[Federal Register Volume 69, Number 164 (Wednesday, August 25, 2004)]
[Notices]
[Pages 52278-52283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19445]


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FEDERAL TRADE COMMISSION

[File No. 041 0014]


Virginia Board of Funeral Directors and Embalmers; Analysis To 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before September 13, 2004.

[[Page 52279]]


ADDRESSES: Comments should refer to ``Virginia Board of Funeral 
Directors and Embalmers, File No. 041 0014,'' to facilitate the 
organization of comments. A comment filed in paper form should include 
this reference both in the text and on the envelope, and should be 
mailed or delivered to the following address: Federal Trade Commission/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments containing confidential material must be 
filed in paper form, as explained in the Supplementary Information 
section. The FTC is requesting that any comment filed in paper form be 
sent by courier or overnight service, if possible, because U.S. postal 
mail in the Washington area and at the Commission is subject to delay 
due to heightened security precautions. Comments filed in electronic 
form (except comments containing any confidential material) should be 
sent to the following e-mail box: [email protected].

FOR FURTHER INFORMATION CONTACT: Robert Davis, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3530.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for August 16, 2004), on the World Wide Web, at http://www.ftc.gov/os/2004/08/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before September 13, 2004. Comments should refer to ``Virginia 
Board of Funeral Directors and Embalmers, File No. 041 0014,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room H-159, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. If the comment contains any material 
for which confidential treatment is requested, it must be filed in 
paper (rather than electronic) form, and the first page of the document 
must be clearly labeled ``Confidential.'' \1\ The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions. Comments filed in electronic form should be sent to the 
following e-mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC Web site. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted for public comment an 
Agreement Containing Consent Order with the Virginia Board of Funeral 
Directors and Embalmers (the ``Board'' or ``Respondent''). The 
Agreement has been placed on the public record for thirty (30) days for 
receipt of comments from interested members of the public. The 
Agreement is for settlement purposes only and does not constitute an 
admission by the Board that the law has been violated as alleged in the 
Complaint or that the facts alleged in the Complaint, other than 
jurisdictional facts, are true.

I. The Commission's Complaint

    The proposed Complaint alleges that Respondent, an industry 
regulatory board of the Commonwealth of Virginia, has violated Section 
5 of the Federal Trade Commission Act. Specifically, the proposed 
Complaint alleges that the Board has unlawfully restrained or 
eliminated price competition among the providers of funeral goods and 
services in Virginia.
    The Board is the sole licensing authority for providers of funeral 
goods and services in Virginia and is authorized by Virginia statute to 
take disciplinary action against licensees who violate any rule 
promulgated by the Board. The Board is composed of nine members, seven 
of whom are required to be funeral service licensees themselves.
    The proposed Complaint alleges that the Board has restrained trade 
by agreeing to, promulgating, and implementing a regulation (18 Va. 
Admin. Code section 65-30-50(C) (West 2003) (``18 VAC 65-30-50(C)'')) 
that prohibited funeral licensees from advertising the prices of 
certain products and services they sell.\1\ Board regulation 18 VAC 65-
30-50(C) read: ``No licensee engaged in the business of preneed funeral 
planning or any of his agents shall advertise discounts; accept or 
offer enticements, bonuses, or rebates; or otherwise interfere with the 
freedom of choice of the general public in making preneed funeral 
plans.''
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    \1\ As a result of the investigation, the Board has removed 18 
VAC 65-30-50(C) from its regulations. See Va. Regs. Reg., vol. 20, 
issue 21 at 1 (2004).
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    The proposed Complaint further alleges that the Board's conduct was 
anticompetitive because it had the following effects: the conduct 
deprived consumers of truthful information about prices for funeral 
products and services; the conduct prevented licensees from 
disseminating truthful information about their prices for funeral 
products and services; the conduct deprived consumers of the benefits 
of vigorous price competition among Board licensees; and the conduct 
caused consumers to pay higher prices for funeral products and services 
than they would have in the absence of that conduct.

