A UK watchdog has shelved plans to cap the cost of UK funeral and cremation services, saying price controls were “not feasible” as firms struggle to get through the coronavirus crisis.
The Competition & Markets Authority (CMA) is instead likely to force firms to be clearer on prices, ban payments to care providers for passing on customers, and actively monitor companies’ sales for signs of “harmful behaviour.”
It will also urge central government to launch an independent inspection regime for funeral directors in England, Wales and Northern Ireland. Scotland already has such a regime. But it did not rule out price caps in future.
The CMA launched an investigation into Britain’s funeral market in 2018, amid controversy over rising costs in the sector.
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Its latest provisional decision report published on Thursday said the market was “not functioning well,” and highlighted a “persistent level of excess profits.” Average funeral costs have risen 5% annually over the past 13 years, while cremation costs have risen 6% over the past decade.
The regulator believes customers are overpaying by an average of at least £400 for funerals, around £175 for local authority cremations and around £215 for private cremations.
It identified several issues limiting or distorting competition. A major issue is that paying for funerals is “intrinsically challenging,” with customers dealing not only with grief but also typically limited knowledge of what funeral organisation involves and social pressures to “do the right thing” for loved ones.
The CMA said such challenges meant many customers followed personal recommendations or stuck with directors used by family before, and chose a crematorium based on “location or familiarity.”
But the watchdog said these issues were made harder by a lack of easily available, clearly comparable information on directors’ services, including prices and quality, and a low number of crematoriums available.
It found barriers to entry for potential new firms offering cremation are high, including planning issues and high fixed costs of opening and running.
The CMA said it would have been likely to impose price controls if COVID-19 had not hit, which would have marked a radical intervention in the market. But it said high death rates and the “particularly distressing and unusual” nature of funerals during the pandemic had put extreme pressure on funeral directors and other stakeholders such as councils.
It said government-imposed restrictions, including on funeral attendee numbers and social distancing measures, had “dramatically” altered the economics of the industry. Funeral and cremation providers’ average costs and revenues had been affected, with an “increased prevalence” of simpler funerals.
The pandemic also limited the CMA’s ability to carry out its investigation.
The CMA sent a clear signal that price controls could be on the cards later down the line, however. It proposed “holding open the door” to price controls once the industry has reached a “steady” state, acknowledging it may not be the same as before COVID-19 hit.