Recent reports have highlighted the very high prices being charged to bereaved families for funeral services.
There have been large increases in such charges over recent years. It appears that around one third of the costs of a typical cremation are made up of local authority cremation charges.
There is also evidence that, whilst other costs have actually decreased, these local authority charges have substantially increased over the period.
These increases in local authority charges will, in part, reflect additional costs which are incurred in upgrading or expanding crematorium facilities.
However, there is evidence (which was cited on today’s Radio 4 ‘You and Yours’ programme) that part of the increase is a response to central government austerity.
As the central government support for local services is cut, then the pressure grows on local authorities to increase the charges levied for services (such as cremation) to ‘take up the slack’.
Now there are specific, administrative law rules applicable to local authorities which are designed to prevent them increasing their charges to any level that the market might be able to bear and to ensure that, instead, charges do no more than reflect the costs incurred in providing the relevant service.
However, in addition to these rules, competition law may also apply to any local authorities who may be tempted to generate profits from fees in a desire to cross-subsidise other stretched parts of their budgets.
This is because many local authorities, when they provide services in return for a fee, are treated as ‘undertakings’ (broadly speaking, businesses) for competition law purposes. And undertakings which hold a position of market power (or dominance) are prevented by competition law from charging excessive prices for their services.
As will be obvious, there are various markets where a local authority might be regarded as a dominant undertaking, or might even hold an effective monopoly.
Given the high barriers to entry for cremation services, local authority crematoria might well be dominant in some areas. In that event, local authority cremation charges which go further than simply recovering the costs of providing the relevant services may in some cases be regarded as excessive and contrary to competition law.
This is potentially important in terms of legal risk, given current scrutiny of crematoria services by the Competition and Markets Authority.
Usually speaking a breach of competition law might expose a dominant undertaking to the risk of a fine from the CMA. That does not seem likely in the case of local authorities.
However, someone injured by a competition law breach (such as the person paying an excessive price) will have a right to sue for damages – potentially a much bigger risk.
For bespoke advice from our expert team on any of the topics discussed in this article, speak to Gordon Downie, Partner in our regulation and markets team, or your usual Shepherd and Wedderburn contact.