The Australian Competition and Consumer Commission (ACCC) made it clear at the start of 2021 that it would be monitoring and investigating the funeral services sector for competition and consumer law issues. As discussed in our previous article, the ACCC has so far been true to its word, issuing multiple infringement notices to funeral businesses in response to alleged false or misleading representations, and seeking submissions from consumers and businesses as part of its Funeral Services Survey (Survey).
This month, the ACCC released its report on the funeral service sector (Report), prepared on the basis of the Survey and other consultation materials.1 In addition to detailing the ACCC’s key issues of concern in respect to the funeral services sector, the Report made it clear that funeral businesses will need to carefully review their contracts and pricing practices to ensure that they comply with the Australian Consumer Law (ACL).2
In this article, we will break down the key findings of the Report and provide some tips and takeaways for businesses, particularly those that are in the funeral services sector.
The key issues of concern
The Report, which collected information from the Survey, independent reports, and its recent enforcement investigations, indicated that the ACCC’s key issues of concern in regard to the funeral services sector were as follows:
- Pricing which lacks transparency and clarity and may mislead consumers;
- Unfair contract terms in standard form consumer contracts;
- Potentially misleading claims that funeral businesses are ‘local’;
- Failure to fulfil prior commitments regarding prepaid funeral products and services;
- Non-disclosure of payments in return for third-party endorsements from comparison websites or health service providers; and
- ‘Bundling’ or ‘tying’ that limits consumers’ access to funeral products or services and may restrict competing businesses’ access to customers.
We will discuss each of these issues in turn below.
1. Pricing lacks transparency and clarity
The ACCC’s investigations found that pricing information provided by funeral businesses often lacks transparency and clarity, and may mislead customers where providers fail to disclose all of the relevant fees and charges forming part of the total amount payable. Specific examples include a failure to include GST in packaged pricing, failure to include particular disbursements such as fees associated with burial permits and death certificates, and mislabelled fees (e.g. labelling late payment fees as ‘estate fees’ which inaccurately suggests the fee is mandatory).
2. Unfair contract terms
The ACCC’s investigations found that there were a number of potentially unfair terms being used in standard form contracts in the industry, such as terms prescribing excessive interest rates for overdue fees, terms requiring customers to indemnify funeral businesses for loss or damage in a wide set of circumstances, terms requiring full payment in advance (where this limited a consumer’s ability to recover costs if the contract was disputed), terms permitting funeral businesses to charge consumers for additional services without notice or consent and terms allowing funeral businesses to avoid performance of the contract or vary the date for performance at its sole discretion.
3. False ‘local’ claims
The ACCC’s investigations revealed that a number of funeral businesses were incorrectly promoting themselves as being independent or family-owned, when in fact they were a subsidiary of a larger company. The ACCC took action against two funeral businesses for these sorts of claims, which we discussed in detail in our previous article. The ACCC considered that this type of conduct could distort the competitive process for consumers who would prefer to use independent or family-owned suppliers.
4. Failure to fulfil prior prepayments
The ACCC’s investigations identified issues with the pre-payment of services in the funeral services sector. This included, for example, the prepayment of burial plots or cremation niches decades in advance which were not performed or fulfilled by funeral providers when the time came for performance (either due to an inability to locate proof of purchase, a change in ownership or poor record-keeping). The ACCC noted that consumer contracts running over many decades are unusual and create compliance risks for funeral businesses.
5. Non-disclosure of paid endorsements
The ACCC’s investigations revealed concerns about third parties (such as comparison websites or hospital and healthcare staff) receiving commissions from funeral businesses in return for positive recommendations and/or referrals. The ACCC noted that non-disclosure of commercial relationships can distort consumer choices, as consumers may not realise that a business is being recommended to them because the recommender is receiving a commission, rather than as a genuine endorsement.
6. Bundling or tying
Finally, the ACCC’s investigations found that a number of funeral businesses were requiring consumers, in effect, to acquire products or services from other nominated businesses as part of a ‘bundle’ or ‘tied’ funeral package. The ACCC noted competition law concerns with this conduct if funeral businesses’ policies or contractual requirements restricted competing providers’ access to customers and thereby blocked their ability to enter or expand into relevant markets.
Recent action
Since our last article, the ACCC has issued an infringement notice to Bare Funeral Group Pty Ltd trading as Bare Cremation (Bare Cremation) after it allegedly made false and misleading representations about the price of its cremation services in breach of section 29(1)(i) of the ACL. Bare Cremation represented on its website that the minimum price of its ‘Cremation Only Service’ was ‘from $1,299’ and the minimum price of its ‘Bare Memorial Service’ was ‘from $2,199’, when in reality these prices were only available in one of the seventeen regions in which Bare Cremation operates. Bare Cremation paid a penalty of $13,320 and amended the descriptions on its website to accurately reflect the pricing available in different regions. The ACCC warned against the use of ‘from pricing’ common in funeral services industry, in line with its overall general concerns about a lack of transparency and clarity in pricing throughout the industry. 3
Takeaways for businesses
The ACCC has made a number of specific recommendations in its Report, strongly encouraging businesses to review their promotional materials, business processes and training materials to ensure that:
- pricing information is clear and transparent;
- contract terms are fair and reasonable;
- ownership claims are accurate; and
- adequate systems are in place to document, verify and honour long-term consumer contracts such as those the subject of pre-payment.
The ACCC has also encouraged businesses to remain conscious of the competitive effects of paying commissions in return for recommendations and of bundling or tying products and services.
How can we help?
We have a dedicated consumer law team that can help you review your contracts, marketing materials, website content and business practices to ensure that you comply with the ACL. If you would like more information about the services that we provide, please contact us.
This article was written by Teresa Torcasio, Partner, Zoe Vise, Solicitor and James Xue, Law Clerk.
1 Australian Competition and Consumer Commission, Funeral services sector Competition and consumer issues (Report, December 2021) <https://www.accc.gov.au/publications/funeral-services-sector-report-0> (‘ACCC Report’).
2 Competition and Consumer Act 2010 (Cth) (‘CCA’) sch 2 (‘Australian Consumer Law’) or (‘ACL’).
3 ACCC, ‘Bare Cremation pays penalty for allegedly misleading consumers on pricing’ (Media Release, 9 November 2021) <https://www.accc.gov.au/media-release/bare-cremation-pays-penalty-for-allegedly-misleading-consumers-on-pricing>.