II. Terms of the Proposed Consent Order

    The proposed Order would provide relief for the alleged 
anticompetitive effects of the conduct principally by means of a cease 
and desist order barring the Board, either by the enactment or 
enforcement of a new regulation or by the enforcement of any current 
regulation, from prohibiting, restricting, impeding, or discouraging

[[Page 52280]]

any person from engaging in truthful and non-misleading price 
advertising of at-need or preneed funeral products, goods, or services.
    Paragraph II of the proposed Order bars the Board from in any way 
acting to restrict, impede or discourage its licensees from any 
truthful and non-misleading price-related advertising. Paragraph II of 
the proposed Order further bars the Board from enforcing any 
regulation, including 18 VAC section 65-30-50(C), the effect of which 
regulation would be to prevent licensees from notifying potential 
customers of prices or discounts through the use of truthful and non-
misleading advertising. As discussed below, the proposed Order does not 
prohibit the Board from adopting and enforcing reasonable rules to 
prohibit advertising that the Board reasonably believes to be 
materially fraudulent, false, deceptive, or misleading.
    Paragraph III of the proposed Order requires the Board to eliminate 
any regulation, the effect of which regulation would be to prevent 
licensees from notifying potential customers of prices or discounts 
through the use of truthful and nonmisleading advertising.
    Paragraph IV of the proposed Order requires the Board to 
prominently publish the proposed Order along with a letter explaining 
the terms of the proposed Order in the Board's newsletter. Paragraph V 
of the proposed Order requires the Board to send to its licensees the 
proposed Order, along with a letter explaining the terms of the 
proposed Order. Paragraph VI of the proposed Order requires that the 
Board prominently publish the proposed Order on its World Wide Web 
site. Each of the methods of publishing the proposed Order is intended 
to make clear to licensees that they are not restricted from engaging 
in truthful and non-misleading price-related advertising, including the 
advertising of discounts.
    Paragraphs VII and VIII of the proposed Order require the Board to 
inform the Commission of any change that could affect compliance with 
the proposed Order and to file compliance reports with the Commission 
for a number of years. Paragraph IX of the proposed Order states that 
it will terminate in twenty years.

