All Boxed In
Driving through Atwater Village the other day, I passed a store whose only sign was a big black board painted with white letters that read CASKETS. It stuck out, in the middle of a block of nail salons, dentist offices and taquerias. I turned around, parked, and walked over.
In the front windows, open caskets were on display like bedroom sets, and two long rows of shiny wooden caskets stretched into the store behind them. Each one had a little price card on it. Way in the back was a woman sitting at a desk. She introduced herself as Diana and said she ran the store for her boyfriend, Rob.
Diana had long dark hair, great cheekbones, and seemed to be the elusive size 0. She told me a casket store has been at this location, selling discount caskets directly to the public, for several years, but that the guy who owned it before Rob kept a much lower profile: no sign, no caskets in the window, curtains drawn. His business was mostly by word of mouth. Rob opened the place up. He even rents caskets to the HBO show Six Feet Under, Diana said.
People who go into this business -- not me -- are kind of weird, she said, out of the blue. I got dragged in -- you know, significant other.
So, is Rob weird? I asked.
Yeah, hes kind of weird, Diana said.
We set a time for me to come back and talk to Rob.
Retail casket stores, like Rob and Dianas, exist because caskets are expensive -- not because they cost a lot to make, but because funeral homes often charge a lot for them. Caskets can be marked up as much as five times, keeping the average American funeral around $6,400. And often, the cheaper the casket, the more the markup.
A casket made of particleboard (the most commonly sold cheap casket) wholesales for $150 and can go for $695 at a funeral home. Rob and Diana sell it for $395, and offer an even cheaper cardboard one for $195. Since the mid-90s, casket retailers have proliferated, cutting into funeral homes nice, fat casket profits.
Rob is 25 minutes late to meet me, which Diana had warned me might happen. While we wait, she shows me some caskets. The most memorable one is painted to look like a giant package and says EXPRESS DELIVERY. RETURN TO SENDER. They sell it for $1,695, versus around $2,500 at a funeral home.
Rob Karlin finally arrives. Hes a heavy, rumpled man in his 50s with a salt-and-pepper beard and a full head of hair. He apologizes for being late.
He doesnt seem all that weird, just distracted. He takes a few minutes to settle in and begins telling me about how five years ago he left mortgage banking and started selling caskets, after his father died. Not that he felt gouged by his fathers funeral, he just wanted to do something different with his life.
We talk for an hour and a half, because when you talk about caskets, you cant just talk about caskets: Youve got to get into funeral homes and cemeteries and crematoria and politics and laws and billions of dollars.
Karlin happened to stumble into the retail casket business just as it was getting started. A loophole in the Funeral Rule (the federal law thats supposed to keep the funeral industry honest) had been closed the year before, and it was a loophole that had been keeping casket retailers out of business. Funeral homes had been charging a casket-handling fee (sometimes hundreds of dollars) if a family wanted to use a casket theyd purchased elsewhere. The Funeral Rule was amended in 1994 to ban casket-handling fees, because they hurt competition. Karlin opened his first store in Culver City in 1996, and it did pretty well.
Theres one statistic thats constant in the world, Karlin said. For every birth, theres a death.
Three years ago, sales started mysteriously falling off. Karlin didnt understand it, until he checked into the new pricing sheets at area funeral homes -- both big ones like Forest Lawn and Rose Hills, and smaller ones like Inglewood Cemetery Mortuary. Heres what was happening: Funeral homes had started offering discount packages that bundled services -- such as hearse rental, visitation and embalming -- with a casket. These packages cost significantly less than buying those goods and services a la carte. The hitch was that you could only get the discount if you bought the casket from the funeral home.
Karlin calls it an indirect handling fee. The way he sees it, funeral homes are flouting the spirit of the Funeral Rule by penalizing people for buying a casket elsewhere. Funeral homes call it competitive business, and if consumers judge the packages to be good deals, who are casket retailers to gripe?
Its a good question. I havent quite decided for myself whether I agree with Karlin. On the one hand, its great that funeral homes are lowering their prices (in some cases) to be competitive with casket retailers, and if individual casket retailers suffer, too bad. On the other hand, if casket retailers are driven out of business by being undercut by big funeral homes, that brings us back to the days when funeral homes had a monopoly and could charge whatever they wanted.
The funeral business these days is a lot like the media: Five big corporations have gobbled up many formerly independent funeral homes to the point where one out of every four deaths in the U.S. is handled by these top five companies. Its worse in cities, where corporate consolidation has been concentrated, and usually you cant tell which homes are part of a corporation and which are family-run because the corporations keep the family name on the homes they buy.
Companies that make caskets have also consolidated in the last few years, and the big ones wont sell to small outfits like Karlins because the big funeral conglomerates would boycott them.
Karlin has tried to get the state Department of Consumer Affairs to look into indirect handling fees, but they say theyre waiting to take their cue from the Federal Trade Commission (FTC), which regulates the funeral industry nationwide.
