New Funeral Rules Help Business, Not Consumers

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The grisly discovery of hundreds of decaying corpses on the grounds of Georgia's Tri-State Crematory (search ) in the winter of 2002 has sparked proposals in many states to tighten the regulation of funeral markets.

The goal is laudable: to ensure that people never again receive urns filled with powdered cement instead of the ashes of their loved ones. However, most of the proposed state laws and regulations would harm grieving consumers by reducing competition, leading to higher prices and lower quality funeral services. Ironically, they may also have the perverse effect of increasing the likelihood and severity of scandals like Tri-State.

Not surprisingly, Georgia was the first state to tighten its regulations after the scandal. Prior to the Tri-State discovery, the Peach State did not have license requirements for crematories because cremation is relatively rare in Georgia. In contrast, the state's requirements to become a funeral director are among the most stringent in the nation. For example, Georgia requires funeral directors to be embalmers (search) even though many funeral directors (search) do not embalm bodies. That requirement serves little purpose other than to provide jobs for embalmers and to raise prices for consumers.

Under Georgia's new law, crematories (search) must employ embalmers despite the fact that crematories have no need for their services. This will raise the cost of producing cremations, which will be passed on to consumers via higher prices. The alleged benefits of the law are much more speculative, resting on the assumption that embalmers are more ethical, on average, than crematory operators. The only people who unambiguously benefit from the new law are embalmers who face a greater demand for their services. Simply put, the new law is a foolish requirement -- unless the real purpose is to benefit embalmers and protect funeral firms from competition.

In Colorado, state lawmakers considered adopting a similar provision earlier this year: All funeral establishments would be required to be under the personal supervision of qualified funeral directors. That sounds sensible at first, but does a crematory really require a funeral director who has been trained in areas of funeral science and funeral services not used in crematories? Fortunately, the Colorado bill died in committee, but its sponsor has pledged to introduce a new version next year, one that would correct the "appalling" situation where Colorado is the "only state in the nation" that does not license funeral homes.

Not surprisingly, the Colorado Funeral Directors' Association (search) supports the legislation, arguing that the lack of licensing "has contributed to an influx of non-professionals." The funeral directors would like us to believe that the influx of those "non-professionals" has harmed Colorado consumers by lowering the quality of funeral services. It is more likely that the influx has harmed the association's members by forcing them to decrease their profit margins and lower their prices, a change that benefits consumers. My own research finds that consumers would save at least $335 million per year if other states followed Colorado's lead by repealing unnecessary funeral regulations.

The implicit assumption made by the supporters of stringent regulations is that scandals like Tri-State are less likely to occur in heavily regulated states. However, adding a lot of funeral regulations (search) could have the perverse effect of raising the likelihood and severity of scandals like Tri-State. A similar scandal in California was uncovered when a competitor blew the whistle on the misbehaving firm. In states like California that have more streamlined, competition-encouraging regulation, competitors are more likely to blow the whistle on one another.

The gruesome scandal at Tri-State should not be used as an excuse to re-regulate the funeral industry (search) in Colorado or to justify costly new regulations in Georgia or elsewhere. It also should not be used to defend retention of state regulations that limit consumers' options in funeral services, raise prices, and often make what is a difficult experience harder than it should be. Opening up the funeral market to more competition would make life -- and death -- easier to handle. Sadly, most states are stampeding in the wrong direction.

David E. Harrington is the Himmelright Associate Professor of Economics at Kenyon College in Ohio, and his academic research includes study of funeral services economics. Harrington offers an extensive discussion of this topic in the current issue of Regulation magazine, a publication of the Cato Institute.