III. The Conduct Prohibited Under the Order

    The proposed Order prohibits the Board from discouraging its 
licensees from using truthful and non-misleading advertisements of 
prices and discounts. The proposed Order does not prohibit the Board 
from adopting and enforcing reasonable rules to prohibit advertising 
that the Board reasonably believes to be materially fraudulent, false, 
deceptive, or misleading. Because such a rule would not violate the 
proposed Order, and because the issues raised by this case arise 
frequently, it is appropriate to address the analysis required in some 
detail, focusing on the current restraint of the Board.
A. Antitrust Analysis of the Legality of Competitive Restraints
    The Board's regulation was an agreement among competitors not to 
advertise price discounts. The fundamental question regarding the 
legality of restraints agreed upon between competitors is ``whether or 
not the challenged restraint enhances competition.'' \2\ A framework 
for analysis of the competitive impact of such agreements was described 
recently by the Commission in PolyGram Holdings.\3\ Under that 
framework, the plaintiff has the initial burden of showing that the 
restriction is ``inherently suspect'' in that it has a likely tendency 
to suppress competition.\4\ A restraint is shown to be inherently 
suspect when ``past judicial experience and current economic learning 
have shown [that conduct] to warrant summary condemnation.'' \5\ If the 
plaintiff can sustain that burden, the practice will be condemned 
unless the defendant can articulate a valid justification for the 
restriction.\6\ A legitimate justification must be ``cognizable'' in 
the sense that the benefits that the defendant proposes from the 
restraint must be consistent with the goals of the antitrust laws.\7\ A 
justification, to be legitimate, must also be plausible in the sense 
that the defendant can ``articulate the specific link between the 
challenged restraint and the purported justification to merit a more 
searching inquiry into whether the restraint may advance procompetitive 
goals, even though it facially appears of the type likely to suppress 
competition.'' \8\ Once the defendant has overcome the presumption of 
the anticompetitive effect of the inherently suspect restraint by 
asserting legitimate procompetitive justifications for the restriction, 
then a more in-depth analysis of the specific effects of the restraint 
is necessary.\9\
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    \2\ California Dental Assoc. v. Federal Trade Comm., 526 U.S. 
756, 779 (1999) (``CDA''); see also Chicago Board of Trade v. United 
States, 246 U.S. 231, 238 (1918) (``The true test of legality is 
whether the restraint imposed is such as merely regulates and 
perhaps promotes competition or whether it is such as may suppress 
or even destroy competition.'').
    \3\ 2003 WL 21770765 (FTC), slip op. at 29-35 (``PolyGram 
Holdings''). The PolyGram Holdings framework is not, of course, the 
only means of establishing a violation of the antitrust laws, which 
may also be accomplished by a showing of market power and a 
restraint likely to harm competition, or by actual competitive 
effects. See PolyGram Holdings, slip op. at 29 n.37; Schering-Plough 
Corp., Dkt No. 9297, slip op. at 14-15 (FTC Dec. 8, 2003).
    \4\ Id. at 29; see also Broadcast Music, Inc. v. Columbia 
Broadcasting System, Inc., 441 U.S. 1, 19-20 (1979) (In 
characterizing conduct under the Sherman Act, the question is 
whether ``the practice facially appears to be one that would always 
or almost always tend to restrict competition and decrease output, * 
* * or instead one designed to `increase economic efficiency and 
render markets more, rather than less, competitive.' '' (quoting 
United States v. United States Gypsum Co., 438 U.S. 422, 441 n. 16 
(1978))).
    \5\ PolyGram Holdings, slip op. at 29.
    \6\ Id.
    \7\ Id. at 30-31.
    \8\ Id. at 31-32.
    \9\ Id. at 33, fn. 44.
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B. A Restriction on Price Advertising in the Funeral Industry Is 
Inherently Suspect
    In CDA, the Commission challenged a set of restrictions imposed by 
the California Dental Association. One of the restrictions allowed the 
advertising of price discounts only where specified additional 
information was presented in the advertisement, purportedly needed to 
ensure that the price advertisement was strictly accurate, and another 
restriction was a flat restriction on the advertisement of quality 
claims by dentists.\10\ The price advertising restriction was 
challenged as being so burdensome as to be, in effect, a ban on the 
advertisement of price discounts. The Association defended the 
restrictions as necessary to avoid false or misleading advertising, but 
the Commission and the Ninth Circuit held that the likely 
anticompetitive effects of the restrictions were clear, and that the 
Association therefore had, and did not sustain, the burden of 
establishing procompetitive benefits. The Supreme Court reversed, 
holding that the competitive effect of the restriction needed to be 
evaluated in light of the professional context in which it occurred, 
including the articulated justifications for the restriction.\11\ The

[[Page 52281]]

