TCS Daily


Pine Box Politics

By Jerry Ellig - May 1, 2006 12:00 AM

The estate tax isn't the only government action that affects the cost of dying. Consider the regulation of funeral caskets.

Many consumers enjoy substantial savings by shopping online for a casket and then having it shipped to the local funeral director. Unfortunately, some states deprive consumers of such savings with laws or regulations declaring that only licensed funeral directors can sell caskets.

Consumers spend approximately $11 billion annually on cremations, funerals, and related expenses to take care of the roughly 2.4 million Americans who die every year. A traditional funeral costs more than $5,000. A casket, typically the most expensive component of a traditional funeral, usually costs between $2,000-3,000, and some mahogany or metal caskets cost as much as $10,000.

While funeral homes typically mark up their caskets by 300-400 percent, independent vendors often sell caskets online at much lower prices than funeral homes. Many online vendors also offer a greater variety, such as individualized caskets with western or Victorian themes. One online vendor features caskets emblazoned with the phrase "Return to Sender."

Laws requiring casket sellers to be licensed funeral directors increase the price of caskets. A survey by University of Oklahoma economist Daniel Sutter found that prices for 30 caskets in 14 Oklahoma funeral homes exceeded online prices for the same caskets by an average of 68 percent. Yale University economists Judith Chevalier and Fiona Scott Morton, in a working paper available from the National Bureau of Economic Research, found that licensing requirements increase the price that funeral homes charge for a plain wood casket by about $261.

But do these laws increase overall funeral costs? Or do funeral directors who face low-cost casket competition simply jack up the price of other funeral goods and services if independent retailers undercut them on caskets?

The evidence on this point is mixed. Chevalier and Scott-Morton conclude that funeral directors in non-restrictive states simply raise the price of other services by about the same amount that they reduce their casket prices. However, they also calculate that a consumer in a non-restrictive state using a plain wood casket could save about $344 on a funeral by buying the casket online, even after paying the higher price that funeral directors charge for their services in such states.

Another study by Sutter finds that licensing requirements for casket retailers increase funeral costs in the states where the licensing requirements are most costly and restrictive. Funeral homes' receipts per death are 11 percent higher in states that require casket sellers to have a funeral director's license and impose the most extensive training requirements for funeral directors.

Thanks to conflicting appeals court decisions, some states can impose costly licensing requirements on independent casket retailers, while others cannot.

The Tenth Circuit Court of Appeals ruled in 2004 that Oklahoma can require independent casket retailers to be licensed funeral directors and operate out of a licensed funeral establishment. To obtain a funeral director's license in Oklahoma, a candidate must graduate from an accredited program of mortuary science, complete 60 college semester hours at an accredited institution of higher education, pass two exams, complete a one-year apprenticeship in a funeral home, and embalm 25 bodies. A "funeral establishment" must have a fixed physical location, preparation room for embalming bodies, merchandise-selection room with at least five caskets, and adequate space for public viewing of human remains. All this, just to sell a box.

An Internet-based casket retailer in Oklahoma argued that the law was unconstitutional because it violated the 14th Amendment's Due Process, Equal Protection, and Privileges or Immunities clauses. The court reached the unprecedented conclusion that protecting funeral directors from competition from independent casket retailers is a legitimate state interest! By that logic, darn near all our commercial liberties get rendered unto Caesar.

The Tenth Circuit's decision conflicts with a decision by the Sixth Circuit in 2002. In Craigmiles v. Giles, the Sixth Circuit found that a Tennessee law similar to Oklahoma's furthered no legitimate state interest, such as consumer protection or public health and safety. Instead, Tennessee's actions were "naked attempts to raise a fortress protecting the monopoly rents that funeral directors extract from consumers," and courts have never regarded this as a legitimate governmental purpose that rescues otherwise unconstitutional laws.

In 2005, the Supreme Court turned down an opportunity to resolve the conflict when it declined to hear an appeal of the Powers case. But other decisions by the Supreme Court suggest that state casket laws could be struck down if opponents were to challenge them as violations of the Interstate Commerce Clause.

In a 2005 case involving direct wine shipping, Granholm v. Heald, the Supreme Court reiterated that discriminatory barriers to interstate commerce must be justified by a legitimate state interest, and states must present real evidence that the discrimination is necessary to accomplish their policy objectives. Justice Kennedy's majority opinion relied heavily upon a comprehensive study conducted by the staff of the Federal Trade Commission, which found that the laws increase costs to consumers but are not necessary to accomplish the states' policy objectives, such as preventing underage alcohol consumption or collecting taxes.

Even dissenting Justice Stevens noted, "The New York and Michigan laws challenged in these cases would be patently invalid if they regulated sales of an ordinary article of commerce rather than wine."

Like caskets, perhaps?

It's difficult to find any compelling state interest that is furthered by policies that permit only funeral directors to sell caskets. A common justification for licensing funeral directors is that they might otherwise take advantage of opportunities to sell grieving consumers merchandise they do not really want when they are vulnerable and distraught. But this argument is irrelevant for independent casket retailers, and especially irrelevant for online casket sales.

The consumers savvy enough to shop for caskets at independent retailers are unlikely to be the vulnerable consumers that the regulation is supposed to protect. And if they shop online, they can avoid dealing with sales staff who might pressure them into making unwise purchases. As the Federal Trade Commission pointed out in its amicus brief in the Powers case, licensing laws that reduce competition from independent casket retailers do nothing to protect grieving consumers from exploitation.

Nor is there any public health reason for requiring casket retailers to be funeral directors. Any possible public health effects would stem from the quality of the casket, not the identity of the seller. As the Sixth Circuit noted in Craigmiles, "There is no evidence in the record that licensed funeral directors were selling caskets that were systematically more protective than those sold by independent casket retailers. Indeed, the only difference between the caskets is that those sold by licensed funeral directors were systematically more expensive."

When a state law gets challenged on interstate commerce grounds, the state bears a much heavier burden of justifying the law. If critics of restrictive casket sales laws can resurrect their challenge as an interstate commerce case, they can drive the last nail into the coffin of casket sales licensing.

Jerry Ellig is a senior research fellow at the Mercatus Center at George Mason University and a coauthor of the FTC staff's analysis of state direct wine shipping laws. This essay is based on an article forthcoming in the Fall issue of The Elder Law Journal.

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2 Comments

Solution?
The whole problem could be solved as portrayed in a Broadway play of the 1970's. It was titled, "Oh Dad! Poor Dad! Mama's Hung You In The Closet And I'm Felling So Sad!"

Could taxidermy be the answer?

caskets
States restricting sales are cutting their own throats because they can't restrict purchases or shipping bodies out of state. Maybe burial can become a state economic issue.

COSTCO sells caskets.

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