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Tuesday, May 7, 2013

Grave Robbers: Anti-Competitive Regulations for the Dead

HARRISBURG, Pa. – The monks of St. Joseph Abbey in Covington, Louisiana, leave this world in the same simple way as they live in it.

And when public interest in their basic, handmade wooden caskets grew, the monks proved to have a shrewd business sense, too. They opened a woodworking shop in 2005 to produce caskets that they sell for about $2,000 each, far below the average price for a casket in the state.

But where the monks saw an opportunity, a state cartel of funeral home owners and funeral directors saw unwanted competition.

In 2007, the Louisiana State Board of Embalmers and Funeral Directors—eight of the nine members of which are licensed funeral directors—voted to ban the abbey from selling its caskets. Under state law, only licensed funeral directors are allowed to sell caskets, and they are only allowed to do so from state-licensed funeral homes. 

Those two simple requirements buried the monks in a tangle of red tape.

To get a license, St. Joseph Abbey would have to build a funeral parlor with room for 30 people, a display room for at least six caskets, an arrangement room, and an embalming room. They also would have to hire a funeral director and pay him a full-time salary.

The monks launched a petition to the state legislature to change the regulations. When that failed, they took the board to court. 

In March, a panel of federal judges upheld a lower court ruling in the monks’ favor. In a scathing rebuke to the state board, the judges of the 5th U.S. Circuit Court of Appeals wrote that “funeral homes, not independent sellers, have been the problem for consumers with their bundling of product and markups of caskets.”


Open-Market Funeral

The casket-selling laws in Louisiana are unique, but there are regulations on the books in almost every state designed to protect funeral homes from competition and lower prices.

Joshua Slocum is the executive director of the Funeral Consumers Alliance, a Vermont-based organization that favors a more open market for funeral providers and customers. He says the funeral industry is unlike most other businesses in two key ways.

“For one, there are no repeat customers,” Slocum says glibly. “I have but one life to give to my funeral director.” 

Having no repeat customers means there is little in the way of competition for the best services. And since literally everyone has one life to give, there is no shortage of customers. 

There is also little market pressure on the establishments because it is rare for anyone to “shop around” for a funeral home in the way he or she might seek the best deal for a cruise or any other once-in-a-lifetime purchase. 

This is partially psychological—we have a natural aversion to thinking or talking about the inevitable end of our lives, and cost is rarely in the front of mourning family members’ minds. 

But do a dead body’s final moments above ground or a family’s last goodbyes to a loved one require a three-story Victorian home, a $30,000 embalming room, a Mercedes hearse, and a $4,000 casket?  In most places, you’d have a hard time finding an alternative.

That is slowly starting to change, thanks to entrepreneurs like Verlin Stoll, who believe there is an untapped market for affordable, no-frills funerals that would appeal to those with modest means.

Stoll opened Crescent Tides funeral home in St. Paul, Minn., in 2006. He offers low-cost funerals in a nondescript building in an office park that does not have a viewing chapel or other amenities. The basic package at Crescent Tides starts at $250, about 10 percent of the average Twin Cities funeral.

His model has been so successful that Stoll wants to open a second location in nearby Minneapolis, but in order to do so, he has to comply with costly state regulations—like one that requires that he build a $30,000 embalming room in the second location, despite the fact that he outsources embalming services to a third party and specializes in cremations and other types of funeral services that do not require embalming.

And Stoll already has an embalming room at his St. Paul location; he uses the room for storage because he does not need it.

“This additional expense has forced him to delay expanding his low-cost model to a new community,” said Katelynn McBride, an attorney with the Institute for Justice, a national libertarian public-interest law firm that is fighting the law on Stoll’s behalf. “We just don’t think where funeral homes have no interest in embalming that they should have to build useless facilities.”

The Minnesota Department of Health has argued that embalming rooms are necessary as a matter of public health.

His case is currently awaiting a ruling before a state judge, following oral arguments in early March. 

But in many places, onerous regulations on funerals are in retreat. 

In Pennsylvania, a federal judge struck down 11 parts of the state’s Funeral Director Law—including an embalming room requirement similar to the one in Minnesota—for being unconstitutional. Like in Louisiana, the rules were written by an unelected panel controlled by licensed funeral directors.

The Keystone State is perhaps the funeral home capital of America. There are more than 1,600 funeral homes in the state, and each performs, on average, fewer than two funerals per week.

In a truly free market, Slocum says, that many funeral homes would never be able to stay in business. After all, how many businesses in other sectors would be able to survive on a single job per week?

But thanks to rules that keep costs high and discourage head-to-head competition that would drive costs down, all those funeral homes remain open and consumers have no idea they are being overcharged.

John Eirkson, executive director of the Pennsylvania Funeral Directors Association, disagrees with the idea that the industry has been captured.

Eirkson also doesn’t see regulations as anti-competitive. Rather, they are important protections that keep unscrupulous owners from taking advantage of grieving families. Eroding long-standing regulations on the industry means fewer inspections of funeral homes, including inspections of funeral homes’ finances, he warns.

But it is the funeral board that is taking advantage of customers, says Ernie Heffner, who owns a dozen funeral homes across Pennsylvania. He was one of several plaintiffs who brought the challenge that ended some of the state’s regulations last year—including such minutiae as restrictions on the names of funeral homes and a prohibition on serving food during visiting hours.

“Now I can offer continental breakfast visitations and I can offer dessert visitations in the evening. Is that a bad thing? I don’t think so,” Heffner said.

The changes also open the door to high-efficiency, low-cost funeral homes in Pennsylvania that could adopt Stoll’s successful Minnesota model.

Death may not be proud, but it might finally be getting a little less expensive.


  • Eric Boehm is a reporter for Reason. He lives in Arlington, Virginia, but will never consider himself a southerner. He writes about state government, pensions, licensing, regulations, civil liberties, and anything else that strikes him in the moment. Previously, he was a national regulatory reporter for and was bureau chief of the (now defunct) Pennsylvania Independent in Harrisburg, Pennsylvania.