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Pennsylvania Funeral Directors Ass'n, Inc. v. F.T.C.

filed counsel corrected november 3 1994.: October 17, 1994.


Petition for Review of the Federal Trade Commission's Amended Funeral Industry Practices Regulation Rule.

Before: Stapleton and Greenberg, Circuit Judges, and Atkins,*fn* Senior District Judge

Author: Atkins


ATKINS, Senior District Judge:

The Pennsylvania Funeral Directors Association, Inc. and the National Funeral Directors Association of the United States, Inc. as intervenor (collectively "PFDA"), have petitioned this court, pursuant to Section 18(e) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 57a(e), for review of the Federal Trade Commission's ("FTC") amended Funeral Industry Practices Rule. The PFDA specifically asks this court to invalidate an amendment to the original Funeral Industry Practices Rule ("Funeral Rule") which prohibits all funeral service providers from charging consumers a "casket handling fee" in instances where the consumer has purchased a casket from a party other than the funeral service provider -- i.e., from a third party casket vendor. The PFDA contends that the FTC's decision to implement a ban on casket handling fees was arbitrary and capricious and that the factual findings underlying that decision were unsupported by substantial evidence in the rulemaking record taken as a whole. For the reasons set forth below, we will affirm the amended Funeral Rule, and in particular the ban on casket handling fees.


On September 24, 1982, the FTC promulgated the Funeral Rule, which prohibited certain unfair and deceptive practices in the funeral service industry. Trade Regulation Rule; Funeral Industry Practices, 16 C.F.R. Part 453 (1982). The FTC's decision to issue the Funeral Rule was appealed to the Fourth Circuit, and was affirmed in Harry & Bryant Co. v. FTC, 726 F.2d 993 (4th Cir. 1984), cert. denied, 469 U.S. 820, 83 L. Ed. 2d 37, 105 S. Ct. 91 (1984). The Funeral Rule became effective on April 30, 1984.

One section of the Funeral Rule required the FTC to initiate rulemaking proceedings within four years of the effective date of the Funeral Rule to determine whether the Funeral Rule should be amended or repealed. Pursuant to this provision, the FTC issued an Advanced Notice of Proposed Rulemaking on May 31, 1988, which included the proposed language for the amendment under challenge in this case.

In January, 1994, after comprehensive rulemaking proceedings, the FTC adopted the amendment to the Funeral Rule which is at issue here; that amendment bans casket handling fees. On January 14, 1994, the PFDA petitioned this court for review of the amendment. The National Funeral Directors Association of the United States, Inc., of which Pennsylvania Funeral Directors Association, Inc. is a member, sought and was granted permission to intervene.


The Funeral Rule

The Funeral Rule was enacted on September 24, 1982, after extensive rulemaking proceedings and became fully effective on April 30, 1984. The Funeral Rule was premised on evidence that consumers are uniquely disadvantaged when they purchase funeral services after the death of a loved one, due to grief, time constraints, and inexperience. Additionally, the evidence showed that funeral service providers often sold only preselected packages of goods and services such that consumers were forced to purchase goods and services they did not want.

Therefore, the Funeral Rule set forth several requirements and prohibitions to remedy the unfair practices. Specifically, the Funeral Rule required funeral service providers to disclose prices over the telephone and to supply each customer with an itemized price list with every service and good that the provider sold. Additionally, the Funeral Rule required funeral service providers to "unbundle" their price packages, forbidding them from requiring the purchase of a casket for direct cremations and from conditioning the purchase of funeral goods or services on the purchase of any other goods or services;*fn1 the purpose was to prevent funeral service providers from forcing customers to purchase goods or services they did not want.*fn2 However, recognizing that each funeral requires the service of a funeral director and staff, the Funeral Rule permitted funeral service providers to charge a non-declinable fee for their professional services.

Several groups challenged the promulgation of the Funeral Rule in 1982 on evidentiary, policy, procedural, statutory, and constitutional bases. However, the Fourth Circuit rejected the challenge and affirmed the Funeral Rule. Harry & Bryant, 726 F.2d 993.

The Amendment Procedures

The Funeral Rule specified that, four years after it took effect, the FTC would initiate a rulemaking amendment proceeding to determine whether the Funeral Rule was operating effectively, whether any amendments to the Funeral Rule were needed, and whether the entire rule should be repealed. The FTC started the rulemaking proceedings in December, 1987, when it solicited comments on the Funeral Rule from consumers and funeral service providers. More than 350 comments were submitted. The majority of the comments came from people and entities which favored retaining and/or strengthening the Funeral Rule. Most funeral service providers, however, favored repealing or weakening the Funeral Rule.

In May, 1988, the formal rulemaking proceedings began when the FTC issued a Notice of Proposed Rulemaking. This notice informed recipients that the issue of banning casket handling fees would be considered by the FTC. More comments were submitted (189), public hearings were held in three cities, and evidence, including surveys, was presented to a presiding officer. After the testimony of 83 witnesses was presented, interested groups submitted rebuttal statements and proposed findings, as well as comments on later reports filed by the FTC staff.

The Casket Handling Fee Amendment

Prior to the enactment of the Funeral Rule, funeral service providers (i.e., funeral homes) were virtually the only parties selling funeral goods. However, after the implementation of the Funeral Rule, the way was paved for third parties to provide various funeral goods -- namely caskets. Because funeral service providers could no longer require a consumer to purchase a casket in order to receive any other funeral services, third parties stepped into the markets, but only in some areas.*fn3 The third ...

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