IS THE FUNERAL INDUSTRY ON THE ACCC’s RADAR

Announcement posted by eziFunerals 01 Mar 2019

In the past few decades, various state and territory governments have conducted inquiries into the funeral industry, with the aim of addressing community concerns relating to:

the high cost of funerals
a lack of competition
the need for increased regulation.

The last major inquiry occurred in 2011, when InvoCare Limited (InvoCare) acquired Bledisloe Group Holdings Pty. Following this inquiry, the ACCC determined that this acquisition would be unlikely to substantially lessen market competition and did not oppose it, subject to (Section 87B) undertakings being provided by both companies.

‘Despite these inquiries, not much has changed’

Despite these inquries, not much has changed. In fact, some may even argue that things have got a lot worse for consumers. The funeral industry in Australia has now grown to a $1 billion dollar industry, and is currently dominated by two ASX listed companies, InvoCare and Propel Funeral Partners.

At the time of the ACCC inquiry in 2011, InvoCare operated 178 funeral homes and 12 cemeteries and crematoria nationally. It now currently operates over 270 locations and 16 cemeteries/crematoria with a current turnover of approximately $477 million a year. InvoCare currently controls 33% (projected to grow to 40%) of the Australian market.

In 2017, Propel Funeral Partners (Propel) became the latest funeral company to list on the ASX, and is now the second largest private provider of death care services in Australia and New Zealand. Propel performed over 10,000 funeral services in FY18 and the Company’s portfolio currently comprises 108 locations (54 freehold and 54 leasehold) in Australia and New Zealand, including 24 cremation facilities and 7 cemeteries.

'ASX listed funeral companies fight for market share'

In a race to grow their market share even further, both InvoCare and Propel have been busy buying up smaller family owned funeral homes across Australia. Since 2018, InvoCare has acquired $14.0 million of Australian-based funeral providers, as part of their ‘Protect & Grow 2020 Plan', with more acquisitions planned.

InvoCare’s recent acquisitions of small independent and family owned funeral homes, since March 2018 include:

English Rose Funerals, South Australia
Lester & Son Funerals, Victoria/New South Wales
Southern Highlands Funerals, New South Wales
J A Dunn Funerals, Tasmania
Archer & Sons Funerals, Western Australia
Grafton & District Funerals, New South Wales
Hastings Funerals, New South Wales
Harrison Funerals, Victoria.

Propel's recent acquisitions of small independent and family owned funeral homes, since November 2017 include:

John Hossak Funerals, New South Wales/ACT
William R Groves Funerals, New South Wales/ACT
White Dove Funerals, New South Wales/ACT
Parkview Funeral Home, New South Wales/ACT
McGuiness Funerals, New South Wales/ACT
Acacia Funerals, New South Wales/ACT
Manning Great Lakes Memorial Gardens, New South Wales
Norwood Park, New South Wales, Queensland
Newhaven Funerals, Queensland
Morleys Funerals Pty Ltd, Queensland
Conway Funeral Home, Victoria
Seasons Funerals, Western Australia
Just Cremations, Western Australia.

Should we follow the UK inquiry into the funeral industry

The funeral industry in the UK has some interesting parallels to the Australian marketplace. Just like Australia, the UK industry is dominated by two corporate funeral chains, Co-op Funeral Care and Dignity. However, the UK funeral chains only control approximately 27% of the market, whereas, InvoCare and Propel control around 40% of the Australian industry (and it’s growing).

In response to community concerns, the UK funeral industry is currently facing a major inquiry from the competition watchdog after findings by the Competition and Markets Authority (CMA). Issues found by the CMA during its six-month review included:

The price of the essential elements of a funeral has increased by more than two thirds in the last 10 years. The CMA says that today, people generally spend between £3,000 ($5,200 AU) and £5,000 ($8,700 AU) organising a funeral. It says for those on the lowest incomes, this amounts to nearly 40% of their annual outgoings, more than they spend on food, clothing and energy combined.
Customers could save over £1,000 ($1,700 AU) by looking at a range of choices in their local area. Despite choice being available, the CMA says that people organising a funeral are usually distressed and often not in a position to do this – making it easier for some funeral directors to charge higher prices.The CMA has also found that prices are often not available online, making it difficult to compare options.
Some larger chains have implemented policies of consistently high year-on-year price increases. The CMA says that a number of these have now introduced lower cost funeral options, but this doesn’t go far enough to make up for years of above inflation price hikes.The CMA’s evidence also indicates most people who organise a funeral remain extremely vulnerable to exploitation and future rises in charges.
Fees charged by crematoria have increased by 84% on average in the past 10 years. The CMA says that cremations account for 77% of funerals, yet there are limited choices for most people in their local area.It says the cost increase amounts to more than three times the rate of inflation.

Other findings from the review include how funeral directors are:

Failing to inform customers about cheaper options unless they specifically raise concerns about cost;
Not providing a clear breakdown of prices online so families can compare like‑for-like funeral packages;
Luring in customers with low-cost deals and then selling more expensive options once they are in the branch;
Using family names to give the impression branches are independent when they are, in fact, owned by the same group.

Is it time for Australia’s competition watchdog (ACCC) to protect consumers at their time of grief

eziFunerals has expressed ongoing concerns about the funeral industry in Australia. The monopolisation of any marketplace can be a bad thing for consumers, especially when they are most vulnerable. In a market economy, monopolies are able to demand higher prices for their service because they have limited competition. They can become immensely powerful and use this power and economies of scale to further benefit themselves, at the expense of consumers.

The issues found by the CMA in the UK raises similar concerns about the Australian industry. However, unlike the UK Competition and Markets Authority, the ACCC has been silent in monitoring the way the funeral industry operates nationally.

Most funeral homes in the industry do the right thing, but government regulators in Australia need to act in the interests of consumers, even when there are marketplace reasons not to do so. Only time will tell if the fallout from the UK funeral inquiry will have serious flow on effects for the funeral industry in Australia.

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