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Seeing the Big Picture
The past year has been full of changes and challenges for our industry. Irwin Shipper, CCE, chairman of the ICFA Government and Legal Affairs Committee, talks about the ongoing federal investigations, summarizing what's happened so far, what the ICFA has done to meet these challenges and what the industry should expect next, as well as some of the things happening on the state level.
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Irwin, every year at this time it's always enlightening to get your perspective on the government and legal events of the last twelve months. Before we discuss these developments, can you comment about some changes in the Shipper family? You seem to have come full circle in the corporate sense.
We've been independent cemeterians for decades but, as most people know, we sold our interests to one of the public companies, Loewen, about five years ago. Recently, we reacquired some of those interests and we're independent cemeterians again. This background turns out to be helpful in dealing with the many issues our industry is now facing.
When we spoke last year our industry was in the middle of unprecedented scrutiny at the federal level. The U.S. General Accounting Office (GAO) was in the process of investigating cemetery and funeral home sales practices, the Senate Special Committee on Aging was preparing to hold public hearings, and the Federal Trade Commission was reviewing the Funeral Rule for possible expansion to all sellers including cemeteries. Before getting into the details, can you tell us what caused all this activity?
I don't think there was any single cause. Basically, I believe that the attention by the government and the media was the result of a number of factors. First is the highly publicized experiences of the public companies. This has focused attention on the finances of the entire industry including independent businesses. The Internet is also becoming a powerful communications tool although the number of people who actually shop for funeral and burial services through the Internet is still small. Another factor may be the aging of the huge baby boomer generation that is creating the largest group of funeral and burial consumers in history. The baby boomers are, in a sense, "double consumers" because they are involved in arranging their parents' funerals and later they will be planning their own. These demographics are not lost on government regulators and the media.
How did these factors affect the GAO investigation of the industry? Last summer, you predicted that if the GAO lived up to its reputation for objectivity, our industry would have nothing to fear. How would you characterize the GAO report that was published last October?
The investigation was a case of "don't call us, we'll call you," and GAO investigators did call on the ICFA again and again. We even offered to open our complaint files if that would help them gain a perspective on the types and volume of consumer complaints. The GAO investigative report confirmed the ICFA position that there are few consumer complaints relating to funeral homes and cemeteries. In fact, the report has moved the entire debate on consumer protection to a new level. Prior to the report, industry critics repeatedly claimed that there were widespread consumer abuses. The GAO investigators asked these people to document their allegations and they were unable to do so. Today, the new argument is that there may not be a lot of complaints but the potential is there -- a shaky premise at best, but that indicates some progress in the debate.
So the GAO report has become a useful document to support the industry's view that there exist a low level of consumer complaints. I believe that we are in a stronger position as a result of the government's investigation.
The Senate Special Committee on Aging originally said that it would decide to hold hearings depending on the findings of the GAO report. Can you tell us about that?
That development was interesting. When the ICFA met with committee staff last year, we were told that Senator Grassley, Chairman of the Aging Committee, indicated that hearings might be held depending on the outcome of the GAO investigation. Remember that the Aging Committee asked the GAO to investigate the industry in the first place. Given the lack of any "smoking gun" in the report, it was surprising that the committee went ahead and held hearings anyway. Even more surprising, nobody from GAO was invited to testify.
The Senate committee hearings were held on April 10 and 11. How would you characterize the hearings?
Whenever public hearings are held on any issue, especially when they are televised, there is a risk that they may become theatrical. The Aging Committee hearings were no exception and we have serious concerns over what the committee thought it was trying to prove. The first witness was a convicted felon who testified by video from a California prison. He embezzled some preneed funds from a cremation company and was now serving time. So what was the point of that? If you break the law, you go to jail.
Was there a point to this testimony?
In my opinion, I think it was an attempt by the committee to grab some headlines. The media coverage that I saw seemed to acknowledge that the testimony was anecdotal and represented an isolated event. The witness himself did not exactly look like public enemy number one. He looked like somebody's grandfather and probably was. He was a businessman who made a mistake and was paying for it. As our witness, Paul Elvig, said at the hearing, the fact that the committee was receiving testimony from a man in jail proves that the system works.
Can you give us a brief review of the other witnesses at the Senate hearing?
