CMA: the story so far
It was on 1 June 2018, amid concerns that prices had been increasing substantially and that funerals had become unaffordable, that the Competition and Markets Authority (CMA) launched a review of the funeral industry.
This did not come as a surprise to many of us in SAIF as concerns were being expressed in community organisations and the UK media. Scottish SAIF had also been working closely with the Scottish Government to develop a Code of Practice and discuss regulations for the industry following the Burial and Cremation (Scotland) Act 2016 which gave ministers the powers to install regulations.
It was only a matter of time before those in Westminster took notice and decided to act.
The seriousness of this review was not taken lightly by both National and Scottish Executives and discussions ensued to decide how best to respond to what was clearly an attack on our members. Having had experience of previous investigations by the Office of Fair Trading (OFT), the Government department which went before the CMA we were under no illusion as to how far-reaching and disruptive this would be.
It was decided that the review should be responded to on a national basis and a task group was formed to represent the interest of all SAIF members throughout the UK. It was important that members of the task group had considerable experience of the funeral sector, both independents and corporates, had knowledge of Government practices and could take time out of their businesses to focus on what would undoubtedly be intense scrutiny and frequent demands by the CMA to respond within short timescales.
In announcing this review on 1 June 2018, the CMA invited responses by 28 June 2018, giving just 27 days for SAIF to consult with members, gather evidence and submit comments, including whether the CMA should make the market investigation.
The CMA received 28 responses, including a very detailed response from SAIF outlining the support given to all our members in ensuring they act responsibly and ethically in all their dealings. We gave details of our Code of Practice and Quality Assurance Programme – which inspects all members every second year – our complaint procedure and evidence of the very high level of client satisfaction enjoyed by our members. However, the CMA decided that there was cause to assume that the industry was not working in the interests of the consumer and proceeded with the review.
The following months saw a constant round of meetings and responses to requests from the CMA and, on 29 November 2018, its interim report was issued,
proposing the funeral market should be referred to the CMA Group for a Market Investigation Reference (MIR). Once again, the CMA welcomed comments and gave until 4 January 2019 for submissions.
Many hours were spent poring over the interim report and SAIF – after careful consideration – responded. We agreed with the need for a price review, protecting the consumer from unscrupulous funeral providers, a call for online pricing, standardisation of the breakdown of pricing and its acknowledgment of the very high satisfaction levels of independent funeral company clients. However, we did not agree with the one-size-fits-all remedy, the purely economic evaluation of a funeral service and the threat of draconian measures based on limited evaluation.
The CMA had reached the conclusion that:
- Customers are generally vulnerable, under time pressure and inexperienced and their responsiveness to price and quality differences are relatively limited
- This results in very few customers comparing funeral directors as part of the purchasing process, relying instead on personal experience, recommendations or general reputation.
- Competition on price was weak
These, together with other reasons, led the CMA to conclude that it was appropriate to exercise its discretion to make an MIR.
Having made the MIR on 28 March 2019 it is required to conclude any investigation within a maximum of two years and 27 March 2021 was confirmed as the statutory deadline.
Over the following year, the CMA carried out various meetings and round table discussion including meetings with SAIF. It is impossible to estimate the number of pages of reports that have been issued and pored over, other than it runs into several thousands and many man hours put in by the task group who analysed and responded to CMA requests. It is possibly the most important and time-consuming task undertaken by SAIF since its inception.
February 2020 saw the start of the coronavirus pandemic and funeral directors around the country found themselves under great pressure as the death toll mounted. Despite this, the CMA review continued. However, in March a concession was made to extend the response period by six months. At that time no one knew how long we would be in the grip of the virus and when cases began to abate the CMA reverted to its original timescale. SAIF objected to this and a tele-conference was held to request a halt to the review until a proper assessment of the changes in funerals could be undertaken.
We cited changes to procedures which could have a lasting effect on local customs, reduced income and increased costs all having a significant effect on the industry, all to no avail. The CMA could not extend further than the statutory end date and was not willing to give any extension to the reporting dates.
Despite being under great pressure dealing with the pandemic, the SAIF task group made its final response on 19 June 2020, prior to the issue of any Provisional Decision Report. In our response we made our feelings very clear – our opening statement read:
‘It would have been contrary to the principles of fairness and equity, which the CMA seek to uphold in all their activities, not to have invited commentary on the impact of COVID-19 on this enquiry. It is noted, with great disappointment and rejection from SAIF, that this CMA investigation at the tail end of the COVID national/global pandemic crisis lacks all sensitivity for those professionals in the funeral sector coping with 15-18 hour days for the last two months; and then having to address this enquiry on an unforgiving, unchanged timetable.
‘SAIF determines that the CMA’s inflexibility and lack of understanding towards the funeral profession is disturbing and doubts greatly that HM Government would tolerate a similar in-depth enquiry into the budgetary and operational conduct of the NHS over the same period; strict legislative timeframe or not, it is simply wrong.’
On 13 August 2020 the CMA issued its Provisional Decision Report (PDR) and stated responses had to be made by 5pm on 10 September 2020. This report ran to 470 pages of detail, together with a further 573 pages of appendices.
We protested, claiming that we were still dealing with the pandemic with indications that cases were again rising. We requested more time and also a face to face meeting. Both requests were refused, with the CMA saying it would only accept written responses.