Court, in holding that the Court of Appeals had prematurely shifted the 
burden to the defendant, focused in particular on two facts: (1) The 
restriction at issue was ``very far from a total ban on price discount 
advertising,'' and (2) since ``the particular restrictions'' at issue 
on their face were aimed at deceptive advertising, they might have the 
effect of promoting competition by ``reducing the occurrence of 
unverifiable and misleading across-the-board discount advertising.'' 
\12\
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    \10\ The restriction on price-related advertisement in CDA 
required that any such advertisement ``fully and specifically'' 
disclose ``all variables and other relevant factors.'' The 
restriction also prohibited the use of qualitative phrases relating 
to the cost of dental services like ``lowest prices.'' Finally, the 
restriction required that any comparative phrases like ``low 
prices'' must be based on verifiable data, and the burden of showing 
the accuracy of those statements is on the dentist. CDA, 526 U.S. at 
760, fn. 1.
    \11\ See CDA, 526 U.S. at 771-773 (``The restrictions on both 
discount and nondiscount advertising are, at least on their face, 
designed to avoid false or deceptive advertising in a market 
characterized by striking disparities between the information 
available to the professional and the patient.'').
    \12\ Id. at 773-774.
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    The current restriction of the Board is inherently suspect.\13\ The 
regulation is the type of restriction that has been found inherently 
suspect by the Commission in the context of the optometry 
profession,\14\ and is well understood in the economic literature as 
having anticompetitive effects in the context of professional 
services.\15\ Studies show that advertising restrictions harm 
competition in the market for funeral services.\16\ The importance of 
price information to funeral service consumers, especially when they 
receive that information early in the process, is a well-accepted fact 
of the industry.\17\
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    \13\ In CDA, the advertising restraint could not be condemned 
because the FTC had not provided sufficient evidence to show ``why 
the presumption of likely anticompetitive effects that applies in 
non-professional markets also applied in the professional setting'' 
at issue there. PolyGram Holdings, slip op. at 33, n. 44.
    \14\ See Massachusetts Board of Registration in Optometry, 110 
FTC 549, 606-607 (1988) (``Mass. Board'') (``By preventing 
optometrists from informing consumers that discounts are available, 
respondent eliminates a form of price competition.''); see also 
PolyGram Holdings, slip op. at 38-39, fn. 52 (citing economic 
literature).
    \15\ See PolyGram Holdings, slip op. at 38-39, fn. 52.
    \16\ See, e.g., Funeral Industry Practices Mandatory Review 16 
CFR Part 453: Final Staff Report to the FTC with Proposed Amended 
Trade Regulation Rule 64-65 (1990) (``1990 FTC Staff Report'').
    \17\ See, e.g., Wirthlin Worldwide, Executive Summary of the 
Funeral and Memorial Information Counsel Study of American Attitudes 
Toward Ritualization and Memorialization 3 (January 2000), available 
at http://www.cremationassociation.org/docs/attitude.pdf (``Wirthlin 
Survey'') (Cost is one of the top factors influencing funeral home 
selection); Id. at 4 (Most often mentioned change recommended by 
consumers in funeral industry is to ``see costs kept down.'').
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    Thus, restrictions on price advertising in the funeral industry are 
likely to suppress competition and will be condemned in the absence of 
a legitimate efficiency justification.
C. The Order Permits Reasonable Regulation of Advertising
    In CDA, the Supreme Court concluded that, before the type of 
restrictions at issue there could be condemned as anticompetitive, a 
more searching analysis was required. See 526 U.S. at 779-81. Several 
distinctions between the rule of the Board and the rules at issue in 
CDA are instructive, and further support the conclusion that there is 
reason to believe a violation of the FTC Act has occurred:
     Unlike in CDA, the restriction at issue here was a total 
ban on price discount advertising in the relevant market (that for 
preneed funeral services).
     Whereas in CDA the restrictions on their face purported to 
be aimed at limiting false or misleading advertising, here the fact 
that the restriction was imposed only on the sale of preneed services 
(where price competition is most likely to be effective), and was not 
imposed on at-need services (where, by all accounts, the consumer is 
most vulnerable), suggests that the regulation restricts price 
competition rather than eliminates deception.
     In CDA, there was a concern that price advertising that 
provided less than complete information regarding prices would allow 
dentists to create advertisements that would give the appearance that 
prices were lower when in fact they were not. This problem arose from 
the difficulty consumers might have in obtaining price information in 
the market for dental services.\18\ Here, however, each funeral 
director is required by the FTC's funeral rule to disclose all price 
information to any consumer who might inquire about those services, 
including the prices of all products and services not subject to the 
discount.\19\
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    \18\ Id. at 771-776.
    \19\ 16 CFR 453.2 (1994).
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     Finally, in CDA, the respondent advanced the prevention of 
false and misleading claims as a justification for general restrictions 
on advertising. Here, there is a separate regulation that relates to 
the prevention of false and misleading claims.\20\
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    \20\ The regulation at issue was the ``Solicitation'' provision 
in the Part of the preneed regulations entitled ``Sale of Preneed 
Plans.'' The Board has a separate set of regulations relating to 
false advertising generally that does not prohibit price and 
discount advertising, as long as the representations in the 
advertisement are not untrue, deceptive, or misleading. See 18 Va. 
Admin. Code section 65-20-500(3) (West 2003).
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IV. Opportunity for Modification of the Order