There were two consumer witnesses. The first testified about a leaking casket and the second about the highly publicized case of Paradise Memorial Park in Sante Fe Springs, California. Both incidents occurred some years ago. An independent funeral director from Florida testified about an elderly lady who signed a series of preneed agreements totaling $132,000. This story received most of the attention in the media. The funeral director used the episode to criticize the public companies but the media covered it as a case against the entire industry. Aside from the issue it presented, I thought it was embarrassing to see a representative of our industry trying to promote herself at the expense of others in the same profession. I don't think it worked and the media coverage indicated as much.
Two industry critics, Darryl Roberts and Father Henry Wasielewski, made a wide-ranging series of allegations. When Senator Grassley asked Father Wasielewski to be more specific, he said he couldn't but spoke instead about the bribery of clergy by funeral directors. It was bizarre. Roberts said he couldn't stay for questioning and abruptly walked out of the hearing. I have to wonder if the committee regretted inviting them.
Two consumer groups, AARP and FAMSA (Funeral and Memorial Societies of America) concluded the first day's testimony. I really couldn't summarize what they said and, judging by newspaper accounts, the media couldn't either.
The second day of the hearing was the turn of industry and government to testify.
Yes. Representatives from the Federal Trade Commission and the California Department of Consumer Affairs gave detailed accounts of how they regulate industry members and protect consumers. I thought they created a positive impression that industry regulation was well in hand. The final two witnesses were representatives from NFDA and the ICFA. We were the cleanup batter, so to speak.
I think some very good points were made by the trade associations but some of the impact may have been undercut by an emotional exchange between the NFDA witness and Senator John Breaux, the ranking Democrat on the committee. The NFDA witness, Iowa funeral director Jay Jacobson, questioned the fairness of the hearings and the qualifications of the individuals the committee had called. His comments were fair game until he demanded an explanation from Senator Grassley over why Grassley did not defend the industry. This criticism of the committee was not helpful to the industry.
Our witness, Paul Elvig, from Evergreen-Washelli Memorial Park and Funeral Home in Seattle, addressed the issues and did an excellent job of placing them into perspective. Paul persuasively demonstrated that the testimony critical of our industry was anecdotal and not representative of the public's broader experience with us. Paul adroitly pointed out that the committee made a mistake by focusing on a handful of sensational cases. Even Senator Breaux characterized the hearings as consisting of four or five people who said they had a problem with the industry. I believe that the general public did not relate to these issues and the media coverage reflected that fact.
After the Senate hearings, there was a lot of analysis and Monday morning quarter- backing in the industry trade press. Did you see any consensus emerge over what the hearings meant?
The hearings provided industry members with the first opportunity to see what we and our critics look like on C-Span. There seemed to be some recognition in the trade press that attacks by an industry member on others in the profession make everybody look bad, whether it be independents vs. public companies, casket retailers vs. funeral homes, and so on. It reminds me of Ronald Reagan's 11th Commandment, "Thou shalt speak no ill of a fellow Republican." This policy makes a lot of sense for all of us, especially when industry issues enter the political arena.
We also saw a good example of this policy, or the lack of it, at the FTC Funeral Rule public workshop. Can you give us your reaction to that session?
The Funeral Rule public workshop was held on November 18 at FTC headquarters in Washington, D.C. Twenty-three groups were represented and about 20 of them were industry organizations. There was a great deal of sniping back and forth between various segments of the industry and at a couple points the chairman of the workshop, FTC Associate Director Eileen Harrington, had to caution the participants. It was embarrassing and served nobody except our critics. I'm glad to say that the ICFA made its points effectively without having to badmouth anyone. While the FTC hearing was not broadcast, a transcript is available on the FTC website.
So we don't get ahead of ourselves, please summarize the FTC Funeral Rule review process.
The Federal Trade Commission is required to periodically review its trade rules and the Funeral Rule came up for its second review last year. I'll assume the position of the interested parties are well known by now so I won't repeat them except to say that the ICFA supports the Funeral Rule in its present form. According to FTC procedures, the rule cannot be expanded to other parties such as cemeteries unless there is substantial evidence in the rulemaking record that consumers are being harmed by these other parties, the harm is widespread, and the Funeral Rule would remedy that harm. In our opinion, so far there has been no showing in the Funeral Rule review that would justify expansion based on the requirements of FTC procedures.
But FTC procedural requirements haven't stopped various organizations from calling for expansion of the Funeral Rule to cemeteries and other sellers.
