Prepared Statement of the Federal Trade Commission

For the Committee on Energy and Commerce

Subcommittee on Commerce, Trade, and Consumer Protection

United States House of Representatives

Washington, D.C.

January 27, 2010
 The views expressed in this statement represent the views of the Commission. My oral 1

statement and responses to any questions you may have are my own and do not necessarily

reflect the views of the Commission or any individual Commissioner.

Mr. Chairman and members of the Subcommittee, I am Charles A. Harwood, Deputy

Director of the Federal Trade Commission’s Bureau of Consumer Protection. The Commission

appreciates this opportunity to provide comments to the Subcommittee on H.R. 3655 and

information on the Commission’s law enforcement activities regarding the funeral industry. 

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The Commission remains committed to working with the Subcommittee to identify ways

in which the Commission’s rulemaking, law enforcement, and outreach experience can be of

assistance in considering solutions to the problems highlighted by the horrific events that took

place at the historic Burr Oak Cemetery in Alsip, Illinois. In particular, the Commission is

grateful to have an opportunity to discuss H.R. 3655, a Bill that would, among other things, give

the Commission the authority to regulate cemeteries nationwide. 

The Commission commends your leadership in responding to the problems highlighted 

by the tragic events at Burr Oak Cemetery, as well as the efforts of local and state law

enforcement and regulatory authorities in responding to this tragedy. By addressing the

problems aggressively, you have clearly signaled the public’s resolute unwillingness to tolerate

the abusive and appalling behavior that occurred. We are hopeful that your combined efforts

have brought some comfort to families with loved ones interred at Burr Oak. 

PROPOSED LEGISLATION: H.R. 3655

We strongly support the goals of H.R. 3655, which are to provide more effective

consumer protection against fraud and abusive practices in connection with the provision of

funeral goods and funeral services. H.R. 3655 would direct the Commission to conduct a

rulemaking within one year of enactment to extend the key consumer protections in the
 16 C.F.R. Part 453. 2

 The Rule applies to “funeral providers” who sell or offer both “funeral goods” and “funeral 3

services.” 16 C.F.R. §§ 453.1(i); 453.2(a). “Funeral goods” are goods sold or offered in

connection with funeral services. 16 C.F.R. § 436.1(h). “Funeral services” are any services that

may be used to care for and prepare bodies for burial, cremation or other final disposition and

arrange, supervise or conduct the funeral ceremony or other final disposition. 16 C.F.R.

§ 436.1(j). Thus, both funeral goods and funeral services are offered by funeral homes, but both

also may be offered by crematories that sell urns or other goods, and by cemeteries with

mortuary facilities on their premises that care for and prepare bodies for final disposition.

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Commission’s Funeral Industry Practices Trade Regulation Rule (“Funeral Rule”) – now 2

principally applicable to funeral homes – to cemeteries, crematories and retailers of caskets, 3

urns, monuments, and markers. The Bill would mandate that a final rule require these members

of the funeral industry to provide pre-sale price disclosures, prohibit misrepresentations and

required purchases, and mandate clear contracts that itemize the goods and services purchased

and their prices, just as funeral providers must now do under the Funeral Rule. 

H.R. 3655 also would go beyond the current provisions of the Funeral Rule to: (1)

mandate that a final rule require all pre-paid funeral contracts to disclose any future fees and

costs that purchasers may incur, and any penalties for cancellation or transfer of the contract to

another provider; (2) require cemeteries to disclose their written rules and regulations in a timely

manner, and provide purchasers with a clear written explanation of the burial rights they have

purchased, including any repurchase option by the cemetery and any resale rights available to the

consumer; (3) mandate that cemeteries retain all extant burial records and maps, accurately

record and retain burial records after the rule takes effect, and make these records available to

federal, state and local governments; and (4) authorize states to bring enforcement actions for

violations of any of these rules. 
 Compare ROBERT G. E. SMITH, THE DEATH CARE INDUSTRIES IN THE UNITED STATES, McFarland & 4

Co., Inc., at 23 (1996) (citing estimates of 7,500 commercial cemeteries) with ELIZABETH G. &

JAMES D. KOT, UNITED STATES CEMETERY ADDRESS BOOK 1994 - 95, Indices Publ. (1996) (providing

addresses of “more than 25,000 cemeteries”). A number of states prohibit for-profit cemeteries,

including New York, New Jersey, Massachusetts, Wyoming, Connecticut, and Maine. 73 Fed.

