's most salient requirements; six 
have enacted at least four of those provisions, and, overall, thirteen 
to twenty-five states have laws that include one or more provisions 
similar to the Rule.85 No party presented evidence during the 
review that additional states have adopted relevant funeral laws or 
that existing laws have been significantly strengthened.
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    \8\5See R-C-12 (staff survey); R-J-1 (Conference of Funeral 
Service Examining Boards survey) at 4-6.
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    Testimonial evidence presented by state legislators and officials 
further indicates that, although the Rule has helped stimulate the 
enactment of similar funeral industry laws in several states, such 
reform is unlikely in their or other states because of industry 
opposition. Those witnesses expressed their views that the Funeral Rule 
needs to be retained as a result, and is beneficial to consumers, 
funeral providers, and state enforcement officials.86
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    \8\6See the testimony cited in R-N-1 (SR) at 97-100.
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C. Section-by-Section Analysis

1. Introduction
    The Rule as amended contains two major changes--deletion of the 
affirmative telephone disclosure requirement and the prohibition of 
non-declinable fees (such as so-called ``casket handling fees'' and 
``basic facilities fees'') charged in addition to the non-declinable 
fee for basic professional services of the funeral director and staff. 
These primary changes, and a number of ``fine-tuning'' amendments, are 
intended to increase the Rule's benefits and reduce its costs by 
facilitating funeral providers' compliance with, and consumer 
understanding of, the Rule's requirements, while preserving the 
integrity of the Rule's ``unbundling'' and price disclosure 
requirements. Finally, the Commission has made several technical 
amendments to the Rule that are necessary to correct inconsistencies or 
unnecessary language in certain Rule provisions, or to complement other 
amendments.
2. Affirmative Telephone Disclosure Repeal: Section 453.2(b)(1)(i)
    Section 453.2(b)(1)(i) of the original Rule required funeral 
providers to affirmatively tell persons who call and ask about the 
``terms, conditions, or prices'' at which funeral goods or funeral 
services are offered that price information is available over the 
telephone. The Commission has decided that the affirmative telephone 
disclosure provision should be deleted from the Rule because its costs 
outweigh its actual and potential benefits to consumers, and because 
the integrity of the Rule's price disclosure requirements will be 
maintained by retaining the requirement to provide price information 
over the telephone on request.
    The Commission designed this provision to help consumers in two 
ways. First, it would alert them to the availability of price 
information over the telephone, and, second, it might diminish 
consumers' reluctance to seek such information. The Commission intended 
that affirmative disclosure provision to facilitate consumers' 
comparison shopping for a provider.87
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    \8\7R-B-5 (SBP) at 42273.
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    Empirical evidence presented by the Replication Study, however, 
indicated that few consumers comparison shop before selecting a 
provider. The Commission in the NPR thus requested public comment on 
whether: (1) Consumers are aware of their right to seek price 
information over the telephone; (2) compliance with this provision is 
costly; and (3) it should retain the affirmative telephone disclosure 
provision in view of the study results.88
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    \8\8R-A-1 at 19869 (Question 7).
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    Empirical and testimonial evidence in the record provided insights 
into the delicate relationship between consumers and funeral providers 
that appear to affect the degree to which consumers seek price 
information directly from providers. Results from the Baseline, 
Replication and Gallup Studies indicated that consumers seldom seek 
price information or comparison shop by calling providers directly. In 
1981, 7.2% of the Baseline Study respondents comparison shopped by 
contacting more than one funeral home;89 4.2% of the 1987 
Replication Study respondents did so,90 and 11% of the 1988 Gallup 
Study consumers contacted more than one provider.91 Most 1987 
Replication Study respondents knew which funeral provider they intended 
to use,92 and those who had not decided on a funeral provider 
usually contacted only one at the time of need.93 In the initial 
telephone contact, RS respondents asked about ``prices, terms or 
conditions'' only 9.2% of the time.94
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    \8\9HX-122 (BE Report) at 14, Table VI.
    \9\0Id. (42 of 991) Eighty-five percent of respondents had 
already decided on a funeral home before contacting any. R-B-2 at 
Table III-18, p. III-24. Eighty-two percent of those who had not 
decided on a particular funeral home contacted only one funeral 
home. Id. at III-25.
    The study contractor, Market Facts, in its report stated that 
these results ``must be viewed with extreme caution'' because so few 
respondents (43) contacted multiple funeral homes and even fewer 
(35) contacted any by telephone. Id.
    \9\1Colasanto, HX-66 at Ex. B, p. 7 and Tabs, p. 19 (68 of 607).
    \9\2R-B-2 at Table III-18, p. III-24 (85% had already selected 
the provider).
    \9\3Id. at III-25 (95% of the respondents who had not decided on 
a funeral provider before contacting one still contacted only one).
    \9\4HX-122 (BE Report) at 16.
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    Record evidence indicated that both consumers and providers are 
reluctant to initiate price discussions during funeral 
arrangements.95 The evidence indicates that, unlike a visit to the 
funeral home, where the general price list facilitates the actual 
review of services and merchandise, the offer to discuss prices over 
the telephone is helpful only if the consumer is prepared to do so. The 
weight of the evidence demonstrates that the initial telephone contact 
is a tentative encounter in which the consumer is relying on the 
funeral provider to set the tone of the interaction. The funeral 
provider at that delicate time, however, reasonably wishes to avoid the 
appearance of insensitivity by raising price issues when the callers' 
typical concerns are whether and how to arrange the funeral with the 
particular provider.
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    \9\5See R-N-1 (SR) discussion at 61; Hocker, Tr. Vol. III, 1435; 
Johnson, Tr. Vol. I, 744; Starks, Tr. Vol. II, 402-403; and 
Hennessy, Tr. Vol. II, 1024.
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    Several provider witnesses96 testified that the affirmative 
telephone disclosure has offended callers, who interpret the disclosure 
as an indication of the funeral provider's preoccupation with the 
consumer's ability to afford services.97 For example, a state 
funeral board member observed that, whenever a client calls first to 
arrange a date and time for a funeral service, expecting an empathic 
response, the consumer is offended by the funeral director's uninvited 
statement that price information is available, and the funeral provider 
resentful about having to make such a statement at this early 
juncture.98 Other providers distinguished between the accepted 
practice of giving price information that is requested, and the 
difficulty of telling the caller who has not requested it that the 
funeral provider is prepared to talk about prices.99 Funeral 
director representatives concluded that providers' goodwill is harmed 
as a result of the offense generated by the unsolicited affirmative 
disclosure, which providers under the Rule must make during the initial 
telephone contact.100
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    \9\6None of the systematic, empirical evidence in the record 
addressed the question whether the unsolicited disclosure during the 
initial telephone discussion that price information is available was 
offensive or confusing to consumers. The Gallup results indicated 
that most arrangers (83%) are not offended ``when funeral directors 
give them information about the cost of funeral services when they 
first begin making arrangements.'' See Colasanto, HX-66 at Appendix 
B, Tabulations, p. 24. That question, however, refers more 
specifically to consumers' feelings about actual price information 
offered by providers during the arrangements conference, such as 
providers' offer of the GPL, and not to consumers' views about the 
affirmative telephone disclosure that price information is 
available.
    \9\7Hocker, Tr. Vol. III, 1400-1401 (``It's very difficult 
sometimes to tell people price information is available on the 
telephone when they don't ask for it and when it's the furthest 
thing from their mind. It creates a real awkwardness for us. There 
are many times people want to have an idea of when they can have the 
service, how long they can wait, Joey's in Germany in the service 
and he has to come back home, and to tell them that price 
information is available on the telephone is sometimes an intrusion 
when it's not called for.''). See also, Nilsen, Tr. Vol. III, 1482; 
and Keith, Tr. Vol. III, 1459.
    \9\8J. Hunter, Tr. Vol. III, 603-604. See also, Nilsen, Tr. Vol. 
III, 1482 (``It just simply makes it look to callers that instead of 
caring individuals we're money-hungry professional or business 
people out there; that's what it does to the consumer at that point 
in time.'').
    \9\9See Keith, Tr. Vol. II, 1459 (``We're objecting to the 
disclosure at that moment, that triggering event, not to the 
disclosure of the prices over the telephone upon request''); and 
Hocker, Tr. Vol. III, 1464, 1480 (``I would rather not have to make 
an affirmative statement unless people asked for price information, 
and then you know that they're interested in it, and so there's no 
problem.'').
    \1\00See, e.g., Hennessy, HX-61 at 7-8; Farrow, HX-85 at 4; and 
Johnson, Tr. Vol. I, 748.
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    The evidence further shows that providers experience difficulty in 
understanding their obligation under Sec. 453.2 (b)(1)(i). Under that 
affirmative disclosure provision, a funeral provider must either tell 
every caller that price information is available, or determine whether 
an inquiry concerns a ``term,'' ``condition,'' or ``price'' of funeral 
goods or funeral services offered, thus triggering the disclosure. The 
original staff Compliance Guidelines illustrated that problem; the 
Guidelines told funeral providers that a call asking whether the 
provider will perform a funeral for a particular religion does not 
trigger the disclosure, whereas a call asking whether the provider will 
remove the deceased from a hospital does.101 The difficulty of 
determining whether an inquiry concerns a ``term'' or ``condition'' 
thus places a clear burden on the provider, without a commensurate 
benefit to the caller.102
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    \1\01R-B-6 at 28062, 28064 (Illustrations #2 and #6).
    \1\02The Commission, however, has not adopted the AARP-suggested 
modification that would resolve this compliance problem by requiring 
funeral providers to inform all callers that price information is 
available over the telephone. The record contains substantial 
evidence that some consumers would be offended unnecessarily by such 
unsolicited remarks, and that substantial harm to funeral providers' 
reputations could occur, without significant consumer benefit. These 
possibilities further may increase the likelihood of non-compliance, 
which the evidence suggests may be no greater than 50% at this time. 
On balance, ensuring that those callers who seek price information 
can obtain it would better assist consumers in making informed 
selections.
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    Other empirical data indicate that the disclosure does not affect 
consumers' expenditures for funeral arrangements. Economic analysis of 
the Replication Study data indicated that those consumers who called 
the provider and received the Rule-required affirmative disclosure 
spent no less for their arrangements than other respondents.103
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    \1\03HX-122 (BE Report) at 17.
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    Consumer group participants, however, suggested that the 
affirmative disclosure was meant to signal consumers who are reluctant 
to raise price issues that it is acceptable to do so, and that 
providers can find ways to make that disclosure without offending 
consumers.104 Although the empirical evidence is not conclusive on 
the issue, the preponderance of the reliable anecdotal evidence 
provided by many funeral directors who must make the disclosure to 
consumers supports the conclusion that the requirement's potential to 
overcome consumers' inhibitions and benefit additional consumers is 
unlikely, and does not justify the imposition of awkwardness and 
potential offense in a transaction already fraught with delicate 
business, social and personal issues.
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    \1\04P-39 (AARP) at 31-39; P-36 (National Consumers League) at 
2.
---------------------------------------------------------------------------