Which brings us to President Bush. The FTC was supposed to have weighed in on indirect handling fees, and come out with an overall update to the Funeral Rule, a year ago. Possibly the fact that Bush is good friends with the head of the biggest funeral conglomerate on the planet, the Houston-based Service Corporation International (SCI), has slowed the pace of the review. But maybe not. I spoke to an efficient-sounding FTC staffer working on the review, Myra Howard, who said the spring 2001 deadline was just an optimistic guess, and the process simply takes a long time.
Then again, Bush is close enough to Robert Waltrip, SCIs CEO, that when he was governor of Texas, he got the head of the Texas Funeral Service Commission fired when she tried to investigate SCIs embalming practices. She turned around and sued SCI, Waltrip and the commission (from which shed been fired) and might have subpoenaed Bush to testify, but the lawsuit was quietly settled last November for $210,000. Texas paid $95,000 and SCI paid the rest.
To be fair, the FTC was coming under fire even before Bush took office. A General Accounting Office investigation in 1999 concluded that the FTC cannot, with any reasonable assurance, report that there is high nationwide compliance with the [Funeral] Rule. This was after the FTC issued a statement saying it had found widespread compliance with the rule, even though it had tested only 4 percent of the countrys funeral homes.
I talked for a long time to Ron Hast, who has been publishing the two main funeral-industry trade journals -- Mortuary Management (a monthly) and the Funeral Monitor (a weekly) -- for decades. He was at pains to tell me that the funeral business is an honorable one that always takes it on the nose whenever some isolated horror story about greed or malfeasance gets into the news. He said funeral directors, for the most part, are decent business people whether the FTC is looking over their shoulders or not.
You cannot legislate honesty, he said. The great percentage of people in this business are concerned about their future and their reputation, and conduct themselves in a very professional manner.
Hast is a funeral director himself, and has been in the business for 45 years, and, in his opinion, casket retailers are just gumming up the works.
First of all, he said, its an awkward purchase. Who, in the throes of grief, wants to go to a casket store, in addition to the funeral home, and worry about how to get the casket there, whether its going to fit in the vault, among other considerations? And theres another potential problem.
If a [casket] store goes out of business, and youve got 45 days to pick your casket up, whats an 80-year-old woman going to do to pick up and store a casket? said Hast.
Such things do happen. People often buy caskets pre-need, and casket stores do sometimes go under, leaving people scrambling. Hast loathes the whole idea of pre-need, but not so much because of casket retailers. Theyre small fry in the world of pre-need scandals, and he doesnt want to talk about them.
The true outrage of the funeral industry, Hast said, is this: For years, SCI and others have been selling pre-need arrangements and amassing billions of dollars, setting it all aside in trust accounts. But in 2000, after years of breathless expansion, these companies were in dire financial straits, and they started looting tens of millions of dollars from trust funds theyd set up in the pre-need mecca: Florida. They took out $84 million, to be exact.
These depleted trusts are now mostly a pile of what are called surety bonds -- essentially IOUs -- which are only good as long as the companies keep paying the annual premiums the bonds require. If either company loses ground, the premiums will increase, maybe to the point that they wont be able to renew the surety bonds.
All of this is legal in most states. Small pre-need scandals -- a funeral home goes out of business and takes its pre-need money with it -- happen every few months in the funeral industry. But now there are billions of dollars at stake, rather than thousands.
This is where the money is, said Karen Leonard, who worked with Jessica Mitford on her update of the book The American Way of Death. More money is made in pre-need than in any other aspect of the funeral industry.
A small irony, Leonard said, is that the whole idea of funeral pre-planning (though not pre-paying) started with nonprofit consumer organizations in the 1930s that wanted to help people save money and grief. These organizations saw funerals being taken out of the realm of family and church and turned over to a profit-driven business, so they wanted to help people retain some control. The funeral industry fought the idea of pre-planning tooth and nail, until it finally realized it could profit from it.
No one wants to think about any of this, of course. Thats one of the reasons the funeral industry has been so difficult to change. People dont like to deal with death, and they certainly dont like to organize around it, said Leonard.
Karlin is one of six plaintiffs from the California Casket Retailers Association suing SCI, Forest Lawn and several other local and national outfits, trying to make their case against indirect handling fees, but so far theyre not having much luck. Even though Californias laws governing funerals and business practices are stricter than federal laws, a judge two weeks ago said Karlins lawsuit as it stands doesnt hold water.
Superior Court Judge Victoria Chaney said that Karlin failed to show that the tying of a discounted package to a particular purchase [the casket] constitutes an illegal business practice.
But immediately after saying this, she turned and said, Sitting here reading this, I can think of ways to fix the deficiencies in this case, depending on what the facts are.
So she shot Karlin down but invited him to try again, which he plans to do. But hes worried enough about going out of business that he also has another idea: get out of the retail casket business and open a funeral home of his own: Absolutely. If you cant beat em, join em.
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