By Chris Farmer, NFDA General Counsel
As many of you may have read, in response to the soaring inflation that is gripping the country (an increase of 6.8% compared to 12 months ago and its highest level in 39 years), many vendors have begun instituting surcharges on their products. Perhaps you’ve read about these surcharges or you might have received a letter directly from your vendor. Because the price of their raw materials and supplies has surged due to a worldwide shortage of supplies, companies are favoring a temporary surcharge, as opposed to a general base price increase, which would be instituted to address the inflationary pressures that continue to drive up costs.
The increasing commoditization of funeral goods has resulted in more price sensitivity than in years past. While everyone wants to provide the families they serve with quality products, increasing competition, especially from overseas, has resulted in increased competition in price and quality, forcing vendors to keep their prices in line with ever increasing market pressures.
Tacking on a surcharge, as opposed to increasing the base price, is a way to recover increased costs while conveying the temporary intent of the fee and keeping the base price competitive. How “temporary” these surcharges and the factors that necessitated them are remains to be seen.
How Should Funeral Homes Handle Surcharges?
While some vendors have not commented on how funeral homes should handle the surcharges, a few have advised their funeral home clients to add the surcharge as a line item on the GPL. However, the Federal Trade Commission has previously admonished funeral homes about adding a surcharge as a line item on the GPL since it is a violation of the Funeral Rule.
This came up several years ago when gas prices spiked and some businesses imposed a fuel surcharge on their customers. Several funeral homes wanted to do the same for removal, hearse and limousine charges, but the FTC Staff stated that they considered such an addition to be a potential Funeral Rule violation since the consumer should be able to look at one price to determine whether he or she wants to purchase a service and not be required to add up various fees for a service the Funeral Rule requires be itemized.
The FTC Staff stated that funeral homes should simply raise prices for these items to cover higher gas prices, rather than separating the fees for the service. The same rationale would apply here. If the funeral home is incurring a commodities surcharge, it should simply raise its casket prices or basic services fee to capture increased costs or surcharges.
If you’d like to increase your nondeclinable basic services fee to include a recovery of overhead, such as surcharges, you may add the phrase “and overhead” after the word “services,” on your GPL:
The goods and services shown here are those we can provide to our customers. You may choose only the items you desire. However, any funeral arrangements you select will include a charge for our basic services and overhead. If legal or other requirements mean you must buy any items you did not specifically ask for, we will explain the reason in writing on the statement we provide describing the funeral goods and services selected.
This advice also applies to additional fees and costs you may incur to cover additional PPE and sanitation measures needed to protect funeral home staff from COVID-19, as the FTC does not permit surcharges for PPE or other measures. As with vendor surcharges, you may increase your fees on the GPL to cover additional costs to the funeral home, but you cannot impose a surcharge.
While you battle the myriad challenges COVID has brought on the front lines, NFDA is working hard to support you, prepare you and keep you up to date on the national issues affecting funeral directors and funeral service. Members who have questions should not hesitate to reach out (800-228-6332 or firstname.lastname@example.org).
This article originally appeared in the January 6, 2022, issue of the Memorial Business Journal.