The Washington Post

Funeral giant SCI agrees to sell off properties to resolve FTC concerns about merger

Service Corporation International, the country’s largest funeral services provider, said Monday it has agreed to sell off 91 properties to resolve the Federal Trade Commission’s antitrust concerns about its acquisition of Stewart Enterprises, the second-largest funeral provider.

The announcement came as SCI, the dominant player in the U.S. funeral business, said it had completed the $1.4 billion deal, which is expected to give the company roughly 15 percent of the overall market and annual revenue of nearly $3 billion.

The FTC said it had worked with attorneys general from several states to examine how local markets for funeral and cemetery services would be affected by the deal and had found 59 communities in which the merger was likely to “substantially lessen competition.”

Each of those markets is highly concentrated, the FTC said, and the deal “would enable the merged firm unilaterally to raise prices charged to consumers in these local markets and would substantially increase the risk of collusion between SCI and the few remaining competitors in the affected local areas.”

Washington area Jewish leaders worried that the merger would spell the end of a contract they have with the Hines-Rinaldi Funeral Home in Silver Spring that provides basic Jewish funerals at a fixed low price. While costs at other funeral homes can reach as high as $6,000, the deal guarantees members of any area Jewish group and their families a complete Jewish funeral for $1,820, and frees them from making difficult decisions on a funeral while grieving.

Hines-Rinaldi has been owned by Stewart, and SCI officials had pledged to honor the existing contract if the deal went through. But community leaders pointed to what they said was SCI’s bad track record and instead asked regulators to require that the business be sold off. SCI has faced questions about its pricing policies at Jewish funeral homes in New York and complaints about its handling of human remains and other practices.

The proposed consent decree with the FTC — which requires SCI to sell 53 funeral homes and 38 cemeteries in six months — would allow Hines-Rinaldi to remain a part of SCI. Instead, it calls for the divestiture of Edward Sagel Funeral Direction in Rockville, which has been owned by SCI.

“We’re surprised,” said Bob Hausman, president of the Jewish Funeral Practices Committee of Greater Washington, which negotiated the contract with Hines-Rinaldi. “It’s clearly not what we asked for,” he said, adding that the group was still weighing the FTC’s order but that the prospect of a new competitor in Rockville could be a good thing for the market.

The FTC said its antitrust review took into account how the deal would affect “specific ethnic and religious populations in these localities” and made particular mention of funeral services for Catholics in Los Angeles, cemetery services for the African American community in south Dallas, as well as services for the Jewish community in Washington and the Maryland suburbs.

“We believe that, as a result of the divestitures we’re requiring the companies to make, consumers in these markets will continue to have access to competitive funeral and cemetery services,” the FTC said.

Such divestitures are not uncommon in the funeral industry. After its 2006 acquisition of Alderwoods, SCI agreed to sell up to 48 funeral homes and 15 cemeteries.

Houston-based SCI welcomed Monday’s announcement. “We are pleased to have reached a mutually satisfactory agreement with the FTC that permitted us to complete this highly beneficial transaction for SCI and its shareholders,” Tom Ryan, president and chief executive of SCI, said in a statement.

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