Funeral sector regulation has been a bit of a hot topic recently, and at Brodies we have been following and updating on developments as they have happened. As we were issuing an update last week on Scottish funeral regulation, we included a *stop press* on UK-wide sector reviews from the Treasury and the Competition and Markets Authority (CMA).
The former will consider, in the Government’s words, “tougher regulation for funeral plan providers” by making them subject to full Financial Conduct Authority oversight for the sale and provision of pre-paid funeral plans.
At the same time the Treasury was putting out its call for evidence, the CMA announced its decision to look into the “at need” funerals market (i.e. funerals where there is no pre-paid plan and families and loved ones are engaging a funeral director after a death). A statutory market study notice was published on 1 June 2018.
How does a market study work?
A CMA market study is an initial look at a market, under the Enterprise Act 2002, to consider whether there are problems in how that market works that may have an adverse effect on consumers and, if there are, to consider what steps can be taken to remedy any problems. If the CMA has reasonable grounds for believing that the market has problems, the study may lead on to a full “phase 2” market investigation. This gives the CMA the ability to make orders directing market players to change their behaviour.
Alternatively, the market study may conclude that there is no problem with the market at all, or recommend that the government change regulations or public policy and/or that businesses change their behaviour.
The CMA can also accept formal undertakings from key market players in lieu of making a reference, or if particular companies are identified as having poor behaviour it may decide to take consumer or competition law enforcement action against them specifically.
The CMA’s interim report must be published after 6 months, and the final report after a year. For further information see the CMA’s case page.
Why has the CMA decided a market study is needed?
The CMA says it has particular concerns regarding:
- too high funeral prices (particularly challenging for low income consumers) which have seen long-term above-inflation increases, indicating that competitive constraints are not keeping prices down;
- significant price differentials and lack of transparency of pricing and package information, indicating that consumers are finding it difficult to make funeral directors compete for their business; and
- with regard to pre-paid funeral plans, high pressure selling, lack of information regarding the limits of such plans, and high cancellation fees, all of which might raise consumer protection issues.
The statement of scope notes that the market study will focus on two core issues: (1) how competition between funeral directors works and transparency issues in the provision of funerals, and (2) how competition works in the crematorium segment of the industry. Notwithstanding the CMA’s concerns regarding pre-paid funeral plans, these will not be scrutinised by the market study as they are subject to the parallel Call for Evidence by the Treasury.
What happens now?
The CMA should already have approached key stakeholders in the market (including purchasers, businesses and industry groups, local authorities, government departments, consumer groups and charities) to seek their initial views on the concerns the CMA has identified and the proposed scope of the study. Any other person is free to make a written representation to the CMA on issues relevant to the market study, though the window for submitting those is only open until 28 June 2018. Those affected by the CMA review (including but not limited to funeral directors and industry bodies) should engage with the opportunity to make representations, to ensure their perspective is taken into account from the outset of the study.