Not surprisingly, consumer groups such as AARP want as much regulation as possible so their support for expanding the rule is predictable. However, industry groups such as NFDA, that historically opposed the Funeral Rule, have dropped their opposition and are also pushing for expansion. Their reasoning is questionable and they rely on jargon such as "the level playing field" to support their non-substantive position.
Similar to the Senate hearings, the ICFA seems to be the only industry group that sees the big picture in the Funeral Rule review. Nobody objects to providing consumers with written prices and a number of states are moving to enact such a requirement. The real issue is whether this requirement is more effectively handled at the state or federal level. The problem with a federal requirement is that it would not take the place of state regulation, it would be in addition to state regulation. The ICFA is opposed to a dual and potentially conflicting system of state and federal industry regulation. I understand that most if not all of the other industry trade associations also oppose a dual system of regulation but, unfortunately, they are advocating expansion of the Funeral Rule anyway. They are sending out a conflicting message that is not in the best interests of the industry and causes confusion among legislators.
What is the current status of the FTC Funeral Rule review and the Senate Special Committee on Aging hearings?
Both the FTC staff and the Senate Aging Committee are due to issue reports in the near future, possibly by the end of the summer. The FTC report is expected to be an Advanced Notice of Proposed Rulemaking whereby the staff will propose certain changes to the Funeral Rule and solicit public comments. I would guess that the issue of expanding the rule to all sellers will still be on the table. It will be interesting to see whether FTC staff limits any proposal to the 16 goods and services listed in the Funeral Rule. Eventually, there will be another public workshop. This procedure basically repeats the events of last year where interested parties will submit comments and meet at the workshop at some point to discuss them. It will be some time before any final decisions are made by the commission.
I think some issues other than expansion of the rule to other sellers may emerge more significantly than they have already. Especially, the potential prohibition of the nondeclinable service fee and the prohibition of discounts on package plans sold by funeral homes if the discount has the effect of being another form of a casket handling fee. Consumer groups are pushing hard for these prohibitions but the funeral trade associations seem more focused on the expansion issue instead. Whether the rule is expanded won't affect the bottom line of funeral homes, but these other issues will. It doesn't make sense to misdirect their efforts this way.
Regarding the Aging Committee, its report will contain a transcript of the April hearings, the written submissions of the parties, and some sort of recommendations by the committee. Senator Grassley has stated that the issue of portability of preneed contracts may be considered for possible federal legislation, and model guidelines may be developed to encourage states to enact comprehensive laws. The issue of the possible misrepresentation of sealer caskets will also be considered. There is some indication that another round of public hearings may be scheduled but possibly not until next year.
Can the Aging Committee approve legislation?
Not directly. The committee is advisory and has no authority to vote on legislation. However, the members of the committee could always introduce legislation on their own that would be considered by other Senate committees.
Before turning to state issues, can you tell us about other issues pending at the federal level?
Well, in addition to the issues we discussed, two other issues could have a major impact on our industry. First, OSHA has proposed an ergonomics program that would turn all employers into musculoskeletal disorder (MSD) specialists in the workplace. If enacted, the ergonomics program would require businesses to assess the work area for potential MSD hazards such as back injuries and carpel tunnel syndrome. After the fact, OSHA inspectors would check the business and impose substantial fines if they disagreed with the action taken by the employer.
Is there a small business exemption to the ergonomics program?
No, there is no exemption and the U.S. Small Business Administration estimates that the costs of compliance could reach into the tens of billions of dollars. This issue is so serious that ICFA and NFDA got together to jointly develop testimony in opposition to the proposal. The ICFA also partnered with the U.S. Chamber of Commerce and the National Ergonomics Coalition. ICFA testified before the U.S. Department of Labor in May on a panel with NFDA and the National Funeral Directors and Morticians Association. OGR and NSM also testified at other hearings. Despite the complexities and uncertainties of the regulations, OSHA seems determined to implement the program by the end of this year.
Due to a lobbying effort by American businesses, a few weeks ago both the House and Senate added language to the Department of Labor's 2001 appropriations bill that prohibits OSHA from using any funds on the ergonomics program. This development would seem to table the proposal until well after the national election in November but President Clinton has threatened to veto this bill. Congress would either have to delete the ban on ergonomics to obtain Clinton's approval of the appropriations or risk a shutdown of a big part of the federal government. So this issue is far from being resolved.
