Once considered a dead policy issue, the Federal Trade Commission’s “Funeral Rule” is back in the headlines.

After a nearly 10-year investigation, the FTC adopted regulations that took effect in 1984 to rein in alleged abuses of funeral homes’ market power over their bereaved, time-pressed customers. The FTC’s purpose was to limit the then-common (but not universal) practice of selling funerals as inseparable packages (“bundles”) of goods and services at single, non-negotiable prices.

The commissioners also voiced concerns about funeral homes charging for unwanted or unnecessary services, such as embalming corpses destined for cremation.

The Funeral Rule ostensibly was meant to make prices transparent by requiring funeral homes to list charges for the elements of funeral packages separately (caskets, urns, flowers, music and so on) and allowing more freedom of choice to their customers, thereby lowering total funeral costs. Pricing information was to be made available by telephone, reducing consumers’ costs of searching for funeral providers.

As documented in a careful 1990 industry study by the late Fred McChesney (“Consumer Ignorance and Consumer Protection Law: Empirical Evidence from the FTC Funeral Rule,” Journal of Law and Politics), the rule’s effects moved in the opposite direction: the amount spent on the average funeral rose by several hundred dollars.

McChesney explained that the rule was based on a flawed understanding of how consumers arrange funerals for themselves or their loved ones. Future customers and grieving survivors seek advice from others suffering the deaths of family members or friends recently, and they rely on the word-of-mouth reputations of local funeral providers. What is most important is that the directors of funeral homes apparently are better able to combine funeral goods and services into cost-minimizing bundles than are their customers. Given itemized prices, consumers spend more than if the same funeral items were pre-packaged for them.

McChesney’s evidence helps us to understand why funeral home owners, who initially strongly opposed the rule, lobbied vigorously for its reauthorization five years later. As with virtually all regulations, enforcement of the Funeral Rule has been imperfect, and some of the industry’s “bad actors” have failed to comply with the price-transparency provisions.

Fast forward to 1995: To ensure that consumers know the prices of the individual components of funeral bundles, the FTC entered into an agreement with the National Funeral Directors Association (NFDA) to allow the trade group to create an educational and compliance program for funeral homes found to be in violation of the Funeral Rule’s requirements. Insofar as the NFDA is not required to disclose the names of the funeral homes participating in regulatory “re-education” (more than 500 between 1996 and 2018), the program is unique. According to the Wall Street Journal, no such discretion has been granted to any other industry. Is it surprising that bad actors have not complied but continue to do business?

Curbing “unfair methods of competition” is one of the FTC’s law-enforcement mandates. Like all regulatory interventions, however, the Funeral Rule has been shaped in the regulated industry’s favor thanks to effective lobbying. Regulators may pay lip service to the interests of consumers, but when the political dust settles, those interests are largely ignored.

Imperfect information is a fact of life. Forty years ago, the FTC issued a regulation that, based on the evidence available at the time suggesting that funeral home customers generally were well-informed and satisfied with their purchases, arguably was wrongheaded. The price-transparency provisions of the Funeral Rule caused spending on funerals (and the revenues of funeral homes) to rise rather than fall. Then, in 1995, it hired a fox (the National Funeral Directors Association) to guard the regulatory henhouse and permitted the NFDA to conceal the identities of rule violators.

“Consumer protection” rules weaken buyers’ incentives to exercise due diligence because they suppose that regulators are effectively monitoring sellers. The Funeral Rule falsifies that belief.