Despite the huge profits, SCI does not tell its customers that it is using embalmers like Ooten. Nor does it tell clients how much it is paying Ooten or other contract embalmers. The company says it is not required to do so, but the TFSC disagrees. Federal Trade Commission rules require funeral homes to tell consumers if they are using third parties for some goods and services. The FTC calls them “cash advance items” and requires funeral homes to tell consumers how much each cash advance item costs and how much the funeral home is charging them for that good or service. The FTC rules define cash advance items as any “item of service or merchandise” that is “obtained from a third party and paid for by the funeral provider on the purchaser’s behalf.” SCI insists that the FTC rules regarding cash advances do not apply to third-party contracts for embalming services. Says SCI spokesman Bill Miller: “We don’t tell our clients” when contract embalmers are used. “We are not required to under law. And it is not a cash advance item.”
However, a number of sources with experience in the funeral industry disagree with SCI’s interpretation. Marc Allen Connelly, the former general counsel for the TFSC, says if the work is “not being performed at their facility, it’s a third party. And that’s an item that ought to be disclosed to the consumer. The real issue is, they have to tell the consumer how much they are paying for the service. They can charge whatever they want as long as the consumer knows there’s a third party involved and how much the funeral home is charging them.”
Myra Howard, an FTC attorney who oversees the agency’s funeral regulations, says that disclosing the use of third-party embalmers has not been an issue in the past because it was unclear if consumers were hurt by the lack of disclosure. She adds that when the funeral rules were written, almost all funeral homes were owned by individual owners who did the embalmings themselves. But with the advent of SCI and other consolidators, the funeral business has changed and commercial embalming services have become more common.
Asked how third-party embalming should be classified for consumers, Howard replied, “If you take a strict reading of our rules, it could be considered a cash advance item.” Howard said the agency is currently reviewing its funeral regulations and that if third-party embalming is “becoming more prevalent and it turns out that consumers are being harmed by the practice, it could be we will take a serious look at it.”
SCI is already making big profits on embalming. In five of its Austin-area funeral homes (the Cook-Walden chain), SCI charges $725 for embalming, which is up to triple the price charged by other local funeral homes. Given SCI’s high volume and a business model which seeks to cut costs, the company’s actual cost for embalming a body may be as little as the $145 that it was charged by Ooten’s company.
In its dispute with the TFSC, SCI wants the agency to interpret the law so that independent, commercial embalming companies will be able to operate out of its existing funeral homes. SCI also wants the state to rule that these commercial embalming companies be allowed to operate under the licenses already held by SCI’s funeral homes. If the state agrees, SCI will be able to reduce its overhead and thereby reduce its embalming costs even further.
In a July 23, 1998, letter to the attorney general’s office, the TFSC’s former general counsel, Jeffrey Schrader, explained the agency’s position on the embalming issue. It’s a position that clearly favors the consumer, not SCI. Schrader said that Texas law requires commercial embalming companies to have their own commercial embalming license. His letter also states that under Texas law, “a commercial embalming establishment cannot be licensed to operate out of the embalming preparation room of a licensed funeral establishment.”
To bolster that conclusion, Schrader says that if commercial embalming facilities are allowed to operate out of existing funeral homes and share the same embalming preparation room, then “it would be unclear to the agency, consumers,\ and the general public as to who is ultimately accountable or responsible for the activities occurring in the funeral home facility.”
Despite the TFSC’s position, some funeral home owners are siding with SCI. John Amey, the co-founder and former owner of Amey Funeral Home in Austin, who was also the chairman of the TFSC during the 1980s, believes funeral homes do not have to tell their clients when they are using a third-party contractor for embalming. And he even submitted an affidavit to that effect in the brief that SCI submitted to Attorney General John Cornyn.
But make no mistake, Amey appears to have an intense dislike for SCI. He says their prices for embalming are “preposterous” and “outrageous.” However, he doesn’t expect anything to come of the current investigation into their practices. “They are the biggest. They are the bully. They have the highest prices. They are the intimidators. They do it all,” he said. The outcome of the TFSC’s dispute with SCI is yet to be decided. But the case brought against SCI by Hood’s family for the faulty embalming is going forward. And given the subject matter, it will no doubt prove embarrassing for the world’s largest funeral company.
Industry Under Review
The Federal Trade Commission is currently reviewing the regulations that govern the funeral industry. It is encouraging citizens to comment on the existing funeral rules and to specify which regulations should be changed. Mail comments to: Federal Trade Commission, 600 Pennsylvania Ave., NW, Washington, D.C. 20580. Please mark your comments with the notation: 16CFR part 453. You can also e-mail comments to: funeral@ftc.gov.
This article appears in July 9 • 1999 and July 9 • 1999 (Cover).