    The Board may seek to modify the proposed Order to permit it to 
promulgate and enforce rules that the proposed Order prohibits if it 
can demonstrate that the ``state action'' defense would shield its 
conduct from liability. The state action defense stems from Parker v. 
Brown.\21\ In Parker, the Supreme Court held that Congress had not 
expressed any intent to apply the Sherman Act to anticompetitive acts 
of the states. Since Parker, the focus of courts evaluating assertions 
of the state action defense has been on whether the alleged actions 
were, in fact, acts of the state.\22\ When the courts have determined 
that the alleged anticompetitive acts were acts of the state as 
sovereign, the state action defense protects those acts.\23\ When the 
courts have determined that the allegedly anticompetitive acts were 
committed by subordinate agents of state governments, rather than the 
state itself, the state action defense could still apply if the acts 
were ``pursuant to a state policy to displace competition with 
regulation or monopoly public service.'' \24\ Finally, when the 
allegedly anticompetitive act was committed by a private party, the 
state action defense can only apply if that action was pursuant to a 
clearly articulated state policy and the actions of the private party 
were ``actively supervised by the state.'' \25\
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    \21\ 317 U.S. 341 (1943) (``Parker'').
    \22\ FTC v. Ticor Title Insurance Co., 504 U.S. 621, 636 (1992) 
(``Ticor'') (The test under state action is ``directed at ensuring 
that particular anticompetitive mechanisms operate because of a 
deliberate and intended state policy.'').
    \23\ Hoover v. Ronwin, 466 U.S. 558 (1984) (``Hoover'') (action 
of state supreme court regulating entry into the legal profession is 
state action exempt from liability under the Sherman Act).
    \24\ Town of Hallie v. City of Eau Claire, 471 U.S. 34, 39 
(1984) (``Hallie'') (Municipality is not the state, but is exempt 
from liability for anticompetitive actions that were pursuant to a 
state policy to displace competition, when the conduct was a 
foreseeable result of the policy), quoting City of Lafayette v. 
Louisiana Power & Light Co., 435 U.S. 389, 413 (1978) (plurality 
opinion); Southern Motor Carriers Rate Conference Inc. v. U.S., 471 
U.S. 48, 57 (1984) (``Southern Motor Carriers'').
    \25\ California Retail Liquor Dealers Assn. v. Midcal Aluminum, 
Inc., 445 U.S. 97, 105 (1980) (``Midcal''). The ``active 
supervision'' test requires that ``the State has established 
sufficient independent judgment and control so that the details of 
the [restraint] have been established as a product of deliberate 
state intervention, not simply by agreement among private parties.'' 
Ticor Title Ins. Co., 504 U.S. at 634-35. The Supreme Court has held 
that municipalities, unlike private parties, are not subject to the 
active supervision requirement and are protected by the state action 
doctrine if they are acting pursuant to a clearly articulated state 
policy. Town of Hallie, 471 U.S. at 46-7. The Court indicated in 
dicta that ``it is likely that active state supervision would also 
not be required'' when the relevant actor is a ``state agency,'' but 
declined to resolve the issue. Id. at 46 n. 10. Thus, the role of 
active supervision for the myriad varieties of governmental and 
quasi-governmental entities, including state regulatory boards, 
remains unclear. See FTC, Office of Policy Planning, Report of the 
State Action Task Force 15-19, 37-40, 55-56 (Sept. 2003) (``2003 FTC 
Staff Report''). Because the Board's policy lacks clear 
articulation, it is unnecessary to resolve this issue here. The lack 
of clear articulation also renders unnecessary any analysis of 
possible preemption of the state law by federal antitrust law. See 
Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 222-24 (2d Cir. 
2004).

