CMA proposes major funeral market probe citing serious market concerns

Candle and white flowers Print publication

18/12/2018

The Competition and Markets Authority is due to begin an in-depth market investigation into the UK funeral sector in the New Year. This will involve a detailed review and scrutiny of the sector and include many of its key players.

On 29 November 2018, the CMA announced in an interim report a number of serious concerns with the funeral market which it believes merit further investigation. In particular, the CMA’s initial work indicates that price rises in the funeral sector have been above inflation for well over a decade. This includes both prices for funeral director services and crematoria services. In the CMA’s view, the scale of these price rises does not currently appear to be justified by cost increases or quality improvements.

CMA’s initial findings

The CMA found that people generally spend between £3,000 and £5,000 organising a funeral, and the price of the essential elements has increased by more than two-thirds in the last 10 years, almost 3 times the rate of inflation:

  • Customers could save over £1,000 by shopping around. However, the CMA recognised that people arranging a funeral are usually distressed and often not in a position to do so. This makes it easier for some funeral directors to charge higher prices. Prices are also often not available online, making it difficult for customers to compare options.
  • While some smaller funeral directors have sought to keep their prices low, other providers have implemented steady year-on-year price increases. Some suppliers have now introduced ‘low-cost’ funeral options, but the CMA does not consider that this goes far enough to make up for years of above inflation price rises. The CMA’s evidence also indicates that most people who organise a funeral remain extremely vulnerable to exploitation and future rises in charges.
  • The CMA found that cremations account for 77% of funerals although there are often limited choices for most people in their local area and fees charged by crematoria have increased by 84% on average in the past 10 years, more than 3 times the rate of inflation.

Comment

The CMA is expected to begin its in-depth probe early in the New Year. The CMA is now consulting on its proposed terms of reference and welcomes any views by 4 January 2019.

Assuming the CMA goes ahead with its investigation, we would expect the CMA to begin sending information requests to funeral businesses in the New Year. The CMA will also publish details in an “issues statement” outlining the proposed focus of its investigation.

Under statutory rules the CMA will need to complete its market study within 18 months. Following this, the CMA has wide-ranging powers to make changes in the sector including:

  • making recommendations to Government on reforms needed;
  • requiring companies to provide more information to their customers (perhaps online);
  • taking measures to promote online comparisons of funeral prices;
  • prohibiting certain fee structures; and/or
  • taking consumer or competition enforcement action in relation to any suspected infringements of consumer or competition law.

A market investigation represents an opportunity to influence future regulation and the shape of an industry. It also provides a way to raise any concerns which smaller firms may have as regards their ability to compete and grow in the market.

The process involves a detailed legal and economic assessment including direct engagement with major funeral suppliers and market participants. The CMA has extensive information gathering powers backed by the ability to issue fines for failure to comply. The outcomes of any market investigation can be potentially very significant for the business models of suppliers and the commercial terms they offer. Firms will no doubt want to be on the front foot armed with appropriate legal and economic analysis to support their position.

The Competition Team at Walker Morris has extensive experience in assisting companies involved in market investigations by the CMA. If you would like further information on how Walker Morris may be able to assist you, please contact any member of the Competition Team listed below.

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