Reg. 13740, 13744 & n.38 (Mar. 14, 2008).

 See 15 U.S.C. § 44. 5

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This testimony focuses on four aspects of H.R. 3655:

! Expansion of the Commission’s jurisdiction to include rulemaking and

enforcement responsibilities with respect to non-profits in the funeral industry;

! Application of the proposed law and resulting rule to retailers of caskets, urns,

monuments, and markers;

! Proposed new disclosures concerning the portability, refundability, and potential

future fees and costs of pre-paid funeral and burial contracts; and 

! Authorization to use Administrative Procedures Act rulemaking authority.

First, the rulemaking and enforcement jurisdiction provided for the Commission in H.R.

3655 would, for the first time, include non-profit members of the funeral industry, including

most cemeteries. Because the vast majority of cemeteries are organized as non-profits, owned or

operated by non-profit religious organizations or states and municipalities, such entities are

estimated to outnumber the nation’s approximately 7,500 for-profit cemeteries by at least 3 to 1.4

As you know, the Federal Trade Commission Act generally excludes non-profit companies from

the Commission’s jurisdiction. Indeed, in the Funeral Rule review proceeding concluded in 5

2008, the Commission declined to amend the Rule to cover only for-profit cemeteries, in part,

because of concerns about likely consumer confusion and the limited benefit of such an effort
 Fed. Reg. at 13745 (noting that “[t]here would be confusion among the general public as to 6

what type of information they could expect to receive and what rights they have to purchase

goods from third parties. To the extent additional requirements are intended to allow consumers

to compare costs among cemeteries, the inconsistent application of the Rule to some cemeteries

and not others could make such comparisons impossible or impractical.”) 

The Commission also cited a lack of evidence that commercial cemeteries are engaged in

widespread unfair or deceptive practices that injure consumers, as required by the Federal Trade

Commission Act (“FTC Act”), 15 U.S.C. § 57a(b)(3), as a basis for its determination not to

proceed with a notice of proposed rulemaking. Id.

 We also note that applying such requirements to religious organizations requires a careful 7

analysis of the need for such requirements and consideration of possible less burdensome

alternatives, and could lead to challenges under the First Amendment.

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when a minority of cemeteries would be affected. The proposed substantial expansion of 6

jurisdiction would enable the Commission to reach many more of the key members of the

funeral industry. At least 17,000 non-profit entities, the vast majority of which are religious

organizations or states and municipalities, would be subject to new disclosure and recordkeeping requirements and the attendant costs of compliance.7

Second, retailers of caskets, urns, monuments, and markers would be covered by the

additional rules mandated by H.R. 3655. These retailers would be subject to pre-sale price

disclosure and itemized contract requirements as well as the prohibition on misrepresentations
 The Commission considered a similar proposal during the rule review to expand the Funeral

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Rule’s price disclosure requirements to retail sellers of funeral goods, such as caskets and

monuments, that was suggested to “level the playing field” for consumers. 73 Fed. Reg. at

13745. At that time, the Commission declined to amend the Rule for that purpose after finding

insufficient evidence to support a reasonable belief “that third-party sellers of funeral goods are

engaged in widespread unfair or deceptive acts or practices” as required under the FTC’s

rulemaking procedures mandated by the Magnuson-Moss amendments to the FTC Act, and

noting that “third-party retailers have a strong economic incentive to display their prices to the

public at large because offering a lower price is the primary way they compete against funeral

providers for sales of funeral goods, such as caskets.” 73 Fed. Reg. at 13745.

