FTC Kills Funeral Home Directors’ Attempt to Bury Competition
On March 9, the Federal Trade Commission reached a settlement with the Missouri Board of Embalmers and Funeral Directors on charges that they had illegally attempted to eliminate non-funeral home retailers from the sale of caskets in Missouri. The consent decree does not require that the Board eliminate the allegedly anticompetitive regulation, but only requires that the Board provide a proviso on its website stating and in its newsletters and magazines that the new regulation does not restrict the right of non-funeral homes to sell caskets.
The Board, which the State of Missouri had empowered to pass regulations regarding funeral homes and services, had amended the regulations in 2004 to state that “No person other than a duly licensed and registered funeral director may make the following at-need arrangements with the person having the right to control the incidents of burial: . . . (C) sale or rental to the public of funeral merchandise, services or paraphernalia.” Missouri statutes, however, explicitly provided that non-funeral homes had the right to sell caskets to the public, despite any regulation that the Board might pass. The FTC, however, found that the new regulation, by itself, coupled with the Board’s power to seek injunctive relief, could discourage potential entrants into the casket market, and decrease competition. The FTC noted that it had brought past complaints against funeral home associations that had attempted to ban other types of companies from selling caskets.
To resolve the complaint, the Board agreed to a consent decree that allowed the Board to keep the amended regulation, but required it to publish the text of the Missouri statute and a proviso stating in its newsletter, on its website, and in the magazine it regularly distributed to its members that the regulation did not prohibit non-funeral home from selling caskets. The FTC also required the website to have a link to the FTC’s decision, to remain active for at least 5 years, and to make itself accessible to all regular search engines.
The order and decision are intriguing because they avoid the problem of mandating that a state organized and sanctioned self-governing body change its regulation and instead remedy the potential problem through a notice. As the FTC’s complaint focused on the perception of the scope of the regulation rather than the regulation itself, this decision and order show a very focused remedy for a problem.
FTC Approves Suit to Block Natural Gas Acquisition in Pittsburgh Area
The FTC voted 4-1 to approve a suit if necessary to stop Equitable Resources, Inc from acquiring The People’s Natural Gas Company, a subsidiary of CNG and Dominion Resources, Inc. According to the complaint, the $970 million acquisition would result in a monopoly in the market for the transmission, distribution, and sale of natural gas in certain counties in Southwestern Pennsylvania, including around the Pittsburgh Area. The press release accompanying the administrative complaint stated that the FTC would not file a complaint seeking to block the merger, unless the Public Utility Commission of Pennsylvania declined to block the acquisition on its own.
The concern for the FTC is Equitable’s proposed control over People’s in areas where the merger would result in a decrease in competition from 4 to 3, 3 to 2, or 2 to 1 competitors. The FTC acknowledged that the Pennsylvania PUC actually sets the rates charged to residential users, potentially blunting the pricing power of even a monopolist, but found that the merger could still result in higher prices. First, businesses within the effected area would be unable to force Equitable and People’s to compete, leaving businesses in the area vulnerable to price increases. Second, the FTC argued that Equitable and People’s had competed for residential customers in the past by providing rebates to the customers, thus decreasing the effective price paid by the residential customers despite the presence of the PUC.
The administrative complaint is interesting, because the FTC admits that it has no plans to file for a preliminary injunction so long as the PUC refuses to permit the merger to go forward. Thus, if the Pennsylvania PUC were to decide that the merger was in the public interest, the parties still could not close, as the FTC would sue to stop the consummation. Given the localized effects of the relevant product markets, the local distribution of natural gas to customers, one could argue that the Pennsylvania PUC would have just as great a concern about the welfare of the citizens of Pennsylvania as would the FTC. In addition, by announcing that it had voted to permit the filing of suit seeking a preliminary injunction when one might not be necessary, the FTC would seem to cut off negotiations that could have resulted in further concessions by Equitable. Thus, just as with the Missouri Funeral Home Directors decision discussed above, the FTC has decided to intervene in a very localized market where the state had already passed laws regulating the anticompetitive conduct at issue, perhaps reflecting a new, more aggressive stance towards enforcement.