Nations Largest Funeral Home/Cemetery Chains Agree to FTC Terms Before They May Merge

The nation’s two largest funeral home and cemetery chains have reached an agreement with the Federal Trade Commission, which contended that Service Corporation International’s (SCI) proposed acquisition of Alderwoods Group Inc. would lessen competition in 47 markets for funeral or cemetery services, leaving consumers with fewer choices and the prospect of higher prices or reduced levels of service. Under the settlement, SCI must sell funeral homes in 29 markets and cemeteries in 12 markets across the United States. In six other markets, SCI must sell certain funeral homes that it plans to acquire or end its licensing agreements with third-party funeral homes affiliated with SCI.

“Funerals involve major purchases, which makes preserving competition in these markets important for consumers,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition.

The Relevant Markets: According to the FTC’s complaint, Houston-based SCI, which had sales of $1.7 billion in 2005, is the nation’s largest chain of funeral homes and cemeteries, representing about 10 percent of all related U.S. revenues. SCI owned and operated more than 900 funeral homes and more than 350 cemeteries last year. Cincinnati-based Alderwoods, which had sales of $740 million in 2005, is the second largest chain, representing about 5 percent of all related U.S. revenues. Alderwoods owned and operated more than 500 funeral homes and more than 100 cemeteries last year.

According to the complaint, the proposed acquisition would raise competitive concerns in 35 highly concentrated funeral service markets and 12 highly concentrated cemetery service markets. In six of these funeral service markets in which Alderwoods operates, SCI does not own or operate a facility, but has a competitive presence through licensing contracts with third- party funeral service providers. These Dignity Memorial affiliates are authorized by SCI to sell services and products under SCI’s Dignity Memorial service mark. SCI sells them promotional materials or sales aids and cooperates with them on pricing for funeral services.

The 29 funeral service markets are Abilene, Texas; Alhambra, California; Baton Rouge, Louisiana; Brownsville, Texas; Broward County, Florida; Cartersville, Georgia; Charlotte, North Carolina; Fort Myers, Florida; Gonzales, Louisiana; Greensboro, North Carolina; Hanford, California; Killeen, Texas; Lansing, Michigan; Lexington/West Columbia, South Carolina; Lynchburg, Virginia; Manassas, Virginia; Memphis, Tennessee; Merced, California; Meridian, Mississippi; Miami-Dade County, Florida; Newton, Mississippi; Odessa, Texas; Port Orange, Florida; Northern Rockland County, New York; Seguin, Texas; Tulare, California; Southern Ventura, California; Yakima, Washington, and Yuma, Arizona.

The 12 cemetery markets are Abilene, Texas; Baton Rouge, Louisiana; Bradenton/Palmetto, Florida; Broward County, Florida; Columbia/Lexington, South Carolina; Conroe, Texas; Fort Myers, Florida; Macon, Georgia; Memphis, Tennessee; Miami-Dade County, Florida; Nashville, Tennessee; and Ventura County, California.

The six Dignity Memorial affiliate funeral service markets are Anchorage, Alaska; Hobbs, New Mexico; Klamath Falls, Oregon; Mansfield, Ohio; Pascagoula, Mississippi; and Williamsburg, Virginia.

The Commission’s Complaint: In April, SCI and Alderwoods entered into an agreement by which SCI would acquire all of the outstanding voting securities of Alderwoods for about $1.23 billion, including the assumption of debt. Together these firms operate in about 140 of the same local geographic areas. The complaint alleges that the proposed acquisition would violate Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, as amended, by lessening competition in 47 of the markets in which the companies compete. This lessening of competition would increase the likelihood of higher prices, lower quality, or the provision of fewer services.

Terms of the Order: The settlement agreement requires SCI to sell 40 funeral homes and 15 cemeteries in 41 markets to acquirers approved by the Commission. The agreement also requires that, in the six markets in which nine third-party funeral homes operate under Dignity Memorial agreements with SCI, until SCI has terminated the agreements or sold the eight Alderwoods funeral homes, SCI may not enter into or enforce any agreement or exchange information with its affiliates regarding actual, suggested, or future prices of funeral services.

The Commission vote to approve the consent order was 5-0. The order will be subject to public comment for 30 days, until December 26, 2006, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

More information about the markets, the proposed acquisition’s likely impact on competition, and affected funeral homes and cemeteries can be found in the analysis to aid public comment on this matter on the FTC’s Web site.

A new FTC brochure, “Paying Final Respects: Your Rights When Buying Funeral Goods & Services,” also available in Spanish, includes information about cost considerations consumers should know about, resources for planning your own funeral, and the FTC’s Funeral Rule. It is available at http://www.ftc.gov/bcp/edu/pubs/consumer/products/pro26.htm.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No. 061-0156)