    In summary, the record evidence shows that consumers rarely price 
shop for a funeral home or seek price information directly from 
providers because of their reluctance to do so and their general lack 
of awareness about prices charged by providers, and not because of a 
conviction that price information cannot be requested over the 
telephone. The affirmative disclosure that price information is 
available thus does not appear to give consumers new information that 
is likely to increase their desire to ask about prices or to encourage 
price shopping.
    The record evidence further indicates, however, that the Rule 
overall is contributing to increased consumer ``price sensitivity'' 
that leads some additional consumers to use the telephone to shop for 
lower-cost providers, or to seek comparative price information from 
non-industry sources. Consequently, consumers who want price 
information will affirmatively use the telephone to seek such 
information from providers who advertise prices, or to engage in 
alternative shopping methods, such as calling memorial societies, media 
price ``hotlines,'' or state agencies that make comparative price 
information available.105 The Commission has concluded that 
consumers will increasingly seek price information as their awareness, 
and the availability, of comparative price information increases.
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    \1\05See, e.g., R-N-1 (SR) discussion at 58-59, 66-67.
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    The preponderance of the evidence in the rulemaking record 
indicates that the affirmative telephone disclosure is an inartful and 
unnecessary signal to consumers about the availability of price 
information that is unlikely, over time, to provide substantial 
benefits to consumers not afforded by the Rule's other price disclosure 
provisions.106
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    \1\06 Nor does the evidence support a conclusion that industry 
compliance with the affirmative telephone provision is too low to 
permit a conclusion about its potential benefits. The evidence on 
compliance with Sec. 453.2(b)(1)(i) is inconclusive. The RS data 
show that about half of all providers (49%) who were asked about 
funeral ``prices, terms, or conditions'' over the telephone made the 
required disclosure. However, an unusually large proportion of the 
respondents--29%-31%--could not recall whether they received the 
disclosure, and the study contractor warned that the results should 
be viewed with extreme caution because of the small cell size (93 
respondents called and asked about ``prices, terms, or 
conditions''). Excluding from the analysis those who could not 
recall increases the compliance level to about 72%. See R-B-2 (RS) 
at III-36, Table III-26; HX-122 (BE Report) at 16-17 (compliance 
results); R-B-2 at III-25, III-31 (Market Facts concern).
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    In light of this evidence, the Commission has determined to repeal 
the affirmative telephone disclosure provision because its potential to 
benefit additional consumers is unlikely, and does not warrant the 
intrusion of potential offense in what is otherwise an extremely 
delicate business, social and personal transaction. The Commission 
further concludes that the integrity of the Rule's price disclosure 
requirements will be maintained by retention of the general requirement 
to provide price and other readily-available information over the 
telephone on request (Sec. 453.2(B)(1)).
    Funeral provider representatives, however, suggested that such 
action would concede what they consider the Rule's premise that 
increased comparison shopping was necessary to cure 
``supracompetitive'' prices.107 That suggestion, however, 
overstates the importance of the disclosure to achieve the goal of 
increasing comparison shopping, and fails to acknowledge record 
evidence indicating that the Rule overall already has contributed to 
increased price competition.108
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    \1\07P-37 (NFDA/NSM comment) at 23-24.
    \1\08See the evidence cited at notes 63-65, supra.
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    The Commission in its Statement of Basis and Purpose for the Rule 
clearly expressed its view that the general telephone requirement to 
give price information on request, and the requirement to give the GPL 
to any person seeking in-person information about funeral arrangements, 
in addition to the affirmative telephone disclosure, would all 
contribute to increased comparison shopping.109 Nevertheless, the 
Commission did not base the Rule's entire success in reducing barriers 
to price competition on the affirmative telephone disclosure or on 
comparison shopping, because it fully recognized that such behavior 
might always be infrequent.110 As described above, the Rule's 
provisions already are providing pro-competitive benefits to consumers, 
including increased price sensitivity, despite the low overall levels 
of industry compliance, price competition and consumer knowledge 
demonstrated by the record. Those benefits are likely to increase over 
time as industry compliance with, and consumer awareness of, the Rule's 
other provisions increases.
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    \1\09R-B-5 at 42272-42273.
    \1\10Id. at 42273, n. 140.
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3. ``Casket Handling Fees:'' Section 453.4(b)(1)(ii)
    One benefit the Commission ascribed to the Rule in its 1982 
Statement of Basis and Purpose was that ``the greater availability of 
price information may encourage entry into the funeral market of new 
competitors seeking to attract business by offering lower 
prices.''111 That prospective benefit was important to the Rule's 
remedial intent, because the Commission found that the funeral industry 
had historically opposed price advertising.112 The Commission 
concluded that, as a result of that reluctance to make price 
information readily available, consumers purchased unwanted items and 
paid higher than competitive prices for items they selected.113
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    \1\11R-B-5 at 42293.
    \1\12Id. at 42266.
    \1\13Id. at 42269.
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    The Commission further recognized that easy access to the market 
and a fair chance to compete were prerequisites to the entry of new 
retailers into the funeral market.114 The Rule's general 
``unbundling'' provision, Sec. 453.4(b), afforded that opportunity to 
new entrants by removing the primary industry restraint on consumer 
choice--package-only pricing.115 The Commission found that, by 
``bundling'' all funeral goods and services in a package, funeral 
providers had effectively forced consumers to buy unwanted items as a 
condition of providing a necessity that only they can provide: 
disposition of the remains.116 Section 453.4(b) of the Rule 
prohibits funeral providers from conditioning the furnishing of one 
funeral product or service upon the purchase of another product or 
service unless required by law, such as embalming for interstate 
shipping, or as a ``practical necessity,'' such as embalming where the 
consumer wants a viewing of the remains for several days.
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    \1\14 R-B-5 at 42291.
    \1\15The Commission's major finding in the original proceeding 
was that funeral providers had denied consumers the privilege of 
freely choosing the goods and services they wanted by failing to 
disclose itemized price information and by ``bundling'' their 
funeral offerings together in pre-determined packages; consumers' 
only choice was between packages. R-B-5 at 42260, 42279-42282.
    \1\16Id. at 42281.
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    Some ANPR commenters asserted that funeral providers, in response 
to emerging competition in the sale of caskets from cemeteries and 
other third-parties, charge high ``casket handling fees'' for 
arrangements where consumers supply their own caskets purchased from 
those third parties.117 The alleged purpose of these fees was to 
recoup overhead costs and profits built into casket prices but lost on 
the third-party casket sales. The Commission in the NPR thus sought 
comment on the existence and impact of so-called ``casket handling 
fees,'' and on whether, and how, the Rule should address that 
practice.118
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    \1\17See R-A-1 (Notice of Proposed Rulemaking) at 19867.
    \1\18Id. at 19870 (Question 14).
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    a. Existence and impact. Members of the third-party, casket seller 
industry119 provided empirical and other evidence on the purpose, 
widespread existence and impact of these ``casket handling fees.'' 
Casket seller representatives asserted that the emergence of third-
party casket sellers is directly attributable to the Funeral Rule's 
``unbundling'' provision; those sales were virtually non-existent 
before the Rule.120 A PAA official who presented the results of a 
PAA membership survey (the ``PAA Survey'') on handling fee issues, Mr. 
Duke Radovich, estimated that there are between 100 and 200 casket 
retailers in the country.121
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    \1\19 Third-party casket sellers generally were represented 
during this review by the PAA.
    \1\20 R-M-12 (PAA) at 18, 82. See also, Radovich, Tr. Vol. III, 
1029 (Casket retailers owe their existence primarily to the 
enactment of the Funeral Rule, which allows the consumer to use a 
casket from an outside source); and Drozda, Tr. Vol. II, 894 (few 
casket retailers before the Rule because providers would not accept 
the outside casket and provide funeral service).
    \1\21 Radovich, Tr. Vol. III, 1057 (31 of the 90 survey 
respondents were active third-party casket sellers at the time of 
the survey). He reported that these thirty-one active casket 
retailers are located in Florida, Illinois, Iowa, Maryland, 
Michigan, Mississippi, Nebraska, Ohio, Pennsylvania and Wisconsin; 
74% of those sellers exist in Pennsylvania, Michigan, and Ohio. Id; 
HX-101 at Exhibit ``A-3.''
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    The PAA Survey provided empirical evidence on the widespread 
existence and amount of ``casket handling fees,'' as reported by the 
respondent retailers. Eighty-six percent of the respondents said that 
at least 60% of the funeral homes in their market area assess handling 
fees, about two-thirds said that 80% to 100% charge the fees, and one-
quarter reported that all of the homes impose the casket handling 
fee.122 Mr. Radovich concluded that a substantial number of 
providers assess ``casket handling fees'' wherever third-party sellers 
exist.123 Individual casket retailers agreed with that 
finding,124 and further testified that funeral providers began 
imposing handling fees when third-party casket sellers entered the 
market.125
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    \1\22Radovich, HX-101 at 17 and Ex. B, p. 5.
    \1\23Id. at 12, 17, 20.
    \1\24See Neel, HX-25 at 4 and Exhibit 2; Teck, HX-58 at 5-6 and 
Ex. B; and Heffner, HX-33 at 8 and Ex. J-1.
    \1\25 Graf, Tr. Vol. II, 647; Neel, Tr. Vol. I, 582-584; and 
Teck, Tr. Vol. II, 861-862. See also, Showalter, Tr. Vol. II, 118. 
One funeral provider witness who did not charge handling fees stated 
on the record that, if he got competition from casket retailers, he 
would begin to assess fees. Hennessy, Tr. Vol. II, 997.
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    Concerning the amount of ``casket handling fees'' assessed, 81% of 
the PAA Survey respondents said that the average handling fee was over 
$300; 74% reported an average fee between $300 and $500.126 Sixty-
two percent of the PAA Survey respondents further reported that the 
highest fee charged was over $500; 35% said that the largest fee was 
over $700.127 A ``handling fee'' of $500 was nearly equal to the 
average wholesale cost of a casket in 1988 ($517) and 60% of the 
average casket mark-up in that year ($821).128 Wendell Hahn of the 
FFDA, which provides financial advising services to 1,500 providers in 
30 states, testified that handling fees are assessed because providers, 
who typically charge professional service fees ``hundreds of dollars'' 
below their true operation cost, will try to recoup those costs that 
are lost by the third-party casket sale. Mr. Hahn concluded that 
handling fees are thus roughly equal to the amount that providers' non-
declinable service fees are underpriced.129
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    \1\26Radovich, HX-101 at 18 and Ex. B, p. 6.
    \1\27Id.
    \1\28See Hahn, FFDA, HX-49 at 2. The average mark-up in 1988 was 
$1,338 (average retail casket price) minus $517 (average wholesale 
cost), or $821. By definition, a handling fee must be ``high'' if 
its purpose is to recoup overhead costs and profit lost on the 
casket sale.
    \1\29Tr. Vol. II, 692-693. Mr. Hahn further suggested that by 
failing to disclose the amount of overhead not included in the non-
declinable professional services fee, providers may be engaged in 
deceptive pricing. Id. at 671.
    Several local surveys conducted by individual casket retailers 
provided further evidence on the range of ``casket handling fees'' 
in given market areas. Those surveys found that handling fees ranged 
from $100 to $700 in Chicago; DeSoto, R-B-42; and Hennessy, HX-61 at 
8; from $150 to $1000 in Greater Pittsburgh; Neel, HX-25, Exhibit 2 
at 1; and from $100 to $800 in Detroit, Michigan; Teck, HX-58, 
Exhibit A. Wendell Hahn of the FFDA reported six instances among a 
sampling of funeral home records he reviewed for the month of August 
1988 where handling fees ranging from $75 to $480 were disclosed on 
providers' GPLs. HX-49 at 5, Tr. Vol. II, 673, 719-720. Other 
witnesses, including two funeral directors, testified to the 
existence of handling fees ranging from $425 to $2,500. See 
Showalter, Tr. Vol. II, 120; HX-36, at 17 (citing an open letter 
from Steve Shurden, President of the Oklahoma Funeral Directors 
Association, printed in The Oklahoma Director, Vol. XV, No. 9 (Sept. 
1985) at 1) ($1,000-$2,500); Starks, Tr. Vol. II, 412 ($700); and 
Drozda, Tr. Vol. II, 896-897 ($425).
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    Record evidence indicates that ``casket handling fees'' prevent 
potential price competition and reduce consumer choice. Ninety-two 
percent of the casket seller respondents to the PAA Survey reported 
that their casket sales have declined since the imposition of handling 
fees; about one-third said that they have reduced or eliminated their 
casket marketing efforts as a result of those fees.130 One 
industry observer testified that ``casket handling fees'' have caused 
the exit from the casket market of five small businesses who thought 
that they could gain market share by offering third-party caskets at 
lower prices.131 Several casket retailers and others also asserted 
that these so-called ``handling fees'' impede price competition by 
removing consumers' incentive to price-shop for less costly caskets, 
and penalize consumers who do shop.132
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    \1\30Radovich, HX-101 at 20-22 and Ex. B, pp. 8-9 (sales 
decreased by 20% for 54% of respondents, by 40% for 29% of sellers, 
and by 80% for 13% of respondents; although other market factors 
could have contributed to the decreases, the PAA attributed them to 
handling fees).
    \1\31Showalter, Tr. Vol. II, 107-108.
    \1\32See, e.g., Teck, Tr. Vol. II, 867; Neel, Tr. Vol. I, 568, 
572-573, 615; Drozda, Tr. Vol. II, 923, 944; Radovich, Tr. Vol. III, 
1063; Showalter, Tr. Vol. II, 109, HX-36 at 16-17; and R-B-27 (CAFMS 
Comment) at 5.
    Casket retailers and others provided evidence that many third-
party sellers offer caskets at prices lower than those charged by 
funeral homes. About half of the seventeen PAA Survey respondents 
who answered the survey's price question said that their price for 
the ``same or similar'' casket was at least $250 less than funeral 
home prices in their market area. About one-quarter said that their 
prices were between $100 and $250 less, and another quarter said 
that their prices were comparable (within $100). See, Radovich, HX-
101 at Ex. B, p. 10. One retailer who commented on the ANPR reported 
that a small casket manufacturer in Chicago was selling 90% of its 
retail caskets on an at-need basis, charging about half that of 
Chicago funeral homes--$250 for a cloth-covered casket and $650 for 
a sealed, metal casket. See, DeSoto, R-B-42.
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    Finally, third-party sellers testified that market forces will not 
effectively regulate ``casket handling fees,'' and that the elimination 
of those discriminatory fees would result in increased competition in 
the sale of caskets and reduced casket prices.133 Mr. Royal Keith, 
a funeral provider appearing for the NFDA, when asked on cross-
examination about the effect of market forces on handling fees, 
responded that he was not aware of any cases where market forces have 
successfully reduced the amount of handling fees charged in a 
particular area.134
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    \1\33See, e.g., Teck, Tr. Vol. II, 872-873; Drozda, Tr. Vol. II, 
944, 974.
    \1\34Tr. Vol. III, 1422.
---------------------------------------------------------------------------

