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Federal Court Upholds Oklahoma Casket Cartel, Disappointed Casket Sellers Will Appeal

Washington, D.C.—A federal court in Oklahoma today bucked a trend of recent federal court decisions striking down government-imposed casket cartels.  Independent casket sellers are challenging an Oklahoma law that prohibits them from selling caskets to Oklahoma residents because they are not licensed funeral directors in Oklahoma, a prohibition that blocks competition and thereby enables funeral directors to raise prices to consumers.

In his 34-page decision, the Honorable Stephen P. Friot of the U.S. District Court for the Western District of Oklahoma deferred to the legislature in its decision to require onerous licensing as a condition of retail casket sales.  The judge wrote, “The legislature may determine, without interference from the Due Process Clause, that protection of the consumer lies in creation of a cartel-like scheme for protection of an industry.”  The Institute for Justice announced that it will appeal the case to the U.S. Court of Appeals for the 10th Circuit.

The judge wrote, “The choice of whether to be paternalistic, and, given that choice, as to how best to be paternalistic, was one for the Oklahoma legislature to make.”

Clark Neily, lead attorney on the case for the Washington, D.C.-based Institute for Justice, which filed suit on behalf of two Oklahoma entrepreneurs, said, “If this decision is allowed to stand, then every American earns a living at the whim of the government rather than as a matter of right.  There is no rational connection between the State’s onerous licensing requirements and the simple act of selling caskets.  Despite today’s ruling, the current law still amounts to nothing more than naked economic protectionism.”

The judge refused to vindicate the rights of entrepreneurs despite his conclusion that “[l]ess than five per cent of the education and training requirements necessary for licensure in Oklahoma pertain directly to any knowledge or skills necessary to sell caskets,” and those who wish to sell caskets “are required to spend years of their lives equipping themselves with knowledge and training which is not directly relevant to selling caskets.”

Chip Mellor, president of the Institute for Justice, stated, “The right to earn an honest living without arbitrary government interference lies at the heart of the American Dream.  We will not rest until that right is vindicated.  We will definitely appeal.”

IJ clients Kim Powers, of Ponca City, Oklahoma, and Dennis Bridges, of Knoxville, Tennessee, launched Memorial Concepts Online (www.memorialconceptsonline.com), a company that provides high-quality caskets to consumers across the nation at a discount price.  But Oklahoma is one of nearly a dozen states that shuts out potential competitors by requiring anyone who sells caskets and other funeral-related merchandise to be a licensed funeral director, even if the retailer, like Powers and Bridges, performs no funeral services of any kind.  Obtaining an Oklahoma funeral director’s license requires several years of full-time college course work, a one-year apprenticeship including the embalming of 25 bodies, and an exam.

Entrepreneur Kim Powers remains unbowed.  “This is wrong.  All we want to do is give consumers a choice to buy their caskets at reasonable prices and where they won’t be exploited or subjected to high-pressure sales practices that are often found in funeral homes.”

Today’s decision is in sharp contrast to a December 6, 2002, 6th Circuit federal court of appeals decision that found, “Courts have repeatedly recognized that protecting a discrete interest group from economic competition is not a legitimate governmental purpose.”  The court stated in that decision, “dedicating two years and thousands of dollars to the education and training required for licensure is undoubtedly a significant barrier to entering the Tennessee casket market.  The question before the court is whether requiring those who sell funeral merchandise to be licensed funeral directors bears a rational relationship to any legitimate purpose other than protecting the economic interests of licensed funeral directors.  The weakness of Tennessee’s proffered explanation indicates that the 1972 amendment adding retail sales of funeral merchandise to the definition of funeral direction was nothing more than an attempt to prevent economic competition.  Indeed, Tennessee’s justifications for the 1972 amendment come close to striking us with ‘the force of a five-week-old, unrefrigerated dead fish,’ a level of pungence almost required to invalidate a statute under rational basis review.”

The federal appeals court stated, “Even if casket selection has an effect on public health and safety, restricting the retailing of caskets to licensed funeral directors bears no rational relationship to managing that effect.”  It concluded, “[Tennessee’s General Assembly’s] measure to privilege certain businessmen over others at the expense of consumers is not animated by a legitimate governmental purpose and cannot survive even rational basis review.”

Oklahoma’s and Tennessee’s casket sales licensing laws are nearly identical.

Despite Oklahoma’s paternalistic regulations, Judge Friot found that in some instances Oklahoma funeral homes actually exploited consumers.  The judge wrote, “For example, Oklahoma funeral homes have attempted to increase the amount of money a consumer spends on a casket by showing higher-priced caskets more favorably in a showroom by strategic use of lighting, by placement of high-end caskets on rugs or beside sentimental sculpture, and by displaying less expensive caskets in unattractive colors alongside expensive caskets displayed in attractive colors.”

“The irony of this finding is that Oklahoma’s licensing scheme does nothing to stop the consumer abuses described by the judge,” said Neily.  “If the State of Oklahoma is genuinely interested in consumer protection, why do they permit these well-known abuses to persist?  The State Board has never passed a single regulation to prohibit them; rather, they are so focused on keeping entrepreneurs out of the market.”

Neily concluded, “Although consumers may be grieving when they purchase caskets, they don’t need to be protected from low prices and better service.”

The Institute for Justice is a public interest law firm that represents entrepreneurs nationwide who are fighting for economic liberty—the right to earn an honest living free from excessive government regulation.  The Institute for Justice is challenging Oklahoma’s licensing laws on the ground that they violate the 14th Amendment’s Due Process, Equal Protection and Privileges or Immunities Clauses by imposing unreasonable and arbitrary barriers to entry into the casket retail market.  The Institute won a similar challenge to Tennessee’s licensing law in October 2000, a decision that was upheld last week by the U.S. Court of Appeals for the 6th Circuit.

The Federal Trade Commission (FTC) filed a brief in support of entrepreneurs challenging Oklahoma’s law.  The FTC, which previously has issued regulations to protect the rights of consumers purchasing funeral merchandise, filed the brief to clarify that its own regulations, unlike Oklahoma’s, are not intended to stifle competition.

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