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FTC Staff Issues Important Opinion on Basic Services Fee

by: T. Scott Gilligan, NFDA General Counsel
November 25, 2009

On February 17, 2009, Federal Trade Commission (FTC) staff issued an Advisory Opinion on discount funeral packages that raised a number of questions regarding the basic services fee. That Advisory Opinion held that while funeral homes may offer discounted packages, they should not discount the basic services fee when deciding the amount of the discount. In other words, a funeral home was permitted to reduce the price of all of the items included in the package, except for its basic services fee.

While the February 17, 2009, FTC Advisory Opinion would have a limited impact on how most funeral homes price their packages, it had the potential for greatly impacting how funeral homes price the four alternative services of forwarding remains, receiving remains, immediate burials, and direct cremations. At the time, some industry observers concluded that this FTC Advisory Opinion now required all funeral homes to incorporate their entire basic services fee into the price of these four alternate services. For example, if a funeral home's basic services fee was $1,800, then its price for direct cremation had to be more than $1,800 because the entire basic services fee had to be incorporated into the direct cremation price.

NFDA disagreed with that interpretation and, within two days of the issuance of that Advisory Opinion, formally requested clarification from the FTC staff. That clarification was issued November 24, 2009, and the FTC agreed with NFDA's position. This new FTC Staff Advisory Opinion concludes that "...the [Funeral] Rule permits funeral providers to reduce their basic services fees for forwarding remains, receiving remains, direct cremations, and immediate burials, in order to reflect the proportionate reduction in facilities overhead and services of funeral director and staff required to provide them."

This FTC Staff Advisory Opinion is important because it finally puts to rest the question of whether a funeral home's prices for these four alternate services must be greater than the funeral home's basic services fee. The answer is that it does not. When pricing the services of forwarding remains, receiving remains, immediate burial, and direct cremation, a funeral home may include only a portion of its basic services fee; it does not have to incorporate the entire amount of the fee into the price of those services.

In a related aside, this new FTC Staff Advisory Opinion also addressed home funerals involving a funeral home that provides limited services. The Advisory Opinion states that, in these circumstances, a funeral home may offer a reduced basic services fee that is commensurate with the limited services it is providing.

On November 24, 2009, the FTC staff also issued a second Advisory Opinion regarding merchandise warranty claims. At issue was a statement made in a funeral home advertisement claiming that a vault was "waterproof and has a warranty in writing." The Advisory Opinion addressed the question of whether the claim that the vault was waterproof violated the Funeral Rule's prohibition against funeral providers making false claims about the protective features of funeral merchandise. FTC staff stated that if the manufacturer's waterproof claim was in fact untrue, then the funeral provider had violated the Funeral Rule. Further, the Advisory Opinion found that even if the funeral provider was simply repeating the claims made in the warranty, the funeral home would violate the Funeral Rule because it was adopting the warranty claim as its own.

This Advisory Opinion reinforces NFDA's longstanding advice that funeral homes should review all of the warranty claims made by the manufacturers of the merchandise it sells. If any of those claims regarding the protective features of the merchandise cannot be substantiated, the funeral home should not sell that merchandise.

NFDA members with questions regarding these matters may contact NFDA General Counsel Scott Gilligan at 513-871-6332.