    b. Providers' basis for imposing ``casket handling fees''. 
Proponents of handling fees did not provide evidence to refute that 
offered by casket retailers and others on the purpose, prevalence and 
impact of ``casket handling fees'' on the casket market. Funeral 
provider representatives, for example, did not dispute that ``casket 
handling fees'' are used to recoup profits and overhead costs lost to 
third-party casket sales, but defended that purpose on several 
grounds.135 Providers' responses to third-party casket sales 
arise, the trade groups asserted, due to the industry's long-standing 
tradition of recovering much of its overhead costs and profits through 
the casket mark-up, and not by increasing service fees; lower service 
fees allow funeral homes to provide full service funerals, including 
lower-priced caskets, to those who might not otherwise be able to 
afford them. Although providers in recent years have shifted some of 
that casket mark-up to service fees, the shift has been very gradual. 
The industry groups concluded that providers who lose casket sales to 
third parties must, as a result, still forego the recovery of much of 
their costs and profits that would have been included in the casket 
sale.
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    \1\35Nor did the NFDA and NSM argue that ``casket handling 
fees'' are imposed for actual services rendered in ``handling'' 
consumer-supplied caskets. Many witnesses, including funeral 
directors, testified that providers incur no additional labor or 
insurance costs when third-party sellers provide a casket, and that 
the actual labor time spent handling any casket is minimal; the cost 
for that service is normally included in the non-declinable 
professional services fee. See R-M-9 (NFDA/NSM) at 182; Hahn, FFDA, 
Tr. Vol. II, 692-693; Bates, NSM Executive Director, Tr. Vol. I, 
706-708; Simms, funeral director, R-J-9 (supplementing HX-42); Dr. 
Nelson, AARP, Tr. Vol. I, 77-78; Showalter, industry analyst, Tr. 
Vol. II, 116-117, 120-122; Graf, Tr. Vol. II, 652; Hennessy, funeral 
director, Tr. Vol. II, 1009-1014; Radovich, funeral director/casket 
retailer, Tr. Vol. III, 1044-1045; Starks, funeral director, HX-41 
at 11, Tr. Vol. II, 369; and Drozda, funeral director/casket 
retailer, Tr. Vol. II, 897.
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    Those groups asserted that the imposition of ``casket handling 
fees'' is an isolated, non-discriminatory practice that fairly 
allocates providers' overhead costs and profits; the purpose of the fee 
is to obtain from consumers who buy third-party caskets consumers' 
proportionate share of providers' costs and profits for rendering the 
funeral service. Providers' only alternative to handling fees, the 
industry groups argued, would be to raise service fees charged to all 
consumers, which, in effect, would require regular clients who purchase 
providers' caskets to subsidize the funerals of consumers who purchase 
their caskets elsewhere--by paying the mark-up on the casket as well as 
the higher service fee that would result from other consumers supplying 
their own caskets.
    Those groups further asserted that handling fees are not assessed 
for ship-ins, outer burial container sales traditionally lost to 
competing cemeteries, or for direct cremation/immediate burials where 
the consumer supplies the alternative container because, unlike the 
unexpected loss of a casket sale to a third-party seller, providers set 
prices for those services with the knowledge that they will not make a 
sale in those cases. Finally, the funeral groups concluded that the 
amount of ``casket handling fees'' is sufficiently regulated by the 
market, because providers that charge unreasonably high fees will 
offend consumers and lose market share.136
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    \1\36R-M-9 at 181-189; R-G-6 at 80-83. Individual providers 
agreed with the NFDA and NSM position. See Hocker, HX-111 at 13; 
Franzen, Tr. Vol. II, 819-820, Tr. Vol. III, 1408; Hennessy, Tr. 
Vol. II, 997-998; Keith, Tr. Vol. III, 1419; Yurs, Tr. Vol. II, 530, 
563; and Nilsen, Tr. Vol. III, 1414-1415. See also, Hahn, FFDA, Tr. 
Vol. II, 692-694.
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    c. Commission's conclusion and amendment. The Commission has 
concluded 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 in the sale of caskets fostered by the Funeral 
Rule.137 Some providers are forced to impose handling fees because 
of their competitive reluctance to shift overhead costs and profit from 
the casket mark-up to professional service fees.138 Others may use 
handling fees as a direct response to third-party competition. In 
either case, the issue to be determined in this proceeding was whether 
the Rule should allow providers to condition a consumer's right under 
the Rule to obtain a funeral service with a consumer-supplied casket 
upon the payment of a non-declinable fee, charged in addition to the 
basic professional services fee (already permitted under the Rule to be 
non-declinable), or whether 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. For example, 
providers under the Rule may recoup any unallocated costs or profits 
lost to third-party casket sales in the non-declinable professional 
services fee permitted by Sec. 453.2(b)(4)(iii)(C). The Commission has 
determined that the latter course is warranted to affirm the Rule's 
intent to increase consumer choice and reduce barriers to price 
competition.
---------------------------------------------------------------------------

    \1\37Even if ``casket handling fees'' were not widespread, their 
coverage in the Rule would be necessary because they frustrate the 
original Rule's ``unbundling'' provision and impose substantial, 
unavoidable costs on consumers who make purchase decisions based on 
their rights under that provision.
    \1\38The Commission disagrees with arguments made by funeral 
provider groups during the proceeding that regulation of handling 
fees would amount to ``price regulation.'' The primary issue is the 
propriety of the handling fee cost and profit adjustment, through 
the imposition of a separate, non-declinable fee charged in addition 
to the non-declinable fee for ``services of funeral director and 
staff,'' and not the amount of the handling fee.
---------------------------------------------------------------------------

    Section 453.4(b) of the Funeral Rule was intended to address all 
``bundling'' arrangements imposed on consumers by funeral providers. 
Under that provision, consumers have the right to decline the purchase 
of any item, including a casket, from a funeral provider, and may elect 
to supply their own. That right, however, is illusory if funeral 
providers can condition consumers' choice on the payment of an 
additional, non-declinable fee. The fee, in any amount, penalizes 
consumers for exercising their choice afforded by the Rule.139
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    \1\39Section 453.4(b)(2)(ii) of the Rule permits providers to 
refuse a request for goods and services that would be ``impossible, 
impractical, or excessively burdensome'' to provide. That provision, 
however, does not permit a funeral provider to refuse service to a 
consumer because the consumer supplied the casket. See, e.g., Staff 
Opinion Letter to George W. Lemke, Executive Director, Casket 
Manufacturers Association of America (March 18, 1985), FTC File No. 
215-46, No. XXVIII-211.
---------------------------------------------------------------------------

    ``Casket handling fees'' require consumers to pay two substantial 
mark-ups, one on the casket they purchase from the third-party seller, 
and another on the casket they did not buy from the funeral provider. 
The evidence indicates that handling fees average between $300 and 
$500, and often are higher. That burden, the evidence shows, 
effectively removes consumers' economic incentive to purchase a casket 
from anyone but the funeral provider. Casket sales by third parties 
have declined as a result, and several retailers have curtailed their 
marketing efforts or withdrawn from the market. Handling fees thus 
frustrate the purpose of the Funeral Rule--to ensure informed consumer 
choice and foster a competitive funeral market. The Commission thus 
concludes that casket handling fees are unfair conditions on a 
consumer's right to decline unwanted items he or she may wish to 
purchase elsewhere, in violation of section 5 of the FTC Act, and the 
spirit of the Rule's ``unbundling'' provision (Sec. 453.4(b)).140
---------------------------------------------------------------------------

    \1\40 Conditioning the furnishing of any funeral good or service 
upon the payment of a so-called ``casket handling fee,'' or any 
other non-declinable fee not otherwise permitted by the Rule, is an 
unfair practice for the same reasons articulated by the Commission 
in declaring ``package-only'' pricing unfair when it promulgated the 
Funeral Rule and its general ``unbundling'' section--453.4(b) (the 
practice is prevalent and imposes substantial and unavoidable injury 
on consumers). See R-B-5 (SBP) at 42269-71.
---------------------------------------------------------------------------

    Section 453.4(b), however, does not specifically address the 
practice of conditioning the furnishing of any funeral goods or 
services on the payment of fees, such as ``casket handling'' fees, 
because those fees have developed since the Rule's implementation, and 
because they are not conditioned charges for ``goods'' or 
``services''--the conditioned products referred to in that provision. 
The Commission thus has concluded that so-called ``casket handling'' 
fees, and other non-declinable fees that are more aptly referred to as 
``recovery of overhead and profit'' fees, need to be separately 
addressed in the Rule.141
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    \1\41 The Commission prohibits fees that are similar in purpose 
to ``casket handling fees'' in its Advertising of Ophthalmic Goods 
and Services Trade Regulation Rule, 16 CFR Part 456. That Rule 
requires eye doctors to give consumers a copy of their eyeglass 
prescription, so that consumers can shop for eyeglasses. Section 
456.7(c) of that Rule further prohibits eye doctors from charging 
consumers a fee ``as a condition for releasing the prescription,'' 
other than the examination fee. The section thus prevents eye 
doctors from charging a fee for goods and services not provided 
that, in effect, would penalize consumers who wish to comparison 
shop for ophthalmic goods. Like the non-declinable ``casket handling 
fee,'' the conditional fee prohibited by this Ophthalmic Goods and 
Services Rule frustrates a consumer's right under the Rule to 
exercise free choice.
---------------------------------------------------------------------------

    The Commission recognizes the legitimate desire and expectation of 
funeral industry members to recover overhead costs and realize a 
profit. The Rule, however, permits consumers to select and buy only the 
items wanted unless state or local law require otherwise. The Funeral 
Rule is designed to permit funeral providers to have one non-declinable 
fee to recover general overhead costs--the fee for the basic services 
of funeral director and staff. Permitting funeral providers to have 
additional surcharges, whether they are called ``casket handling 
fees,'' or something else, would frustrate the Rule's aim to promote 
full itemization and informed consumer choice.
    To prevent that result and clarify the current requirements of the 
Rule, the Commission has added paragraph (b)(1)(ii) to Sec. 453.4 of 
the Rule. That amendment prohibits as an unfair or deceptive act or 
practice the furnishing of funeral goods or services upon payment of 
any conditional ``fees'' not otherwise permitted by the Rule. The 
amendment, however, permits funeral providers to recover overhead in 
the two ways permitted by the original Rule--by marking up the items 
offered for sale to the public, and by having the non-declinable fee 
for basic services of funeral director and staff, permitted by 
Secs. 453.2(b)(4)(iii)(C) and 453.4(b)(2)(i)(A) of the Rule.
    The Commission also has amended Sec. 453.2(b)(4)(iii)(C)(2) of the 
Rule to require, among other things, disclosure of: (1) The dollar 
amount charged for any non-declinable basic professional services when 
that charge is included in the price of the provider's caskets; and (2) 
the statement ``This same fee shall be added to the total cost of your 
funeral arrangements if you provide the casket.'' These amendments are 
intended to have the same effect as the amendment to Sec. 453.4(b) 
above--they prohibit funeral providers (who choose not to itemize the 
charge for basic professional services) from charging consumers who 
purchase caskets from third parties a non-declinable fee for recovery 
of overhead and profit in addition to the professional services fee 
charged to all customers.
    These two amendments are not intended to impede funeral providers 
from recovering overhead costs and earning profits from their 
operations. Efficient providers can structure their prices charged to 
all consumers to recover the revenue lost to third-party casket (or 
other merchandise) sales. The evidence indicates that providers for 
many years have so adjusted their pricing structure to account for 
consumer-supplied caskets (in ship-in cases), outer burial containers, 
and alternative containers.142
---------------------------------------------------------------------------

    \1\42 See, e.g., the evidence cited at note 136, supra.
---------------------------------------------------------------------------

