Burying the Competition

April 1, 2006

Anyone who has ever made funeral arrangements for a loved one knows that it is expensive. Charles Brown can give you at least one reason why this is especially true in Maryland: funeral industry insiders don’t like competition, and they use government force to keep entrepreneurs like him out of the field.

Charles’ story is like that of so many entrepreneurs. He and his family own Rest Haven, a beautifully manicured cemetery in Hagerstown, Md. Charles realized many years ago that he could serve his clients best by building a funeral home on the grounds of Rest Haven, so he did what any good entrepreneur would do: he built one.

That is when the trouble began. Charles is not a licensed funeral director, and Maryland allows only licensed funeral directors to own funeral homes. (Keep in mind, Charles’ son, a licensed funeral director, would operate the funeral home; all Charles would do is own it.)
The only alternatives for Charles are either prohibitively expensive or impossible for him to meet. For instance, the State has reserved special corporate licenses, but they sell for about $250,000—an inflated figure thanks to the government-created scarcity.

Also, the surviving spouse or the executor of a deceased funeral director can own or run a funeral home, even if they have no experience at all in the funeral industry.

These exceptions show that the government has no reason to keep entrepreneurs like Charles out of business merely because they are not licensed funeral directors. In fact, to encourage entrepreneurship and cut costs to consumers, they should open the market. Like cartels everywhere, Maryland’s scheme clobbers consumers. Two experts recently estimated that the average funeral in Maryland costs about $800 more than it would in an open market. And the average funeral home in Maryland takes in about 30 percent more in income each year than the average American funeral home, thanks in large part to the government-imposed cartel.

Amazingly, not even the State of Maryland is behind this law. In 2004, the Department of Health and Mental Hygiene, which oversees the funeral home industry, concluded that Maryland’s funeral home ownership law harms consumers. The Federal Trade Commission said the same thing.

The human dimension of Maryland’s restriction on funeral home ownership hit home to Charles about 10 years ago. Back then, Charles leased his funeral home to a licensed funeral director who ran it. But this funeral director suddenly left one day, leaving the remains of one of Charles’ clients in the building. Charles urgently contacted the State Board of Morticians for permission to bring in a licensed funeral director to take care of the deceased.

The board refused, telling Charles that this would make him the owner of a funeral home and that’s just not allowed. What they meant, of course, was that Charles didn’t have the money and connections to get one of the 58 corporate licenses that would have allowed him to own a funeral home. Charles’ son Eric had to visit the family of the deceased and explain that Rest Haven could not honor its promise to take care of their mother.

This moment of what he calls his “professional humiliation” inspired a decade-long effort to reform Maryland’s funeral home ownership law in the state legislature. Charles wore out more than one pair of shoes walking the halls of the Capitol in Annapolis, talking to lawmakers about a common sense ownership law that would enable entrepreneurs to own a funeral home on the same terms as the special corporate licensees. This would mean owning the business, but hiring a licensed funeral director to supervise operations. A reform like this would bring Maryland into line with all but two other states.

And just about everyone Charles spoke with agreed that the law needed to be changed—everyone, that is, except the funeral home cartel. They keep reform bills bottled up year after year with the help of their special defender in the state legislature, Hattie Harrison, chair of the House Rules Committee. Delegate Harrison, who has received thousands of dollars in contributions from cartel beneficiaries, simply blocks any bill the industry does not like.

The Founders understood that special interests like Maryland’s funeral home cartel would always try to bend the law to their advantage. That is why they intended the Constitution to protect our right to earn an honest living without being subject to arbitrary laws that do nothing but make special interests rich. And that is why on March 1, 2006, Charles and four other entrepreneurs—Joe Jenkins, Gail Manuel, John Armiger and Brian Chisholm—filed suit in federal court seeking to vindicate their constitutional right to earn an honest living without pointless government interference. In bringing this suit, IJ is reminding Maryland and the courts that economic liberty is a cornerstone of the American Dream.

Jeff Rowes is an IJ staff attorney.

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