The recommendation amounted to a one-size-fits-all solution. The key remedies amounted to:
(a) A sunlight remedy to ensure that the pricing and commercial activities of funeral directors and crematorium operators, as well as the quality of service provided by funeral directors, are exposed to greater public scrutiny, in the form of: (i) A requirement on all funeral directors to disclose price and particular commercial information to customers;
(ii) a requirement on all crematorium operators to disclose price information to customers;
(iii) prohibiting funeral directors in conducting certain arrangements, exchange of services and payments with/to third parties; and
(iv) a recommendation to the UK Government and the devolved administrations in Northern Ireland and Wales to establish in England, Northern Ireland and Wales an inspection and registration regime to monitor the quality of funeral director services, as a first step in the establishment of a broader regulatory regime for funeral services in England, Wales and Northern Ireland.
(b) Continuing review of the funerals sector by the CMA in the form of a recommendation to the CMA board to:
(i) actively monitor consumer outcomes in the funerals sector, in order to identify and, where possible, address any harmful behaviour;
(ii) publish an annual review of consumer outcomes in the funerals sector; and
(iii) consider consulting on a supplementary MIR at the earliest opportunity when the impact and consequences of COVID-19 on the funerals sector are sufficiently understood and the sector is more stable. To enable the CMA to monitor the funerals sector, we will require (by Order) some funeral directors and all crematorium operators to provide the CMA with specific funerals price and volume information.
The end games
We now knew where we were heading, and it was not a good outcome for our members. Our next response was the last throw of the dice and it had to be a good one.
Our main objections are:
- A one-size-fits-all remedy. It cannot be right that an independent micro business carrying out 50-80 funerals per annum is considered alongside the Co-op Group with over two thousand employees carrying out around 100,000 funerals per annum. The largest SAIF member has 37 offices, the smallest corporate has 173.
- The insufficient review of the independent sector. In the eighteen months from announcing the MIR, the CMA visited 15 independent funeral directors out of more than 2000. In contrast, the Inspector of Funeral Directors for Scotland, in her first year and with far fewer resources, visited 55 businesses out of approximately 450.
- The use of Life Insurance Company reports as it is in their interests to inflate prices and create a market for their products.
The task group felt that we had to stop responding and take the fight to them and we therefore decided on a two-pronged strategy:
- We would encourage an agenda of disruption and ask as many members as possible to email the CMA with their comments. and
- We would seek the authority from the Executive to engage a top tier firm of competition lawyers to assist in our final response.
The members responded tremendously and flooded the CMA inbox with comments. Additionally, we were given the go-ahead to appoint lawyers. The response was immediate. We were contacted by the CMA for a tele-conference and it was clear their attitude had changed. They agreed to an extension for our response until 1 October and a face to face meeting was arranged for 8 October.
We submitted our final response with the help of the lawyers on 1 October and went into our meeting with the CMA feeling very positive.
On 8 October we had our hearing with the CMA. Due to COVID-19 restrictions this was conducted virtually with Terry, Sean and Jeremy, together with two lawyers in their office, and Paul and myself online from our respective offices in Norwich and Paisley. The CMA was represented by their Chairman Martin Coleman, together with another ten members of their review panel and CMA staff.
Martin Coleman opened proceeding by outlining the expected conduct of the meeting, making clear that the CMA was not willing to discuss the extent or detail of their investigation and that our comments should be restricted to expanding on our final response submission to the PDR.
Sean opened for SAIF by again addressing the nature and diversity of the independent sector and how this differed greatly to corporate funeral companies. He stressed the vocational nature and intention of our members and their need to serve their communities as their principal driver, as opposed to ensuring investors’ financial returns, the principal driver of corporates. He covered Independents’ work in supporting various community focused activities and local projects and the importance independent funeral directors placed on their own reputation within their communities.
Sean was followed by Terry, who expanded on a series of slides detailing our objections to the PDR, in particular the one-size-fits all remedies. This was greatly aided by our lawyers, Linklaters, advising on the established criteria of the Government treating SMEs differently to large organisations. These reminded the CMA of the well-established UK/EU agreed classification of businesses as micro, small, medium and large, based on number of employees and gross turnover. As the majority of our members meet the ‘micro’ and ‘small’ criteria in this agreed classification, this established the principle of different treatmentand we considered this to be a very important plank in our submission.
There followed two short videos recorded by two members expanding on their personal experiences and reaction to the PDR. We are extremely grateful to Andrea Hodgson of Annan, Dumfriesshire, and Craig Perfect, of South Wales, for submitting these.
It was then the turn of the CMA to ask questions which were answered by various members of the task group. Financial reporting and a workable method and procedure for regulating and inspecting standards of facilities and service were questioned. We were restricted to 90 minutes, however the CMA was listening and allowed some leeway when we over-ran. We were then invited to make a further submission, outlining what we considered would be acceptable remedies for the independent sector. We are now working on this and will submit it once ready.
Due to the nature of the meeting being virtual and the different locations of participants, this would not have been possible without the expert technical services of our lawyers, Linklaters. We are extremely grateful to them for their help in formulating our response and their assistance at the meeting. We can honestly say that without their input our submission and presentation would have been far poorer, so we firmly believe that it was the right decision to engage them.
The CMA’s next publication will be its announcement of its final legally enforceable remedies. We believe we have done our best and have now exhausted our efforts to ensure that the independent sector is protected – we trust the CMA has listened to our arguments and will take our proposals on board.
One of the task group said that whatever happens we need to be able to look our members in the face and say we did everything possible – whatever the outcome we believe we can do that.Tags: CMA, legislation, OFT, regulation, response, SAIF, task group