    Providers asserted that the impact of a ban on imposing separate, 
non-declinable casket handling fees, in addition to the non-declinable 
professional services fee, would be increased professional service fees 
to all consumers. The funeral provider industry made the same argument 
in the original proceeding regarding the effect of consumer 
declinations caused by Rule-required itemization.143 As the 
Commission reasoned at that time, providers under the Rule can set or 
shift prices as they wish, but the long-term competitive impact of the 
Rule's price availability provisions might not permit providers to 
recover lost revenue from casket declinations simply by raising 
professional service fees. In the short-term, some consumers might 
spend more and some less than they would without the right to decline 
if providers actually raise service fees in order to recoup revenue 
lost to third-party casket sales. As discussed earlier, however, the 
evidence in this proceeding indicates that, although service fees 
generally are underpriced by roughly the average handling fee amount, 
providers are reluctant to raise service fees even under current 
competitive conditions. In any event, the evidence indicates that the 
impact of a ban on handling fees would more likely be increased 
competition in the sale of caskets, and, in turn, an overall reduction 
in casket prices over time.144
---------------------------------------------------------------------------

    \1\43 See R-B-5 at 42298.
    \1\44 See, e.g., the evidence discussed at notes 135-138, supra.
---------------------------------------------------------------------------

    4. GPL Timing/Distribution Requirements. Section 453.2(b)(4) of the 
Rule required providers to give for retention a General Price List to 
persons who inquire in person about funeral arrangements or the prices 
of funeral goods and services. The GPL must contain, among other 
things, several disclosures about consumers' right to select only those 
items they desire and the retail prices for 17 specified items, if 
offered for sale. Providers under Sec. 453.2(b)(4)(i) of the original 
Rule were required to offer the GPL ``upon beginning discussion either 
of funeral arrangements or of the selection of any funeral goods or 
funeral services.'' (Emphasis added.)
    Many funeral providers, however, erroneously believe that the GPL 
must be given immediately upon initiation of preliminary arrangements 
discussions that do not involve price or specific goods or services. 
That misinterpretation leads them to offer the GPL at arguably 
inappropriate times, such as during preliminary discussions of death 
certificates or veterans benefits, or, in the case of an out-of-town 
death, the location of the deceased.145
---------------------------------------------------------------------------

    \1\45 See R-N-1 (SR) at 151-153.
---------------------------------------------------------------------------

    To remedy their concerns, provider groups proposed repeal of the 
GPL timing and distribution requirements, or, in the alternative, 
amendments that would require providers to:
    (1) ``Make available'' to consumers a GPL;
    (2) Offer the GPL to consumers who inquire only about prices;
    (3) Offer the GPL to consumers before ``specific'' funeral goods or 
funeral services are ``selected'' or prices discussed; and
    (4) Give a GPL for retention only to those consumers who request to 
keep it.146
---------------------------------------------------------------------------

    \1\46R-G-3 (NSM) at 43; R-G-6 (NFDA) at 66; R-M-9 (NFDA/NSM) at 
277.
---------------------------------------------------------------------------

    The Commission has determined, however, that the preponderance of 
the evidence does not warrant the sweeping amendments to, or repeal of, 
Sec. 453.2(b)(4)(i) as proposed by funeral provider groups. The 
Commission draws that conclusion particularly in light of the empirical 
evidence on the level of providers' compliance with the current GPL 
requirements (23% give the GPL at the outset of arrangements 
discussions), and the evidence that consumers want price and options 
information about funeral goods and services and value price 
information that they receive early in the funeral transaction.
    The Commission is persuaded by that compliance evidence, however, 
that some fine-tuning is necessary to clarify the Rule and promote 
increased compliance, thereby enhancing the Rule's opportunity to 
provide benefits to consumers. The amendment discussed below thus is 
intended to remove any ambiguities and unnecessary rigidity in 
Sec. 453.2(b)(4)(i) that appear to cause funeral directors to 
misinterpret their obligations under that provision.
    Provider group proposals would have unacceptably narrowed the 
circumstances in which providers would be required to provide a GPL to 
consumers. First, the suggestion that providers ``make available'' a 
GPL might have been tantamount to effective repeal of the entire GPL 
requirement if such language means something other than physically 
giving the GPL to consumers.147 Consumers might receive no GPL 
disclosures about funeral service prices or options, or concerning 
their rights in the funeral transaction under the Rule or other laws, 
unless they asked to see the GPL and providers voluntarily complied 
with their request. Such a change is not warranted, given record 
evidence on relatively low, overall levels of Rule compliance. Other 
evidence--that consumers are reluctant to raise price issues after the 
death of a loved one, that consumers, nonetheless, desire price and 
service options information, and that consumers benefit from price 
information they receive early in the funeral transaction--also 
supports this conclusion.
---------------------------------------------------------------------------

    \1\47 The proponents of this change did not specifically explain 
or define the term ``make available,'' or how this and other 
suggested amendments would change the current requirements of 
Sec. 453.2(b)(4)(i).
---------------------------------------------------------------------------

    Second, the NFDA suggestion that providers need only give a GPL to 
persons who inquire in person about the ``price'' of funeral goods or 
services would eliminate the obligation to give a GPL to those who ask 
about prices or ``funeral arrangements.'' In light of the evidence just 
mentioned, this proposed narrowing of the GPL distribution requirement 
is not supported by the record. Although one of the Rule's goals is to 
increase price competition, and, in turn, reduce overall consumer 
expenditures, the Commission also intended the provision of itemized 
price information to alert consumers to their various options and to 
permit them to select only those items they desire, whether or not 
expenses would be reduced as a result.148 Lacking record evidence 
to support a change, consumers who inquire about providers' offerings, 
and not their prices, should thus be entitled to receive a GPL.
---------------------------------------------------------------------------

    \1\48R-B-5 at 42297.
    Virtually every funeral director who advocated a change in the 
GPL timing requirements expressed concern about when in the 
arrangements discussions might be the sensitively correct time to 
discuss ``price'' with consumers. None spoke of the correct time to 
provide or discuss information about funeral service ``options'' and 
their relative cost. The record evidence, however, suggested that 
because price issues may not specifically arise early in the 
transaction, due to mutual provider and consumer reluctance, 
consumers may choose particular types of arrangements, or specific 
items, without the benefit of information about the available 
alternatives unless they receive a timely GPL.
---------------------------------------------------------------------------

    Third, the NFDA proposal that providers make the GPL available at 
the funeral arrangements conference before ``specific'' funeral goods 
and services are selected or prices discussed would remove the 
requirement that providers give the list at the beginning of 
arrangements discussions, wherever they take place. Record evidence 
shows that consumers benefit from price and service options 
information, including the GPL, that they receive early in selecting 
funeral goods and services, and that at least some funeral 
arrangements, short of a formal ``arrangements conference,'' often can 
and do occur away from the funeral home premises.149 Other 
evidence discussed earlier demonstrated that consumers' knowledge 
generally about the funeral transaction, although somewhat improved, is 
still relatively low. As a result of adopting the NFDA suggestion, 
consumers' opinions about the overall type of funeral service or 
individual items could thus be formed, or actual selections made, 
without the benefit of the GPL disclosures concerning prices, options 
and consumer rights under the Rule. In that event, the preponderance of 
the record evidence supports the conclusion that the GPL's purpose to 
provide ready price and service options information for consultation 
while consumers are considering what goods to purchase, before they 
make selections, would be unnecessarily defeated.
---------------------------------------------------------------------------

    \1\49See, e.g., Hennessy, funeral director, Tr. Vol. II, 1026-
1027 (timing of visitation and service often likely to be among 
first topics of concern to a family during removal); Hunter, Tx. 
Funeral Service Comm'n, Tr. Vol. III, 602-603 (discussing funeral 
arrangements away from the funeral home is a very common practice); 
Johnson, NSM, Tr. Vol. I, 744 (conversations away from the funeral 
home border on making funeral arrangements); Simms, NFDA, Tr. Vol. 
II, 452, 470-471, 473 (various arrangements discussions during 
removal have occurred); Hocker, NFDA, Tr. Vol. III, 1402, 1479 
(problem during removal when the family says something like ``can we 
have the funeral on Wednesday'' that triggers presentation of the 
GPL); Dr. Nelson, AARP, Tr. Vol. I, 91 (preliminary arrangements can 
occur in consumers' homes where their concept of the funeral may be 
discussed and formed); and Klein, NYSFDAB, Tr. Vol. II, 1067 (not 
all arrangements are made in the funeral home).
    Empirical evidence from the Replication Study on that issue 
indicated that 14% of consumers said that in-person arrangements 
discussions took place at a hospital or nursing home, or at the home 
of the respondent, the deceased, or a relative. See R-B-2 at Table 
III-24, p. III-33. The extent to which some of those respondents may 
also have participated in discussions at the funeral home is not 
clear from the data.
---------------------------------------------------------------------------

    Finally, the NFDA-NSM proposal that the GPL's ``give for 
retention'' requirement be changed so that only consumers who request 
to keep the GPL may do so is not supported by the record. The evidence 
indicates that most consumers value the GPL enough to keep it when it 
is offered for retention.150 The Commission might not disagree 
with the NFDA suggestion if there were evidence that consumers are 
aware of their right under the Rule to retain the GPL. The record does 
not contain that evidence, however, and instead shows that consumers 
generally are unaware of their rights under the Rule.151 There is 
no record basis from which to conclude, therefore, that consumers would 
think to ask to retain the GPL. Consumers, as a result, would be denied 
the opportunity to use the GPL to comparison shop in at-need or pre-
need situations,152 or to compare authorized selections with final 
funeral home charges.
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    \1\50Eighty-seven percent of RS respondents and 82% of Gallup 
respondents who were offered a GPL to keep said that they took it 
with them. See R-B-2 at Table III-32, p. III-46, and HX-66, Ex. B, 
p. 7 and Tabulations, p. 29.
    \1\51A majority of consumer respondents to the AARP's ``Excel'' 
Study were unaware that providers are required to give consumers 
written price lists when they come in to make arrangements. See 
Soulas, HX-76 at 3.
    \1\52Record evidence indicates that consumers may increase their 
comparison shopping before selecting a funeral provider as the 
marketing of pre-need funeral services increases, because the time 
constraints surrounding at-need arrangements are not present to the 
same degree. See, e.g., Neel, R-E-1 at 3.
---------------------------------------------------------------------------

    The Commission has amended Sec. 453.2(b)(4)(i) to effect two 
changes to its original, preventive requirements. This amendment 
remedies providers' stated concerns about the timing of the GPL without 
limiting consumers' ability to use the information provided by GPL 
disclosures effectively. First, the amendment clarifies the GPL 
``timing'' requirements by breaking down the triggering term ``funeral 
arrangements'' into its component parts, namely, discussions of prices, 
the overall type of funeral service or disposition, or specific funeral 
goods or services. This change should eliminate the apparent provider 
misinterpretation that the GPL must be given immediately upon 
initiation of preliminary arrangements discussions that do not involve 
price or specific goods or services. It clarifies, however, that 
discussions about the overall type of service trigger the GPL 
requirement, and that providers must give the GPL at the beginning of 
any discussion involving prices, the overall type of funeral service or 
disposition, or specific funeral goods or services.153
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    \1\53Record evidence indicates that some providers have 
construed the term ``selection'' in the original provision to mean 
choosing individual items, such as the casket or vault. See, e.g., 
F. Hunter, Tr. Vol. I, 801 (``as long as before they sign the 
contract, before they look at the caskets and select the vault and 
the exact kind of funeral''); J. Hunter, Tr. Vol. III, 604-605 
(``after we have discussed some basic funeral plans, when the 
arranger has determined a feel for the families' wishes and desires, 
and prior to the selection of any services and/or goods''); Pierson, 
R-G-1 at 2-3; Starks, Tr. Vol. II, 402; Franzen, Tr. Vol. II, 818). 
Other providers are reluctant to discuss the GPL until price issues 
are raised. See, e.g., Hocker, Tr. Vol. III, 1435; Johnson, Tr. Vol. 
I, 744; Starks, Tr. Vol. II, 402-403; and Hennessy, Tr. Vol. II, 
1024.
---------------------------------------------------------------------------

    Second, the amendment clarifies the GPL ``distribution'' 
requirement contained in an original compliance guidelines 
interpretation that requires that providers must give consumers the GPL 
whether discussions occur in the funeral home ``or elsewhere.'' Record 
evidence shows that arrangements may occur away from the funeral home 
premises. However, the amendment exempts from the GPL requirement in-
person provider requests for prior embalming authorization if the 
provider makes essentially the same GPL disclosure required by 
Sec. 453.3(a)(1)(ii) of the Rule concerning the legal necessity for 
embalming.154
---------------------------------------------------------------------------

    \1\54Any other discussion during that time about price or the 
selection of funeral goods or services would trigger the requirement 
that providers give consumers the GPL.
---------------------------------------------------------------------------

