Competition tsar Rod Sims says the Australian Competition and Consumer Commission will undertake “targeted action” against firms in the funeral industry amid longstanding reports of inflated prices, misuse of market power and a general lack of regulation in the industry.
Delivering a wide-ranging speech on the competition and consumer watchdog’s 2020 priorities to the annual Committee for Economic Development Australia conference on Tuesday, Sims said the funeral sector has emerged as a “key enforcement priority” for the regulator.
Why? Take your pick: misleading and deceptive practices; hidden fees; misrepresentations about products; charging fees for no service; unfair contract terms; complex product bundling; misuse of market power; inflated prices; and anti-competitive conduct by blocking new market entrants.
It’s a rap sheet that reads like the terms of reference for the banking royal commission, and we’re all well aware how that turned out.
Sims says the funeral sector combines a few concerning factors: consumers without experience in the market, who are also vulnerable at a time when they’re grieving, and expensive products (funerals can cost tens of thousands of dollars).
That’s a recipe for consumer and small business exploitation, as the ACCC chair explained on Tuesday.
“There are allegations that some funeral operators inflate the price of services, and take advantage of consumers at a vulnerable time,” Sims said.
“Complex and opaque pricing, product bundling and other strategies adopted by some funeral operators are also issues we will be examining more closely.”
The funeral sector has a long history of dodgy dealings, including cases where directors have courted jail time for practices as ghastly as faking client deaths.
Meanwhile, research undertaken by academics at the Universities of Sydney and Woolongong in 2017 found consumers are often upsold on funerals because they lack information and the industry lacks competition.
Information asymmetry and monopoly power … where have we heard this story before?
“Accessing these services is more often than not driven by circumstance than real consumer choice,” the researchers wrote in 2017.
“This is largely because most deaths occur in an institution (hospital, aged care facility, nursing home) and the social stigma surrounding dealing with the dead.
“This creates an opportunity for funeral directors to add a significant service fee and mark-up on coffins.”
Listed funeral player Invocare dominates the local industry, operating under the White Lady Funerals and Simplicity Funerals brands, holding 40% of the market in total.
The academics found that market share figure was 80% on Australia’s east coast where most people live.
Sims says the ACCC will be allocating resources to doing research into the funeral sector with an eye on weeding out dodgy behaviour.
“Funerals are expensive. Many consumers have limited or no experience with the sector until they need to arrange one,” Sims said.
“There is growing criticism about the lack of price transparency for funeral services and the difficulties consumers face in making an informed decision.
“There are also complaints from consumers about misleading and deceptive practices … hidden fees, add-on services not included and misrepresentations about what will be covered,” he continued.
“We strongly encourage whistleblowers to come forward.”