What is the other major federal issue that affects our industry?
This involves the Telemarketing Sales Rule that is enforced by the Federal Trade Commission. Like the Funeral Rule, the Telemarketing Sales Rule, enacted five years ago, is currently under review by FTC staff. The ICFA was instrumental in obtaining an exemption for phone calls that are followed by a face-to-face meeting. In other words, the rule exempts a typical preneed phone call where nothing is being sold over the phone but the caller is attempting to determine the level of interest and possibly set a mutually convenient date for a presentation.
This exemption has worked well over the past five years and we are unaware of any significant abuses that would justify repealing it. The ICFA submitted comments urging the FTC to retain the exemption and otherwise keep the rule in its present form. None of the other comments received by the FTC appear to take issue with this exemption except for one objection from FAMSA, the Funeral and Memorial Societies of America. Curiously, this group participated in the Funeral Rule review but did not raise the issue there although the rule contains a telephone disclosure provision.
What would be the effect if the exemption for preneed calls were repealed or if funeral homes and cemeteries were excluded from the exemption?
Then the Telemarketing Sales Rule would make no sense. In that event, a caller would have to disclose prices, refund and cancellation policies just to make an appointment to meet with a consumer. I believe that any group advocating the repeal of this exemption as it affects funeral homes and cemeteries shows a blatant anti-industry and anti-preneed bias. In that case, consumer protection becomes an excuse for industry-bashing.
May we assume that, like the Funeral Rule review, the review of the Telemarketing Sales Rule will be an ongoing process over the next year or two?
Yes, both review proceedings will provide interested parties with several opportunities to comment and participate. I think it's fortunate that the same FTC staff attorney, Alan Hile, is supervising both trade rule reviews since there are issues affecting our industry in both regulations. Otherwise, depending on the outcome, we could end up with two FTC trade rules making different and possibly conflicting requirements of our members.
Let's turn to some state issues now. Is it fair to say that it's been a difficult year for industry legisation in some states?
Definitely. It may be the temper of the times, but we've seen efforts in at least three states to ramrod through legislation that would have a significant economic impact on the industry without waiting for studies or an analysis of the proposals. This past winter, a 98-page bill was introduced in Illinois and a 56-page bill was introduced in Georgia. Proponents of these bills launched intensive lobbying efforts to enact them as quickly as possible. "Consumer Protection" was invoked to justify quick action, but most of the provisions had little to do with the interests of consumers. In fact, these bills would have substantially raised the costs of operation, would have complicated regulatory compliance, and were pushed forward in the absence of any cost/benefits analysis.
In California, a bill was introduced to prohibit funeral homes from offering discount packages to consumers. As I mentioned earlier, this issue is currently being studied by the FTC for possible abuses. However, casket retailers in California did not want to wait for any regulatory determination of the issue but attempted to ram their bill through the Legislature in the name of "consumer protection."
Were any of these bills enacted?
The California bill passed the state Senate but was defeated in a committee of the Assembly. The Illinois bill passed the state House but was tabled in the Senate. The Georgia bill was actually enacted into law with some amendments and now they're trying to figure out what it means.
I think the difference in outcome reflects how well prepared industry members were in each of those states. In both California and Illinois, industry members kept up contacts with their elected representatives even when no issues were pending. As a result, when a crisis arose they were known by the lawmakers and that facilitated meetings and, eventually, an understanding of the serious defects in each bill. On the other hand, I am told that in Georgia there had been no serious legislative activity affecting the industry since the mid-1980s. As a result, legislative contacts dried up and lawmakers had little or no knowledge of industry members when this legislation was proposed earlier this year. The legislators were told that the proposal was good for consumer protection and they were not acquainted with anybody who could give them another perspective.
So the legislative battles were very close even where industry members had done their homework. Where no groundwork was prepared, they got hammered. This should serve as a cautionary tale to everybody at both the state and the federal levels.
That brings up a good question. How does the ICFA keep up its contacts with members of Congress?
In several ways. The ICFA has direct contact with members of Congress and their staffs on a number of different levels even when no issues are pending. For example, the association publishes the Guardians newsletter. This publication is sent to all 535 members of Congress twice a year and discusses the association's consumer assistance work, complaint tracking and surveys, and special projects such as our Organ Donor program with the National Kidney Foundation. The response from Capitol Hill has been very positive and the Guardians gives federal legislators a different impression of the industry than they receive through the media.