    Record evidence indicates that providers often may be placed in the 
uncomfortable position of responding to consumers' requests to discuss 
selections during removal of remains. If providers are willing to 
commit consumers to financial obligations at that time by making 
arrangements, record evidence supports consumers' right to receive a 
GPL. Record evidence also shows, however, that giving the GPL during 
removal may be awkward, offensive, and unnecessary if no other 
arrangements discussions occur at that time. Such evidence further 
indicates that a provider's request for prior embalming authorization, 
by itself, may be the most potentially offensive situation for both 
consumers and funeral directors, because it is a request to perform an 
intrusive procedure so soon after the survivors' loss.155
---------------------------------------------------------------------------

    \1\55See R-N-1 (SR) at 207-218 for a full discussion of prior 
embalming approval issues raised during the proceeding.
---------------------------------------------------------------------------

    The original and amended Rule resolve this issue for embalming 
requests made over the telephone by not requiring any disclosure in 
that case. But the original Rule required that the GPL must be given if 
the request is made in person.156 If no other selections are made 
when the provider seeks prior permission, arguably the most important 
information consumers need to make an informed response at that time 
concerns whether embalming is necessary. The required disclosure that 
embalming is not required by law except in certain special cases should 
trigger that discussion if the consumer so desires. The Rule's 
embalming provisions are predicated on that basis. The amendment simply 
substitutes the disclosure of that information for the provision of the 
entire GPL, to reduce the burden on providers and consumers and to 
promote compliance with the Rule. Under the amendment, providers would 
be in compliance if they either provided a GPL when seeking prior 
permission, or made the required embalming disclosure.
---------------------------------------------------------------------------

    \1\56See R-B-6 at 28078 (Illustration #8).
---------------------------------------------------------------------------

5. Fees for Basic (Non-declinable) vs. Other Services
    Section 453.4(b) of the Rule imposes the general legal requirement 
that consumers' selection of funeral goods and services be permitted on 
an itemized basis. However, Sec. 453.4(b)(2)(i)(A) permits an exception 
to that general right to select. Under that provision, consumers may 
not decline the basic services of the funeral provider if the provider 
so requires. The provision in that event further requires that 
providers place on the GPL the following statement: ``However, any 
funeral arrangements you select will include a charge for our 
services.'' Providers under Sec. 453.2(b)(4)(iii)(C) must also place 
the following disclosure on the GPL in conjunction with the price for 
the services of funeral director and staff, if the fee cannot be 
declined: ``This fee for our services will be added to the total cost 
of the funeral arrangements you select. (This fee is already included 
in our charge for direct cremations, immediate burials, and forwarding 
or receiving remains.)''
    The Commission, in promulgating that exception, reasoned that the 
process of selection itself involves use of the provider's services, 
irrespective of the actual goods and services chosen by consumers. The 
Commission thus permitted providers to make the services of the funeral 
provider non-declinable.157
---------------------------------------------------------------------------

    \1\57See R-B-5 at 42282.
---------------------------------------------------------------------------

    The Commission also intended that the non-declinable fee for 
professional services would include only the charge for providers' 
basic services in arranging and planning the funeral, and not charges 
for services associated with providing any of the other sixteen items 
for which itemization is required on the GPL.158 The Commission, 
for example, specifically used the term ``basic services'' in referring 
to those services that consumers could not decline under 
Sec. 453.2(b)(4)(iii)(C) (the GPL service fee disclosure 
requirement).159 The definition in the original Rule itself stated 
that the services of funeral director and staff ``are the services, not 
included in prices of other categories in Sec. 453.2(b)(4) which may be 
furnished by a funeral provider in arranging and supervising a funeral, 
such as conducting the arrangements conference, planning the funeral, 
obtaining necessary permits and placing obituary notices.''160
---------------------------------------------------------------------------

    \1\58Under Sec. 453.2(b)(4)(iii)(C), the non-declinable 
professional services fee also may include charges for unallocated 
provider overhead.
    \1\59Id; see also, R-B-5 at 42285.
    \1\60Section 453.1(o).
---------------------------------------------------------------------------

    The Commission, however, did not codify in the Rule its intent 
regarding basic services other than in the definition. No substantive 
Rule provision thus clarifies that providers in disclosing itemized 
fees on the GPL must separate ``basic,'' non-declinable services from 
services associated with providing the other, declinable GPL goods and 
services, including such items as ``use of facilities for viewing,'' 
and ``use of facilities for funeral ceremony.'' The original staff 
compliance guidelines for the Rule, as a result, contained lengthy 
interpretations of the Rule on that issue, concluding that the non-
declinable fee for ``services of funeral director and staff'' may not 
include a charge for those services involved in providing any of the 
other items required to be separately listed on the GPL. Charges for 
those services, the Guidelines stated, must be included in the price 
for each of those items. The Guidelines further concluded that the non-
declinable fee for services may include the services listed in the 
Rule's definition of ``services of funeral director and 
staff.''161
---------------------------------------------------------------------------

    \1\61R-B-6 at 28068-28069, 28076, and 28087.
---------------------------------------------------------------------------

    The only fee permitted by the Rule to be non-declinable at the 
outset of the funeral transaction is the charge for ``services of 
funeral director and staff'' and items that are required by 
law.162 Several public hearing witnesses expressed their view, 
however, that the original disclosure requirement for the non-
declinable services fee permitted the inclusion of service items that 
all consumers do not receive with their arrangements, so that consumers 
may be paying for services not received,163 or that the services 
fee should be broken down to separate fees for arranging all funerals 
and fees for optional services.164 These and other witnesses 
further suggested that consumers are unaware of that potential 
overpayment problem.165
---------------------------------------------------------------------------

    \1\62Id. at 28077 (Illus. # 12). Cemetery or crematory 
requirements, embalming as a ``practical necessity,'' and requests 
that are ``impossible, impractical or excessively burdensome'' to 
provide may result in ``non-declinable'' charges under certain 
conditions. Generally, however, those items are not considered 
``non-declinable'' in the sense that consumers, at the outset of 
planning arrangements, have no choice but to purchase them.
    \1\63Morrison, Tr. Vol. II, 771, 778; Karklin, consumer, Tr. 
Vol. I, 553; Carlson, Tr. Vol. I, 501-502; Snyder, Tr. Vol. III, 
1252; Perguson, Tr. Vol. III, 1180; and Showalter, journalist/
hospice counselor, Tr. Vol. II, 121, 148.
    \1\64Klein, New York State Funeral Directing Advisory Board, Tr. 
Vol. II, 1040, 1062; Morrison, industry observer, Tr. Vol. II, 771, 
778; Carlson, author, Tr. Vol. I, 500-502; Snyder, West Coast 
Director, Consumers Union, Tr. Vol. III, 1252-1253; Perguson, 
Seattle memorial society, Tr. Vol. III, 1219; and Blake, Wisconsin 
memorial society, Tr. Vol. II, 1121.
    \1\65See, e.g., Bennett, Tr. Vol. I, 355; Carlson, Tr. Vol. I, 
500-501; and Snyder, Tr. Vol. III, 1252.
---------------------------------------------------------------------------

    Still other witnesses identified another problem with the original 
services fee disclosure. Those participants testified that, although 
consumers who ``shop'' among providers rely on quotes for service fees 
as a basis for comparison, providers in fact appear to include 
different items in their service fee charges. Price comparison among 
funeral homes is difficult as a result.166 The record contains no 
evidence or views specifically controverting this.
---------------------------------------------------------------------------

    \166\Simms, funeral director, Tr. Vol. II, 495 (consumers rely 
on professional service price); Johnson, funeral director, Tr. Vol. 
I, 755-756; Botimer, funeral director, Tr. Vol. III, 1287; Starks, 
funeral director, Tr. Vol. II, 423-424); and Perguson, Seattle 
memorial society, Tr. Vol. III, 1177, 1180, 1219 (1987 Seattle 
survey for publication showed ``services'' vaguely and variously 
described).
---------------------------------------------------------------------------

    In addition to these services fee difficulties, funeral provider 
groups asserted that the exclusion of a separate, non-declinable 
``basic facilities fee'' from the required GPL listing misinforms 
consumers about the cost of funeral services.167
---------------------------------------------------------------------------

    \1\67R-M-9 (NFDA/NSM) at 128.
---------------------------------------------------------------------------

    Four witnesses expressed views on the facilities fee issue 
presented by the NFDA. The then-President of the NSM testified that a 
non-declinable facilities fee is a legitimate charge to inform 
consumers that they are purchasing the use of a facility to shelter and 
care for the remains.168 Similarly, Wendell Hahn of the FFDA 
asserted that providers' inclusion of the cost of providing a special-
purpose facility in other charges, rather than showing it separately, 
violates proper accounting practice and may be deceptive pricing. Mr. 
Hahn concluded that the Rule should permit a separate basic facility 
charge that is non-declinable.169 Some funeral providers, in fact, 
currently include items on their GPLs that could be viewed as non-
declinable facility fees, such as fees for ``parking lot use.''170
---------------------------------------------------------------------------

    \1\68R. Johnson, Tr. Vol. I, 745-746, 759.
    \1\69Tr. Vol. II, 671.
    \1\70Starks, Tr. Vol. II, 424.
---------------------------------------------------------------------------

    The Commission agrees that the original requirements for the 
disclosure of the non-declinable and other service charges likely are 
causing compliance difficulties for some providers and informational 
problems for consumers.
    The evidence indicates that some providers on their GPLs may not be 
fully separating non-declinable services from services associated with 
providing other items on the GPL. To the extent that is occurring, 
consumers who decline other items may be purchasing more services than 
they actually receive. Other consumers may be ``double charged'' for 
some services if providers, confused about which services are 
declinable and which are not, include some portion of the services 
associated with declinable items, such as ``use of facilities for 
viewing,'' in that charge, as well as the non-declinable services fee. 
Still other consumers (or groups such as memorial societies that obtain 
and publish comparative price data) who attempt to comparison shop may 
not readily be able to do so.
    The Commission has concluded that the service disclosure 
requirements need to be clarified to implement fully the Commission's 
intent in permitting a non-declinable services fee. Amendment of the 
Rule, however, to permit a non-declinable ``basic facilities fee'' 
charge is not warranted by the evidence or the original Rule 
requirements. The Rule's core purpose is to permit itemization so that 
consumers may select only the funeral items they desire, and decline 
unwanted items. The Rule allows providers to recover overhead for 
facilities by allocating a portion of those costs to each item offered 
or by including them in the non-declinable services fee. A second, non-
declinable fee would signal a return to package pricing, where all 
consumers would pay for the use of all facilities (and, presumably, 
other overhead costs) irrespective of the degree to which consumers 
choose to use them. Itemization permits consumers to decline the use of 
various provider facilities. The testimony of at least one funeral 
director suggested, however, that some providers currently may be 
imposing in some form a ``non-declinable'' facilities fee on consumers, 
in apparent violation of the Rule.
    Accordingly, the Commission has adopted the following amendments to 
clarify the Rule's intent and requirements with respect to service fees 
and non-declinable charges:
    (1) Revision of the ``services of funeral director and staff'' 
definition in Sec. 453.1(o) to clarify that these are the basic 
services that cannot be included in prices of other, declinable GPL 
categories, and that are furnished by a funeral provider in arranging 
any funeral, such as conducting the arrangements conference, planning 
the funeral, obtaining necessary permits, and placing obituary notices;
    (2) Addition of the term ``basic'' before the word ``services'' 
where the latter term appears in Secs. 453.2(b)(4)(iii)(C) (1) and (2) 
and 453.4(b)(2)(i)(A), so that all GPL disclosures regarding the non-
declinable services fee refer to ``basic services'' rather than simply 
``services'';
    (3) Addition of the phrase ``and staff'' after the phrase ``use of 
facilities'' to Secs. 453.2(b)(4) (H) and (I), to clarify that 
providers are required to disclose the prices for use of facilities and 
the services of staff associated with viewing and a funeral ceremony;
    (4) Replacement of the ``other use of facilities'' price disclosure 
requirement, Sec. 453.2(b)(4)(J), with the more specific disclosures 
``use of facilities and staff for memorial service'' and ``use of 
equipment and staff for graveside service'';
    (5) Addition to Sec. 453.1 of the definitions of a ``memorial 
service'' and a ``funeral ceremony'' to distinguish those services for 
purposes of listing them separately on the GPL;
    (6) Addition of the express requirement to the disclosure 
requirements of Secs. 453.2(b)(4)(iii)(C) (1) and (2) that, if the 
services fee cannot be declined, it must include all charges for the 
recovery of unallocated funeral provider overhead, and funeral 
providers may include in the required disclosure (and in the GPL 
disclosure required by 453.4(b)(2)(i)(A)) the phrase ``and overhead'' 
after the word ``services,'' so that disclosures regarding non-
declinable services fees refer to ``basic services,'' and to ``basic 
services and overhead,'' if providers wish; and
    (7) Addition of paragraph (b)(4)(iv) to Sec. 453.2 to make clear 
that the Rule permits only one non-declinable fee for services, 
facilities or unallocated overhead, unless otherwise required by law.
    These amendments clarify the Commission's intent and providers' 
obligations in distinguishing non-declinable service fees from other 
service charges associated with providing separately listed, declinable 
goods and services. The changes are designed to promote industry 
compliance and consumer understanding of the services they must 
purchase and those they may decline, without substantially altering 
providers' obligations. The amendment permitting providers to add the 
phrase ``and overhead'' to the non-declinable service fee disclosure 
responds to industry's stated concern that consumers may be deceived by 
service fee price disclosures that fail to disclose a charge for 
overhead,171 and clarifies for providers that the non-declinable 
fee can include overhead not allocated to other charges.
---------------------------------------------------------------------------

