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State Authorities: Funeral Service Industry Needs to be Reformed



The Competition Council (CC) of Latvia together with the Consumer Rights Protection Centre (CRCP) and the State Revenue Service (SRS) conclude that the market of funeral services lacks a regulatory framework, therefore the competition is distorted and consumers are adversely affected. The CC, the CRCP and the SRS suggest consumers to carefully evaluate service components and prices, and recommend responsible institutions to establish a common regulatory framework.

Funeral services are commonly used during severe emotional distress. Lack of service availability combined with unwillingness to choose between competing service providers might lead to inability to pick service of optimal price and quality. In 2014, the CC initiated an investigation into market of funeral services, followed with a consumer survey by the CRCP and the SRS in spring of 2015.

Overwhelming majority of the 150 respondents reported choosing either first or closest funeral service provider, often located on the premises of the hospital. Respondents pointed out unfair and unethical business practices, as well as risks of possible corruption. In many cases, some employees of hospitals were also employees of a particular funeral service, and respondents were either suggested or even pressured to choose this specific service provider.

The CC, the CRCP and the SRS point out a necessity for discussion concerning tenancy contracts on the premises of hospitals. Investigation concluded that contracts governing such relationships often cover unusually long periods and fail to follow the appropriate legal guidelines, such as initiation of public tenancy procurement, thus, creating unfair competitive advantages.

It is often impossible to evaluate various offers because funeral service providers fail to share detailed information concerning prices of service components. For many undertakings, list of service prices does not exist and service users are not provided with receipts. As a result, the components of final price and the extent to which the required taxes have been paid are unclear. Similarly, no information is provided concerning the storage and service logistics of the recently deceased. All this leads to valid concerns regarding the quality of service received, as well as honesty and reliability of specific service providers.

The existing monopoly position of cremation service provider is of particular concern for the CC. The building and land of Riga crematorium have been controlled by a single individual for the past almost 20 years. Cremation service providers require a license from Riga municipality, which can only be approved with entity currently renting Riga crematorium. This effectively removes the possibility for new participants to enter the market. Competition in cremation service market will not exist as long as Riga municipality does not rent Riga crematorium in a public procurement without an existing service license requirement.

Several regional municipalities are currently engaged in provision of specific services that should be handled by private individuals and undertakings. Municipalities retail tools for funeral services and even engage in specific activities, such as the preparation of a deceased for burial. The CC points out that these type of practices corrupt the market competition, create unnecessary entry barriers and slow down industry development.

As a part of monitoring tax practices of funeral services and related industries, the SRS points out several problems. The main ones concern inconsistent regulations regarding state allowances and lack of aligned principles and requirements governing companies in the industry. Inconsistencies related to state allowances create fraudulent incentives for individuals and legal entities to receive allowance for a deceased even if no relationship between the two parties existed. Lack of aligned principles allow market participants to avoid paying taxes, for example, by not reporting employment.

The CRCP suggests individuals to evaluate several funeral service offers and to resist emotional pressure from a single service provider. Similarly, consumers should pay attention to price-list of service components to understand if additional expenses might arise, whether VAT tax has been included and what the final price of the service is going to be. It is also important to sign a contract which accounts for all of the service components, as well as to receive and save a receipt for the service.

The CC, the CRCP and the SRS conclude that the responsible institutions and hospitals have to take immediate action to evaluate the actions of funeral service providers. The sensitive nature of the service implies a strong necessity for fair business practices, as well as clear and understandable information available to service users. The CC, the CRCP and the SRS aim to reform the industry in the long term by removing the identified competition restrictions and creating a unified regulatory framework aligned with individual consumer as well as social interests.