We also maintain a networking data bank of ICFA members' contacts in Congress. This data is updated every two years when there is a new Congress. We survey our membership to determine who they know among their congressmen and senators. We then analyze these contacts to determine relationships to key committees in Congress. This information can be accessed in minutes when time is important.
The association also employs a lobbyist as needed when occasions arise. For example, last summer we were able to gauge the attitudes of key members of Congress towards the FTC Funeral Rule review and the impact that lobbying by other groups had on the issue. This fact-finding strengthened our participation in the regulatory proceedings since we learned first-hand how legislators viewed the issues.
In addition, every congressional office has our card in their rolodex with the number of the industry-sponsored Cemetery Consumer Service Council. When members of Congress or their staffs are contacted by constituents with questions or problems involving cemeteries or other industry members, we are positioned to hear about it and assist them. The ICFA is probably unique among trade associations in that we offer our help to members of Congress to improve their relationship with constituents. We also send our annual complaint activity survey to all congressional offices to provide accountability for the work we do assisting consumers. I believe that this comprehensive program maintains an ongoing line of communications and promotes our credibility. The fact that the ICFA was one of only two industry trade associations invited to participate in the Senate committee hearings proves the effectiveness of this approach.
It's no secret that the public companies have had to reduce their support to both the state and national trade associations due to their financial challenges. In some cases, this affects the amount of dues being paid and in other cases it affects attendance at meetings. How does this development affect the ICFA government relations program?
I don't think it does, at least not directly. Except for overhead and related support, the government relations program has been largely self-sustaining thanks to the generosity of ICFA members and their contributions to the Government and Legal Fund. We have anticipated that the reduction in funding from the public companies will require, at least in the short term, some increased support from the fund. In other words, the government relations program will become more self-sustaining than it already is. This means that we must rely on our independent members for greater support. This action is consistent with the direction we have been moving in for some years now and will not curtail any of our activities or plans for the future.
We traditionally end our interview by asking you to predict the future. Looking through past issues of the magazine, your batting average is pretty good. Where do you see our industry 12 months from now?
I'm going to be less technical and more philosophical this time. I think the greatest challenge facing our industry right now is the changing attitude of the public and our awareness of the needs of survivors. I believe that anyone who thinks that the purpose of a funeral is merely disposing of a dead body as inexpensively as possible has no conception of the emotional and spiritual needs of the survivors. Few people ever experience much consolation with the knowledge that they saved a bundle by choosing direct disposition for a loved one.
Yet today much of the debate concerning industry regulation ignores these dimensions that funerals and memorialization provide to the living. And many consumers who have never experienced the death of a loved one have little idea how they'll react when the time comes. Instead, we have industry members trying to manipulate public policy to gain an advantage over their competitors and industry critics who claim to be "protecting consumers" by advocating economically unsound regulations. I believe that lawmakers and regulators have started to realize that a lot of bad proposals are being advanced that have nothing to do with consumer protection. I also think that the public's perception of funerals may be changing now that an increasing number of baby boomers are burying their parents. There is a growing realization that the minimalist funeral that saves money also provides little or no closure for the survivors. The issue is evolving from, "How much does it cost?" to "What value do I receive for what I'm spending?" And that distinction is important.
Our critics try to dismiss what we do as just selling metal containers, chunks of granite, and digging holes in the ground. However, most of us understand that people are looking for closure and peace of mind so they can move on with their lives. They look upon the funeral, the interment and memorialization, even with cremation, as a means to achieve these goals. So the ongoing scrutiny of our industry provides an excellent opportunity to focus attention on the emotional and spiritual aspects of death that have so far been ignored. I think the debate has already become more sophisticated due to the objectivity of the GAO report and the triviality of the Senate committee hearings. The agenda of the industry-bashers is fairly obvious by now and they are becoming irrelevant. I think that any hearings or meetings that occur during the next 12 months will highlight this evolution and provide us with a forum, whether at an FTC workshop, another Senate committee hearing, or some other event, to demonstrate to the public what we provide and why we deserve their trust. That's not a problem; that's an opportunity.
Thank you, Irwin. You really have given us the big picture.
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Copyright ICFA 1999.
Individual written contributions and advertisements appearing in International Cemetery & Funeral Management do not necessarily reflect either the opinion or the endorsement of the International Cemetery and Funeral Association.
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