    \1\71 Funeral provider groups asserted during the proceeding 
that consumers should be informed that providers' non-declinable 
fees include a charge for overhead. Providers may do so under this 
amendment. See, e.g., P-37 (NFDA/NSM) at 240-242; P-30 (FFDA) at 2.
---------------------------------------------------------------------------

    The Commission further has determined, to reduce stated and 
potential GPL compliance burdens, to: (1) remove ``other automotive 
equipment'' (flower car/family car)172 and ``acknowledgment 
cards''173 from the required GPL listing; (2) delete as 
unnecessary the required GPL disclosure that the GPL does not include 
cash advance items, Sec. 453.2(b)(4)(i)(D), and move from the GPL to 
the statement of goods and services selected the cash advance mark-up 
disclosure required by Sec. 453.3(f)(2);174 (3) decline to adopt 
the required use of a ``standardized general price list,'' which the 
Commission finds is unnecessary in light of the relatively standardized 
GPL the Rule now requires, and the amendment, discussed below, 
prohibiting any language in any of the Rule-required price lists that 
alters or contradicts the information provided therein.175
---------------------------------------------------------------------------

    \1\72 These items are not as frequently chosen by consumers in 
today's market as are a hearse or limousine, and providers, of 
course, may include the flower/family car on the list if they so 
desire.
    \1\73 To the extent that the Rule's listing provision has caused 
providers to charge for acknowledgment cards that were previously 
provided free of charge, as funeral provider groups suggested, the 
Rule may have had the unintended result of contributing, at least in 
some small sense, to increased consumer costs. To the extent that 
the costs are recouped elsewhere, those costs appear to be so 
incidental as to be tangential to the Rule's primary purpose. In 
either case, the benefits of requiring acknowledgment cards on the 
GPL appear to be outweighed by the harm to funeral providers' 
reputations and consumer satisfaction. The Commission thus has 
concluded that the better course is to remove the provision from the 
Rule.
    There is no record evidence to support, however, a general right 
for the provider to list any of the other items now required to be 
on the GPL as ``no charge'' items, as industry groups suggested. The 
Commission is concerned, for example, that if the Rule were to 
permit the listing of embalming or transportation as ``no charge'' 
items, their costs, which can amount to several hundreds of dollars, 
would be recovered in the prices of other items. As a result, 
consumers would, in effect, not have the opportunity to decline the 
costs associated with important items. Such a change could thus 
result in the diminution of itemization and the return of package-
only pricing, which the Rule was primarily designed to prevent. See 
the discussion at R-N-1 (SR), 172-173.
    \1\74See R-N-1 (SR) at 201. These amendments appropriately 
shorten the GPL and give consumers adequate notice of mark-ups.
    \1\75The AARP and others recommended the adoption of a required 
format and disclosure language for the GPL more detailed than that 
required by the original Rule, because of potential provider non-
compliance and consumer confusion. See R-N-1 (SR) at 169-172 for a 
full discussion of the standardized price list issue.
---------------------------------------------------------------------------

6. Misrepresentation/Disclosure Provisions
    Section 453.3 of the Rule currently requires funeral providers to 
make specific written disclosures on the price lists and the itemized 
statement of goods and services selected. The Commission in its 1982 
Statement of Basis and Purpose determined that, due to funeral 
providers' false claims or failure to disclose accurate information, 
many consumers erroneously believed that certain procedures (such as 
embalming) or particular goods (such as caskets for cremation and outer 
burial containers) were required purchases not subject to individual 
choice, and that goods and services had certain protective and 
preservative qualities when such was not the case.176
---------------------------------------------------------------------------

    \1\76R-B-5 at 42274-42279. Although the record did not contain 
evidence that certain misrepresentations (such as the protective and 
preservative claims of goods and the requirement of a casket for 
cremation) were widespread, the Commission determined that their 
inclusion in the Rule was necessary because of their pernicious 
nature, or because of the substantial, potential cost that could be 
incurred by consumers who make purchase decisions based upon 
incorrect assumptions of material facts. Id. at 42276-42278.
---------------------------------------------------------------------------

    Section 453.3 thus declares that it is a deceptive act or practice 
for funeral providers to misrepresent: embalming requirements, casket 
for cremation requirements,177 outer burial container 
requirements, legal and cemetery requirements, preservative and 
protective value of funeral goods and services, and cash advance 
charges. The provisions of Sec. 453.3 were designed to prevent those 
deceptive practices and to correct consumers' misconceptions by 
requiring written disclosures on both the price lists and the itemized 
statement.
---------------------------------------------------------------------------

    \1\77The companion Sec. 453.4(a)(2) required providers who 
arrange direct cremations to ``make available'' unfinished wood 
boxes or alternative containers so that consumers will not have to 
buy a casket for that purpose.
---------------------------------------------------------------------------

    Funeral provider groups recommended that the twelve affirmative 
disclosure requirements be deleted, or, in the alternative, that the 
Rule permit providers to use their own disclosure language.178 The 
Commission has determined, however, that the record does not provide a 
substantial basis to repeal the twelve affirmative disclosures. 
Although the empirical data indicate that consumers' knowledge has 
increased somewhat under the Rule, and that some misrepresentations 
have declined, the data also show that misrepresentations are still 
occurring, particularly in areas where consumer knowledge is still low, 
such as embalming. The evidence further demonstrates that consumer 
knowledge of funeral requirements and products is still at a minimal 
level. Viewed together, those facts warrant the retention of the 
disclosure provisions.179 Nor is there sufficient evidence to 
warrant an amendment allowing funeral providers to use their own 
disclosure language. That change would make it more difficult to 
monitor compliance, whereas the required, standardized language ensures 
that all consumers are receiving identical information.
---------------------------------------------------------------------------

    \1\78R-M-9 (NFDA/NSM) at 225; R-G-6 (NFDA) at 78-79; and R-G-3 
(NSM) at 45.
    \1\79See the discussion and evidence cited at R-N-1 (SR), 180-
181.
---------------------------------------------------------------------------

    The Commission agrees, however, that the language of several of the 
disclosures has created some potential compliance problems for funeral 
providers. The Commission therefore has adopted the following changes 
to the embalming, casket for cremation, outer burial container, and 
cash advance disclosure provisions in order to clarify the Rule's scope 
and requirements, and to reduce potential disclosure burdens:
    (1) Deletion of the portion of Sec. 453.3(a)(2)(i) that prohibits 
representations that embalming is required for a funeral using a sealed 
casket; substantial evidence indicates that, because sealed (i.e., 
``gasketed'') caskets cannot prevent the escape of gases any more than 
other caskets, embalming may be necessary for a funeral service using a 
sealed casket where refrigeration is not available;180
---------------------------------------------------------------------------

    \1\80See the discussion and evidence cited at R-O-1 (POR), 204-
206.
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    (2) Amendment of the deceptive acts or practices definition 
concerning the necessity for embalming, Sec. 453.3(a)(1)(ii), to 
include the modifying phrase ``if any'' after the phrase ``except in 
certain special cases,'' and amendment of the GPL disclosure required 
by Sec. 453.3(a)(2)(ii) to permit providers to delete from the 
disclosure that embalming is not required by law the phrase ``except in 
certain special cases,'' if state or local law in the areas where the 
provider does business does not require embalming under any 
circumstances. These changes are appropriate to reduce compliance 
burdens and accommodate the situation where state laws do not require 
embalming under any conditions;181
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    \1\81See R-N-1 (SR) at 187.
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    (3) Amendment of the GPL alternative container disclosure required 
by Sec. 453.3(b)(2) to: (a) Delete the required references to: (i) An 
``unfinished wood box,'' in addition to references to an ``alternative 
container,'' because the former in today's market is considered a type 
of alternative container, and (ii) ``pouches of canvas,'' which is not 
a type of container generally available and accepted by crematories; 
(b) include the phrase ``encase the body'' after ``Alternative 
containers;'' (c) include the statement ``The containers we provide are 
(specify containers).''; and (d) substitute ``fiberboard'' for ``heavy 
cardboard'' to conform to market terminology.
    These amendments\182\ more accurately describe the purpose of 
alternative containers and reduce any potential for confusion and 
misrepresentation concerning the types of containers that are available 
for use in cremations;\183\
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    \182\These changes require complementary ones to conform related 
Rule sections--references to an ``unfinished wood box'' in 
Secs. 453.1(p) (definition), 453.3(b), and 453.4(a) also are 
deleted, as is the reference to ``pouches of canvas'' in the 
definitional section, and ``unfinished wood box'' is added to the 
definition of an ``alternative container'' (Sec. 453.1(b)).
    \183\See R-N-1 (SR) at 188-195 for a full discussion of the 
evidence on these amendments.
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    (4) Amendment of the OBC-PL disclosure required by Sec. 453.3(c)(2) 
to permit providers in disclosing that grave liners or vaults are not 
required by law to delete the phrase ``in most areas of the country,'' 
to accommodate situations where state and local laws do not require 
outer burial containers;\184\ and
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    \184\See R-N-1 (SR) at 198.
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    (5) Amendment of the substance of the cash advance mark-up 
disclosure, required by Sec. 453.3(f)(2), to require only that 
providers specify those cash advance items for which the provider 
charges a mark-up. The Commission has determined that the original 
disclosure may have caused the misimpression that providers markup all 
cash advance items, because it broadly referred to all cash advance 
items, when that is not the case.\185\
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    \185\See R-N-1 (SR) at 200-202.
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7. Other Minor/Technical Amendments
    The Commission has made a slight modification to 
Sec. 453.4(b)(2)(i)(B), a provision designed to enforce the Rule's 
unbundling provisions. The purpose for this provision was to inform 
consumers, before they sign the funeral contract, that they may only be 
charged for those items selected or for items that are required by law. 
If purchases are required by law or otherwise, this provision further 
provides consumers with an explanation in writing, together with the 
reason the requirement applies to their selections. The provision was 
intended to provide consumers with a final reminder that they need only 
pay for items that they have selected.\186\
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    \186\R-B-5 at 42292 (``Section 453.4(b), the `optional purchase' 
provision, ensures that consumers can make use of such price 
information by making a decision to decline items which they do not 
wish to purchase.'').
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    The Commission has amended the required language in order to 
clarify for consumers the original purpose of the provision. It alerts 
consumers that they may only be charged for the goods and services that 
they choose, or that are required by law or by a cemetery or crematory 
(such as an outer burial container or a certain type of alternative 
container).\187\
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    \187\See R-N-1 (SR) at 205.
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    The Commission further adopts a technical change to Sec. 453.6 
concerning providers' retention of documents, to clarify its 
requirements. The original section required the funeral provider to 
retain a copy of the ``signed'' statement of goods and services 
selected. The Rule, however, does not contain any express requirement 
that the final statement be signed, either by the consumer or the 
provider. The Commission in its 1982 Statement of Basis and Purpose 
made no mention of the signature requirement. Earlier drafts of the 
Rule included a requirement that the funeral provider ask the consumer 
to sign the itemized statement, but it was not adopted in the final 
version. The ``signed'' language of Sec. 453.6 was apparently inserted 
to complement the earlier draft of the Rule that contained the itemized 
statement requirement; however, when the signature requirement was 
deleted, the language of Sec. 453.6 was inadvertently left intact. This 
language, however, is susceptible to different interpretations, and may 
lead some funeral providers to believe that they must obtain the 
signature of the consumer on the statement.
    The Commission therefore has amended the language of Sec. 453.6 by 
deleting the phrase ``on which the statement was signed,'' and 
substituting the phrase ``of the arrangements conference,'' so that the 
provision now requires providers to maintain a copy of each statement 
of funeral goods and services selected ``for at least one year from the 
date of the arrangements conference.''\188\
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    \188\See the discussion at R-N-1 (SR), 218-219.
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    The Commission, in addition, has added clarifying language to the 
required ``clear and conspicuous'' disclosure standard contained in 
Sec. 453.7 of the Rule. That language clarifies that providers may not 
add statements or information to the Rule-required price lists that 
alter or contradict the information required to be included in those 
lists.
    This specific prohibition is necessary to prevent violations of the 
``clear and conspicuous'' standard that relate to provider detraction 
and potential consumer confusion problems demonstrated in the 
record.\189\
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    \189\See R-N-1 (SR) at 219-220 for a full discussion of the 
evidence, and Commission precedents, relating to consumers' 
comprehension of Rule-required disclosures.
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    Finally, the Commission has:
    (1) Deleted the definition of ``Accounting year'' (Sec. 453.1(a)), 
because that phrase does not appear elsewhere in the Rule;
    (2) amended the definition of a ``casket'' (Sec. 453.1(d)), to 
include those constructed of ``fiberglass'' and ``plastic'', because 
those types of caskets represent a significant portion of caskets 
produced in today's market;\190\ and
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    \190\See R-N-1 (SR) at 223; R-O-1 (POR) at 207.
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    (3) made a slight grammatical change to the definition of ``Funeral 
services'' (Sec. 453.1(j)), to make it clear that the Rule only covers 
services that involve both the preparation of remains and the 
supervision of disposition.