 Although the Rule does not separately address pre-need arrangements, its price disclosure and 9

other requirements apply equally to pre-need and at-need arrangements. 16 C.F.R. § 453.2; see

also, e.g., 73 Fed. Reg. at 13751.

 These two disclosures were suggested during the rule review, but the record contained 10

insufficient evidence that abusive practices were prevalent in the sale of pre-need contracts to

support initiation of an amendment proceeding, as required by the FTC’s Magnuson-Moss

rulemaking authority. 73 Fed. Reg. at 13750-51.

 Some have expressed concern about loss or theft of pre-paid consumer funds and the 11

adequacy of state laws regulating pre-paid contracts. H.R. 3655 does not address these issues

directly, but the Bill’s additional disclosures may provide benefits to consumers.

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required in the final rule. The application of the mandated disclosure requirements should 8

provide benefits for consumers, but they will entail additional costs for these retailers. 

 Third, H.R. 3655 contemplates an expansion of the protections provided by the Funeral

Rule for purchasers of pre-need funeral arrangements, requiring contractual disclosures of any 9

additional fees or costs that may be incurred in the future and any penalties for cancellation or 

transfer of the contract. These additional disclosures represent a means to alert consumers who 10

wish to pre-plan their funeral arrangements to issues involved with prepayment and should

provide tangible benefits to them. Such contractual disclosures would supplement 11

requirements for clear, conspicuous, and accurate disclosure of material terms – including costs
 Section 18 of the FTC Act, 15 U.S.C. § 57a, empowers the FTC to “prescribe rules which 12

define with specificity acts or practices which are unfair or deceptive acts or practices in or

affecting commerce . . ..”

 In rulemaking under Section 18, the Commission may not issue a notice of proposed 13

rulemaking unless it has “reason to believe that the unfair or deceptive acts or practices which

are the subject of the proposed rulemaking are prevalent.” 15 U.S.C. § 57a(b)(3). The

Commission may find prevalence where available information “indicates a widespread pattern of

unfair or deceptive acts or practices.” 15 U.S.C. § 57a(b)(3)(B).

 FTC rulemakings pursuant to Magnuson-Moss procedures typically have required from three

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to ten years to complete. For example, the proceeding to promulgate the FTC’s Credit Practices

Rule, 16 C.F.R. Part 444, using Magnuson-Moss procedures took almost ten years. In contrast,

the proceeding to promulgate the FTC’s Telemarketing Sales Rule, 16 C.F.R. Part 310, using

APA procedures took one year. 

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– at the outset when pre-need arrangements are made, which is currently required under the

Funeral Rule. 

Fourth, H.R. 3655 directs the Commission to conduct a rulemaking within one year of

enactment to extend the key consumer protections in Funeral Rule to cemeteries, crematories

and retailers of caskets, urns, monuments, and markers. Under the cumbersome FTC Act

rulemaking procedures, promulgation of such a rule would likely be a time consuming effort

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and would require a finding that the practices addressed are “prevalent.” The Bill authorizes 13

the use of Administrative Procedures Act rulemaking authority, which should permit the

Commission to meet the rule promulgation deadline in H.R. 3655. 

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The Commission appreciates the Subcommittee’s request for comments concerning H.R.

3655 and welcomes the opportunity to work further with Subcommittee staff regarding the

proposed legislation. 
 The Funeral Rule was promulgated in 1984. A Commission-sponsored 1987 study and a 15

1988 study conducted by the Gallup organization for AARP indicated that at that time funeral

providers’ compliance with the Rule’s core requirement – i.e. to give consumers an itemized

general price list at the beginning of the arrangements discussion – may have been as low as 23

percent. See Federal Trade Commission Bureau of Economics Staff Report – An Analysis of the

Funeral Rule Using Consumer Survey Data on the Purchase of Funeral Goods and Services

(Feb. 1989) at 20. 

