A Federal Trade Commission plan to issue tough consumer regulations for the $6.4 billion funeral industry may be in danger of being scrapped by Congress.

In what would be the latest of several efforts to restrict FTC investigations by cutting off funding during the agency's appropriations process in Congress, Rep. Marty Russo (D-III.) said yesterday that he plans to introduce an amendment to the FTC appropriations bill on the House floor that would prevent the agency from spending any money to promulgate or enforce trade rules for the funeral industry.

On March 23, the FTC, in an open meeting, discussed recommendations from its staff that it issue new regulations to deal with what the staff called widespread abuses" in the funeral industry. The abuses alleged included taking advantage of grieving parties by maneuvering them to more expensive funerals, embalming without permission, refusal to give price information over the phone and requiring casket when the body was to be cremated.

Although the commission endorsed the majority of the regulations proposed by the staff at that meeting, the discussion was still tentative, and the staff was directed to redraft several provisions.

There are some 2 million funerals in the U.S. each year at 22,000 funeral homes. It is the third most expensive consumer purchase (after home and car), but half of the population has only had to arrange for a funeral once, and a quarter of the population has never had to buy one.

Although the staff has made several modifications in its earlier proposal, Russo still maintains that the FTC should not issue any regulation, instead leaving oversight of the industry to the states.

Russo, chairman of a House Small Business subcommittee, said "we do not believe the FTC has proven the case for a federal law in this area. The basic problem is that there isn't any need for a rule, since these funeral homes are already licensed and regulated by the states."

FTC staffers argue, however, that most state funeral boards are dominated by funeral directors and are generally more concerned with licensing and health matters rather than consumer protection and competition. An FTC survey of all 50 states revealed that only 5 percent of the proposed rule's provisions were included in present state laws.

But Russo also contends that the FTC adminstrative process in developing this rule was "seriously flawed," in that the agency did not give the funeral industry a chance to participate.

"The regulation would never hold up in court even if we did let them do it," Russo charged. "The investigation was biased."

He said the FTC sought only the opinion of consumer groups, and would not even let the funeral industry representatives question FTC staffers working on the case.

The staff denies those charges and points to several statements from industry representatives who have commended the staff for changes they made in the rule since the original proposal.

The final regulation is expected to be approved by the full commission by December.