III. Other Matters

A. Final Regulatory and Regulatory Flexibility Analyses

    The Commission has determined that these amendments to the Funeral 
Rule will not have an annual effect on the national economy of $100 
million or more, or otherwise have a significant economic impact on a 
substantial number of small business. The preponderance of the evidence 
in the record indicates that the Rule overall has not significantly 
increased funeral providers' costs of doing business, and that the 
amendments will reduce any costs to providers imposed by the Rule's 
requirements, by making it easier for them to comply. Therefore, 
pursuant to the exception for Rule amendments contained in section 
22(a)(1)(A) of the FTC Act, and the provisions of the Regulatory 
Flexibility Act, 5 U.S.C. 604, 605, section 22 of the Act requiring 
that the Commission issue a final regulatory analysis with the 
promulgation of a final rule does not apply to this amended Rule.

List of Subjects in 16 CFR Part 453

    Funeral homes, Price disclosure, Trade practices.

    Accordingly, title 16, part 453 of the Code of Federal Regulations 
is revised to read as follows:

PART 453--FUNERAL INDUSTRY PRACTICES

Sec.
453.1  Definitions.
453.2  Price disclosures.
453.3  Misrepresentations.
453.4  Required purchase of funeral goods or funeral services.
453.5  Services provided without prior approval.
453.6  Retention of documents.
453.7  Comprehension of disclosures.
453.8  Declaration of intent.
453.9  State exemptions.

    Authority: 15 U.S.C. 57a(a); 15 U.S.C. 46(g); 5 U.S.C. 552.


Sec. 453.1  Definitions.

    (a) Alternative container. An ``alternative container'' is an 
unfinished wood box or other non-metal receptacle or enclosure, without 
ornamentation or a fixed interior lining, which is designed for the 
encasement of human remains and which is made of fiberboard, pressed-
wood, composition materials (with or without an outside covering) or 
like materials.
    (b) Cash advance item. A ``cash advance item'' is any item of 
service or merchandise described to a purchaser as a ``cash advance,'' 
``accommodation,'' ``cash disbursement,'' or similar term. A cash 
advance item is also any item obtained from a third party and paid for 
by the funeral provider on the purchaser's behalf. Cash advance items 
may include, but are not limited to: cemetery or crematory services; 
pallbearers; public transportation; clergy honoraria; flowers; 
musicians or singers; nurses; obituary notices; gratuities and death 
certificates.
    (c) Casket. A ``casket'' is a rigid container which is designed for 
the encasement of human remains and which is usually constructed of 
wood, metal, fiberglass, plastic, or like material, and ornamented and 
lined with fabric.
    (d) Commission. ``Commission'' refers to the Federal Trade 
Commission.
    (e) Cremation. ``Cremation'' is a heating process which incinerates 
human remains.
    (f) Crematory. A ``crematory'' is any person, partnership or 
corporation that performs cremation and sells funeral goods.
    (g) Direct cremation. A ``direct cremation'' is a disposition of 
human remains by cremation, without formal viewing, visitation, or 
ceremony with the body present.
    (h) Funeral goods. ``Funeral goods'' are the goods which are sold 
or offered for sale directly to the public for use in connection with 
funeral services.
    (i) Funeral provider. A ``funeral provider'' is any person, 
partnership or corporation that sells or offers to sell funeral goods 
and funeral services to the public.
    (j) 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.
    (k) Immediate burial. An ``immediate burial'' is a disposition of 
human remains by burial, without formal viewing, visitation, or 
ceremony with the body present, except for a graveside service.
    (l) Memorial service. A ``memorial service'' is a ceremony 
commemorating the deceased without the body present.
    (m) Funeral ceremony. A ``funeral ceremony'' is a service 
commemorating the deceased with the body present.
    (n) Outer burial container. An ``outer burial container'' is any 
container which is designed for placement in the grave around the 
casket including, but not limited to, containers commonly known as 
burial vaults, grave boxes, and grave liners.
    (o) Person. A ``person'' is any individual, partnership, 
corporation, association, government or governmental subdivision or 
agency, or other entity.
    (p) Services of funeral director and staff. The ``services of 
funeral director and staff'' are the basic services, not to be included 
in prices of other categories in Sec. 453.2(b)(4), that are furnished 
by a funeral provider in arranging any funeral, such as conducting the 
arrangements conference, planning the funeral, obtaining necessary 
permits, and placing obituary notices.


Sec. 453.2  Price Disclosures.

    (a) Unfair or deceptive acts or practices. In selling or offering 
to sell funeral goods or funeral services to the public, it is an 
unfair or deceptive act or practice for a funeral provider to fail to 
furnish accurate price information disclosing the cost to the purchaser 
for each of the specific funeral goods and funeral services used in 
connection with the disposition of deceased human bodies, including at 
least the price of embalming, transportation of remains, use of 
facilities, caskets, outer burial containers, immediate burials, or 
direct cremations, to persons inquiring about the purchase of funerals. 
Any funeral provider who complies with the preventive requirements in 
paragraph (b) of this section is not engaged in the unfair or deceptive 
acts or practices defined here.
    (b) Preventive requirements. To prevent these unfair or deceptive 
acts or practices, as well as the unfair or deceptive acts or practices 
defined in Sec. 453.4(b)(1), funeral providers must:
    (1) Telephone price disclosure. Tell persons who ask by telephone 
about the funeral provider's offerings or prices any accurate 
information from the price lists described in paragraphs (b)(2) through 
(4) of this section and any other readily available information that 
reasonably answers the question.
    (2) Casket price list. (i) Give a printed or typewritten price list 
to people who inquire in person about the offerings or prices of 
caskets or alternative containers. The funeral provider must offer the 
list upon beginning discussion of, but in any event before showing 
caskets. The list must contain at least the retail prices of all 
caskets and alternative containers offered which do not require special 
ordering, enough information to identify each, and the effective date 
for the price list. In lieu of a written list, other formats, such as 
notebooks, brochures, or charts may be used if they contain the same 
information as would the printed or typewritten list, and display it in 
a clear and conspicuous manner. Provided, however, that funeral 
providers do not have to make a casket price list available if the 
funeral providers place on the general price list, specified in 
paragraph (b)(4) of this section, the information required by this 
paragraph.
    (ii) Place on the list, however produced, the name of the funeral 
provider's place of business and a caption describing the list as a 
``casket price list.''
    (3) Outer burial container price list. (i) Give a printed or 
typewritten price list to persons who inquire in person about outer 
burial container offerings or prices. The funeral provider must offer 
the list upon beginning discussion of, but in any event before showing 
the containers. The list must contain at least the retail prices of all 
outer burial containers offered which do not require special ordering, 
enough information to identify each container, and the effective date 
for the prices listed. In lieu of a written list, the funeral provider 
may use other formats, such as notebooks, brochures, or charts, if they 
contain the same information as the printed or typewritten list, and 
display it in a clear and conspicuous manner. Provided, however, that 
funeral providers do not have to make an outer burial container price 
list available if the funeral providers place on the general price 
list, specified in paragraph (b)(4) of this section, the information 
required by this paragraph.
    (ii) Place on the list, however produced, the name of the funeral 
provider's place of business and a caption describing the list as an 
``outer burial container price list.''
    (4) General price list. (i)(A) Give a printed or typewritten price 
list for retention to persons who inquire in person about the funeral 
goods, funeral services or prices of funeral goods or services offered 
by the funeral provider. The funeral provider must give the list upon 
beginning discussion of any of the following:
    (1) The prices of funeral goods or funeral services;
    (2) The overall type of funeral service or disposition; or
    (3) Specific funeral goods or funeral services offered by the 
funeral provider.
    (B) The requirement in paragraph (b)(4)(i)(A) of this section 
applies whether the discussion takes place in the funeral home or 
elsewhere. Provided, however, that when the deceased is removed for 
transportation to the funeral home, an in-person request at that time 
for authorization to embalm, required by Sec. 453.5(a)(2), does not, by 
itself, trigger the requirement to offer the general price list if the 
provider in seeking prior embalming approval discloses that embalming 
is not required by law except in certain special cases, if any. Any 
other discussion during that time about prices or the selection of 
funeral goods or services triggers the requirement under paragraph 
(b)(4)(i)(A) of this section to give consumers a general price list.
    (C) The list required in paragraph (b)(4)(i)(A) of this section 
must contain at least the following information:
    (1) The name, address, and telephone number of the funeral 
provider's place of business;
    (2) A caption describing the list as a ``general price list''; and
    (3) The effective date for the price list;
    (ii) Include on the price list, in any order, the retail prices 
(expressed either as the flat fee, or as the price per hour, mile or 
other unit of computation) and the other information specified below 
for at least each of the following items, if offered for sale:
    (A) Forwarding of remains to another funeral home, together with a 
list of the services provided for any quoted price;
    (B) Receiving remains from another funeral home, together with a 
list of the services provided for any quoted price;
    (C) The price range for the direct cremations offered by the 
funeral provider, together with:
    (1) A separate price for a direct cremation where the purchaser 
provides the container;
    (2) Separate prices for each direct cremation offered including an 
alternative container; and
    (3) A description of the services and container (where applicable), 
included in each price;
    (D) The price range for the immediate burials offered by the 
funeral provider, together with:
    (1) A separate price for an immediate burial where the purchaser 
provides the casket;
    (2) Separate prices for each immediate burial offered including a 
casket or alternative container; and
    (3) A description of the services and container (where applicable) 
included in that price;
    (E) Transfer of remains to funeral home;
    (F) Embalming;
    (G) Other preparation of the body;
    (H) Use of facilities and staff for viewing;
    (I) Use of facilities and staff for funeral ceremony;
    (J) Use of facilities and staff for memorial service;
    (K) Use of equipment and staff for graveside service;
    (L) Hearse; and
    (M) Limousine.
    (iii) Include on the price list, in any order, the following 
information:
    (A) Either of the following:
    (1) The price range for the caskets offered by the funeral 
provider, together with the statement: ``A complete price list will be 
provided at the funeral home.''; or
    (2) The prices of individual caskets, disclosed in the manner 
specified by paragraph (b)(2)(i) of this section; and
    (B) Either of the following:
    (1) The price range for the outer burial containers offered by the 
funeral provider, together with the statement: ``A complete price list 
will be provided at the funeral home.''; or
    (2) The prices of individual outer burial containers, disclosed in 
the manner specified by paragraph (b)(3)(i) of this section; and
    (C) Either of the following:
    (1) The price for the basic services of funeral director and staff, 
together with a list of the principal basic services provided for any 
quoted price and, if the charge cannot be declined by the purchaser, 
the statement: ``This fee for our basic services will be added to the 
total cost of the funeral arrangements you select. (This fee is already 
included in our charges for direct cremations, immediate burials, and 
forwarding or receiving remains.)''. If the charge cannot be declined 
by the purchaser, the quoted price shall include all charges for the 
recovery of unallocated funeral provider overhead, and funeral 
providers may include in the required disclosure the phrase ``and 
overhead'' after the word ``services''; or
    (2) The following statement: ``Please note that a fee of (specify 
dollar amount) for the use of our basic services is included in the 
price of our caskets. This same fee shall be added to the total cost of 
your funeral arrangements if you provide the casket. Our services 
include (specify).'' The fee shall include all charges for the recovery 
of unallocated funeral provider overhead, and funeral providers may 
include in the required disclosure the phrase ``and overhead'' after 
the word ``services.'' The statement must be placed on the general 
price list together with the casket price range, required by paragraph 
(b)(4)(iii)(A)(1) of this section, or together with the prices of 
individual caskets, required by (b)(4)(iii)(A)(2) of this section.
    (iv) The services fee permitted by Sec. 453.2(b)(4)(iii)(C)(1) or 
(C)(2) is the only funeral provider fee for services, facilities or 
unallocated overhead permitted by this part to be non-declinable, 
unless otherwise required by law.
    (5) Statement of funeral goods and services selected. (i) Give an 
itemized written statement for retention to each person who arranges a 
funeral or other disposition of human remains, at the conclusion of the 
discussion of arrangements. The statement must list at least the 
following information:
    (A) The funeral goods and funeral services selected by that person 
and the prices to be paid for each of them;
    (B) Specifically itemized cash advance items. (These prices must be 
given to the extent then known or reasonably ascertainable. If the 
prices are not known or reasonably ascertainable, a good faith estimate 
shall be given and a written statement of the actual charges shall be 
provided before the final bill is paid.); and
    (C) The total cost of the goods and services selected.
    (ii) The information required by this paragraph (b)(5) may be 
included on any contract, statement, or other document which the 
funeral provider would otherwise provide at the conclusion of 
discussion of arrangements.
    (6) Other pricing methods. Funeral providers may give persons any 
other price information, in any other format, in addition to that 
required by Sec. 453.2(b)(2), (3), and (4) so long as the statement 
required by Sec. 453.2(b)(5) is given when required by the rule.


