Tuesday, April 10, 2007

Consumer Group Can’t Convince Court to Review FTC Letter Concerning Funeral Rule

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

The U.S. Court of Appeals in Washington, D.C. denied a petition from a consumer Group—the Funeral Consumers Alliance—for review of a 2005 Federal Trade Commission (FTC) letter that purportedly narrowed the scope of the FTC Funeral Rule’s definition of “cash advance item” without following the proper rulemaking procedures for amending a trade regulation rule.

The group sought review under the judicial review provisions of the FTC Act. The statute provided direct appellate court review only for challenges to FTC trade regulation rules or “substantive amendments” to such rules. The group and purchasers of funeral home services contended that, in light of the letter, cash advance items were being marked up by funeral homes without proper disclosures.

"Cash Advance Item"

In the letter (CCH Trade Regulation Reports ¶15,768), the Commission rejected any interpretation of the term "cash advance item" as encompassing all goods or services purchased by a funeral provider from a third-party vendor.

According to the letter, "this interpretation sweeps far too broadly, potentially bringing within its scope every component good or service that comprise a funeral. This was not and is not the Commission's intention in the 'cash advance' provisions of the Rule."

The opinion letter further states that the term "cash advance item" in the Rule applies only to those items that a funeral provider represents expressly to be "cash advance items" or represents by implication to be procured on behalf of a particular customer and provided to that customer at the same price the funeral provider paid for them. The letter explains the analysis leading to this conclusion.

Amendment v. Interpretation

The appellate court held that the FTC did not substantively amend the Funeral Rule by interpreting the phrase “cash advance item” as applying only to items that consumers believe they will receive at cost, based on the express or implied representations of the funeral provider. The letter was—at most—an interpretation of the Funeral Rule.

Also rejected was the consumer group's contention that the letter was a substantive amendment because it was inconsistent with the Commission's previous interpretations of the Funeral Rule. Thus, the group would have to seek review in a federal district court in the first instance in accordance with the Administrative Procedure Act.

The decision is Funeral Consumer Alliance, Inc. v. Federal Trade Commission, No. 05-1351, April 10, 2007.

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