 To implement the sweeps, staff members from the Commission’s regional offices plan and 16

coordinate each annual sweep and identify the funeral homes in the targeted geographic area. 

Typically, between two and four staff members conduct the initial sweep, and after a preliminary

evaluation of the results, they may return for follow-up test shops. The staff members

coordinating the project then review and evaluate the reports of the test shops and the price lists

obtained. Staff members prepare letters notifying violators of the violations that were identified,

communicate what options the funeral provider has, and follow-up to obtain the information

needed to determine the amount of the FROP payment and to enroll the violator in FROP. 

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ENFORCEMENT

In developing H.R. 3655, the Subcommittee is seeking to increase consumer protection in

connection with the provision of funeral goods and funeral services by expanding coverage to

cemeteries and third-party sellers of funeral goods. As both the Subcommittee and the

Commission consider how to go forward in this area, the Commission’s experience

promulgating and enforcing the Funeral Rule is relevant and instructive. 

In the first ten years following promulgation of the Funeral Rule, compliance with the

cost disclosure provisions was very low – by one estimate only 25% of funeral providers

complied. In an effort to improve compliance, the Commission in 1994 initiated annual 15

enforcement Funeral Rule “sweeps” of funeral homes around the country. The sweeps involve

staff from the Commission’s regional offices, who, posing as consumers, visit all the funeral

homes in a particular urban or rural geographic area to determine whether they are in compliance

with the Rule’s core disclosure requirements. Working in cooperation with the National 16

Funeral Directors Association (“NFDA”), the Commission allows first-time offenders to make a
 When two separate sweep test shops show that a funeral provider is violating core Rule

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requirements, the Commission gives the provider, whether or not a member of NFDA, the choice

of a conventional investigation and potential law enforcement action resulting in a federal court

order and payment of a civil penalty, or participation in FROP. Funeral providers that enroll in

FROP make payments to the U.S. Department of Treasury equal to 0.8% of their average annual

gross sales over the prior three years. The NFDA collects a fee from FROP participants for

administering the program, maintains records on funeral homes that are enrolled in the FROP

program and makes these available for review by Commission staff.

 The overall compliance rate is now better than 85 percent. Since the sweeps program began, 18

Commission staff have shopped more than 2200 funeral homes, and referred more than 300 to

the FROP program.

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voluntary payment to the U.S. Treasury and enter into a training, testing, and monitoring

program known as the Funeral Rule Offenders Program (“FROP”). When two separate testshops show that a funeral provider is violating core Rule requirements, the Commission gives

the provider the choice of participating in FROP, or undergoing a conventional investigation and

potential law enforcement action resulting in a federal court order and payment of a civil

penalty. As a result of these annual sweeps, compliance has risen significantly from what it 17

was prior to 1994. Of course, such efforts necessarily entail enforcement costs and decisions 18

about enforcement priorities. 

As the history of the Funeral Rule demonstrates, an active enforcement program will be

essential to secure a reasonable level of compliance with any new requirements. Implementing a

robust program to enforce such new requirements against several thousand new entities likely

will require additional resources or the diversion of current resources away from other important

consumer protection missions. Like all government agencies, the Commission understands that

resources are scarce and must be used as efficiently as possible. However, increased resources

would help us meet the demands of providing more extensive protection for consumers and

would help the Commission effectively implement and enforce the requirements of H.R. 3655. 
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CONCLUSION

The Commission appreciates the Subcommittee’s interest in enhancing consumer

protections in the funeral industry, and wishes to thank the Subcommittee for this opportunity to

comment on H.R. 3655. As discussed, the proposed legislation, including its expansion of the

Commission’s jurisdiction, could entail compliance and enforcement costs and challenges, but it

could also provide meaningful benefits to consumers.