Sec. 453.3  Misrepresentations.

    (a) Embalming provisions.--(1) Deceptive acts or practices. In 
selling or offering to sell funeral goods or funeral services to the 
public, it is a deceptive act or practice for a funeral provider to:
    (i) Represent that state or local law requires that a deceased 
person be embalmed when such is not the case;
    (ii) Fail to disclose that embalming is not required by law except 
in certain special cases, if any.
    (2) Preventive requirements. To prevent these deceptive acts or 
practices, as well as the unfair or deceptive acts or practices defined 
in Secs. 453.4(b)(1) and 453.5(2), funeral providers must:
    (i) Not represent that a deceased person is required to be embalmed 
for:
    (A) Direct cremation;
    (B) Immediate burial; or
    (C) A closed casket funeral without viewing or visitation when 
refrigeration is available and when state or local law does not require 
embalming; and
    (ii) Place the following disclosure on the general price list, 
required by Sec. 453.2(b)(4), in immediate conjunction with the price 
shown for embalming: ``Except in certain special cases, embalming is 
not required by law. Embalming may be necessary, however, if you select 
certain funeral arrangements, such as a funeral with viewing. If you do 
not want embalming, you usually have the right to choose an arrangement 
that does not require you to pay for it, such as direct cremation or 
immediate burial.'' The phrase ``except in certain special cases'' need 
not be included in this disclosure if state or local law in the area(s) 
where the provider does business does not require embalming under any 
circumstances.
    (b) Casket for cremation provisions--(1) Deceptive acts or 
practices. In selling or offering to sell funeral goods or funeral 
services to the public, it is a deceptive act or practice for a funeral 
provider to:
    (i) Represent that state or local law requires a casket for direct 
cremations;
    (ii) Represent that a casket is required for direct cremations.
    (2) Preventive requirements. To prevent these deceptive acts or 
practices, as well as the unfair or deceptive acts or practices defined 
in Sec. 453.4(a)(1), funeral providers must place the following 
disclosure in immediate conjunction with the price range shown for 
direct cremations: ``If you want to arrange a direct cremation, you can 
use an alternative container. Alternative containers encase the body 
and can be made of materials like fiberboard or composition materials 
(with or without an outside covering). The containers we provide are 
(specify containers).'' This disclosure only has to be placed on the 
general price list if the funeral provider arranges direct cremations.
    (c) Outer burial container provisions--(1) Deceptive acts or 
practices. In selling or offering to sell funeral goods and funeral 
services to the public, it is a deceptive act or practice for a funeral 
provider to:
    (i) Represent that state or local laws or regulations, or 
particular cemeteries, require outer burial containers when such is not 
the case;
    (ii) Fail to disclose to persons arranging funerals that state law 
does not require the purchase of an outer burial container.
    (2) Preventive requirement. To prevent these deceptive acts or 
practices, funeral providers must place the following disclosure on the 
outer burial container price list, required by Sec. 453.2(b)(3)(i), or, 
if the prices of outer burial containers are listed on the general 
price list, required by Sec. 453.2(b)(4), in immediate conjunction with 
those prices: ``In most areas of the country, state or local law does 
not require that you buy a container to surround the casket in the 
grave. However, many cemeteries require that you have such a container 
so that the grave will not sink in. Either a grave liner or a burial 
vault will satisfy these requirements.'' The phrase ``in most areas of 
the country'' need not be included in this disclosure if state or local 
law in the area(s) where the provider does business does not require a 
container to surround the casket in the grave.
    (d) General provisions on legal and cemetery requirements--(1) 
Deceptive acts or practices. In selling or offering to sell funeral 
goods or funeral services to the public, it is a deceptive act or 
practice for funeral providers to represent that federal, state, or 
local laws, or particular cemeteries or crematories, require the 
purchase of any funeral goods or funeral services when such is not the 
case.
    (2) Preventive requirements. To prevent these deceptive acts or 
practices, as well as the deceptive acts or practices identified in 
Secs. 453.3(a)(1), 453.3(b)(1), and 453.3(c)(1), funeral providers must 
identify and briefly describe in writing on the statement of funeral 
goods and services selected (required by Sec. 453.2(b)(5)) any legal, 
cemetery, or crematory requirement which the funeral provider 
represents to persons as compelling the purchase of funeral goods or 
funeral services for the funeral which that person is arranging.
    (e) Provisions on preservative and protective value claims. In 
selling or offering to sell funeral goods or funeral services to the 
public, it is a deceptive act or practice for a funeral provider to:
    (1) Represent that funeral goods or funeral services will delay the 
natural decomposition of human remains for a long-term or indefinite 
time;
    (2) Represent that funeral goods have protective features or will 
protect the body from gravesite substances, when such is not the case.
    (f) Cash advance provisions--(1) Deceptive acts or practices. In 
selling or offering to sell funeral goods or funeral services to the 
public, it is a deceptive act or practice for a funeral provider to:
    (i) Represent that the price charged for a cash advance item is the 
same as the cost to the funeral provider for the item when such is not 
the case;
    (ii) Fail to disclose to persons arranging funerals that the price 
being charged for a cash advance item is not the same as the cost to 
the funeral provider for the item when such is the case.
    (2) Preventive requirements. To prevent these deceptive acts or 
practices, funeral providers must place the following sentence in the 
itemized statement of funeral goods and services selected, in immediate 
conjunction with the list of itemized cash advance items required by 
Sec. 453.2(b)(5)(i)(B): ``We charge you for our services in obtaining: 
(specify cash advance items),'' if the funeral provider makes a charge 
upon, or receives and retains a rebate, commission or trade or volume 
discount upon a cash advance item.


Sec. 453.4  Required purchase of funeral goods or funeral services.

    (a) Casket for cremation provisions--(1) Unfair or deceptive acts 
or practices. In selling or offering to sell funeral goods or funeral 
services to the public, it is an unfair or deceptive act or practice 
for a funeral provider, or a crematory, to require that a casket be 
purchased for direct cremation.
    (2) Preventive requirement. To prevent this unfair or deceptive act 
or practice, funeral providers must make an alternative container 
available for direct cremations, if they arrange direct cremations.
    (b) Other required purchases of funeral goods or funeral services--
(1) Unfair or deceptive acts or practices. In selling or offering to 
sell funeral goods or funeral services, it is an unfair or deceptive 
act or practice for a funeral provider to:
    (i) Condition the furnishing of any funeral good or funeral service 
to a person arranging a funeral upon the purchase of any other funeral 
good or funeral service, except as required by law or as otherwise 
permitted by this part;
    (ii) 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).
    (2) Preventive requirements. (i) To prevent these unfair or 
deceptive acts or practices, funeral providers must:
    (A) Place the following disclosure in the general price list, 
immediately above the prices required by Sec. 453.2(b)(4) (ii) and 
(iii): ``The goods and services shown below are those we can provide to 
our customers. You may choose only the items you desire. If legal or 
other requirements mean you must buy any items you did not specifically 
ask for, we will explain the reason in writing on the statement we 
provide describing the funeral goods and services you selected.'' 
Provided, however, that if the charge for ``services of funeral 
director and staff'' cannot be declined by the purchaser, the statement 
shall include the sentence: ``However, any funeral arrangements you 
select will include a charge for our basic services'' between the 
second and third sentences of the statement specified above herein. The 
statement may include the phrase ``and overhead'' after the word 
``services'' if the fee includes a charge for the recovery of 
unallocated funeral provider overhead;
    (B) Place the following disclosure in the statement of funeral 
goods and services selected, required by Sec. 453.2(b)(5)(i): ``Charges 
are only for those items that you selected or that are required. If we 
are required by law or by a cemetery or crematory to use any items, we 
will explain the reasons in writing below.''
    (ii) A funeral provider shall not violate this section by failing 
to comply with a request for a combination of goods or services which 
would be impossible, impractical, or excessively burdensome to provide.


Sec. 453.5  Services provided without prior approval.

    (a) Unfair or deceptive acts or practices. In selling or offering 
to sell funeral goods or funeral services to the public, it is an 
unfair or deceptive act or practice for any provider to embalm a 
deceased human body for a fee unless:
    (1) State or local law or regulation requires embalming in the 
particular circumstances regardless of any funeral choice which the 
family might make; or
    (2) Prior approval for embalming (expressly so described) has been 
obtained from a family member or other authorized person; or
    (3) The funeral provider is unable to contact a family member or 
other authorized person after exercising due diligence, has no reason 
to believe the family does not want embalming performed, and obtains 
subsequent approval for embalming already performed (expressly so 
described). In seeking approval, the funeral provider must disclose 
that a fee will be charged if the family selects a funeral which 
requires embalming, such as a funeral with viewing, and that no fee 
will be charged if the family selects a service which does not require 
embalming, such as direct cremation or immediate burial.
    (b) Preventive requirement. To prevent these unfair or deceptive 
acts or practices, funeral providers must include on the itemized 
statement of funeral goods and services selected, required by 
Sec. 453.2(b)(5), the statement: ``If you selected a funeral that may 
require embalming, such as a funeral with viewing, you may have to pay 
for embalming. You do not have to pay for embalming you did not approve 
if you selected arrangements such as a direct cremation or immediate 
burial. If we charged for embalming, we will explain why below.''


Sec. 453.6  Retention of documents.

    To prevent the unfair or deceptive acts or practices specified in 
Sec. 453.2 and Sec. 453.3 of this rule, funeral providers must retain 
and make available for inspection by Commission officials true and 
accurate copies of the price lists specified in Secs. 453.2(b) (2) 
through (4), as applicable, for at least one year after the date of 
their last distribution to customers, and a copy of each statement of 
funeral goods and services selected, as required by Sec. 453.2(b)(5), 
for at least one year from the date of the arrangements conference.


Sec. 453.7  Comprehension of disclosures.

    To prevent the unfair or deceptive acts or practices specified in 
Sec. 453.2 through Sec. 453.5, funeral providers must make all 
disclosures required by those sections in a clear and conspicuous 
manner. Providers shall not include in the casket, outer burial 
container, and general price lists, required by Secs. 453.2(b)(2)-(4), 
any statement or information that alters or contradicts the information 
required by this Part to be included in those lists.


Sec. 453.8  Declaration of intent.

    (a) Except as otherwise provided in Sec. 453.2(a), it is a 
violation of this rule to engage in any unfair or deceptive acts or 
practices specified in this rule, or to fail to comply with any of the 
preventive requirements specified in this rule;
    (b) The provisions of this rule are separate and severable from one 
another. If any provision is determined to be invalid, it is the 
Commission's intention that the remaining provisions shall continue in 
effect.
    (c) This rule shall not apply to the business of insurance or to 
acts in the conduct thereof.


Sec. 453.9  State exemptions.

    If, upon application to the Commission by an appropriate state 
agency, the Commission determines that:
    (a) There is a state requirement in effect which applies to any 
transaction to which this rule applies; and
    (b) That state requirement affords an overall level of protection 
to consumers which is as great as, or greater than, the protection 
afforded by this rule; then the Commission's rule will not be in effect 
in that state to the extent specified by the Commission in its 
determination, for as long as the State administers and enforces 
effectively the state requirement.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 94-393 Filed 1-10-94; 8:45 am]
BILLING CODE 6750-01-P