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[[Page 52282]]

    The clear articulation requirement ensures that, if a State is to 
displace national competition norms, it must replace them with specific 
state regulatory standards--a State may not simply authorize private 
parties to disregard federal laws,\26\ but must genuinely substitute an 
alternative state policy.\27\
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    \26\ Parker, 317 U.S. at 351; see generally State Action Task 
Force Report at 8, 25-26.
    \27\ See New York v. United States, 505 U.S. 144, 168-69 (1992); 
see also Ticor, 504 U.S. at 636 (State Action ensures that 
``particular anticompetitive mechanisms operate because of a 
deliberate and intended state policy.'').
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    Because of federalism concerns at the heart of the state action 
doctrine, the policy to displace competition must be articulated by an 
entity that can be identified as the state rather than a subordinate 
agency of the state.\28\ Here, it is clear that the Board is not the 
state.\29\ Therefore, the Board, to modify the proposed Order, must 
show that its conduct would be pursuant to a clearly articulated policy 
by the state. An agency or subdivision of the state, like the Board 
here, will be protected by the doctrine only where the conduct is both 
legally authorized by the state and that conduct is pursuant to an 
``authority to suppress competition.'' \30\ With respect to the 
question of legal authority to act, an agency or municipality satisfies 
that requirement for the purposes of the state action defense if it can 
show that it has the authority to engage in that conduct when it does 
so in the substantively and procedurally correct manner, whether or not 
the agency actually did engage in the conduct in the substantively and 
procedurally correct manner in pursuing its allegedly anticompetitive 
conduct.\31\
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    \28\ Southern Motor Carriers, 471 U.S. at 62-63 (Public service 
commissions could not establish the clearly articulated policy of 
the state to displace competition needed to invoke the doctrine.).
    \29\ See South Carolina State Board of Dentistry, Dkt No. 9311, 
slip op. at 16-19 (FTC July 30, 2004) (South Carolina board 
regulating dentists and dental hygienists and composed largely of 
dentists is not the state for the purposes of the state action 
defense and can only claim the protection of the defense if it was 
acting pursuant to a clearly articulated and affirmatively stated 
state policy to displace competition found in state statutes); Mass. 
Board, 110 FTC at 612-613 (Massachusetts board regulating 
optometrists and composed largely of optometrists is not the state 
for the purposes of the state action defense and can only claim the 
protection of the defense if it was acting pursuant to a clearly 
articulated and affirmatively stated state policy to displace 
competition found in state statutes); FTC v. Monahan, 832 F.2d 688, 
689 (1st Cir. 1987) (Massachusetts Board of Registration in 
Pharmacy, which was composed of pharmacists and regulated 
pharmacists was a ``subordinate governmental unit'' which could only 
claim the state action defense if its actions were pursuant to 
clearly articulated and affirmatively expressed state policy to 
displace competition); see also Hoover, 466 U.S. at 568 (``Closer 
analysis is required when the activity at issue is not directly that 
of the legislature or supreme court, but is carried out by others 
pursuant to state authorizations.''); Southern Motor Carriers, 471 
U.S. at 62-63 (Public service commissions could not establish the 
clearly articulated policy of the state needed to invoke the 
doctrine.).
    \30\ City of Columbia v. Omni Outdoor Advertising, Inc., 499 
U.S. 365, 372-373 (1991) (``Omni'').
    \31\ Id. (``[N]o more is needed to establish for Parker 
purposes, the city's authority to regulate than its unquestioned 
zoning power over the size, location, and spacing of billboards.''). 
Here, the Board's authority to ``establish standards of service and 
practice for the funeral service profession'' in Virginia, Va. Code 
Ann. section 54.1-2803(1) (Michie 2003) (``VC 54.1-2803(1)''), 
presumably constitutes adequate legal authority to promulgate the 
regulation at issue sufficient to satisfy the first leg of the test 
in Omni. See 499 U.S. at 370-373.
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    Whether an articulated policy by the state is pursuant to an 
``authority to suppress competition'' depends on the form of the 
statement of the state policy.\32\ When the state has replaced some 
dimension of competition with a regulatory structure and gives an 
agency the discretion to determine how to implement that structure, as 
in Southern Motor Carriers, no more detail than a clear intent to 
displace competition is required.\33\ When the state does not displace 
competition with a regulatory structure, but simply gives some entity 
the authority to displace competition, as in Omni or Hallie, the 
question is whether the ``suppression of competition is the 
`foreseeable result' of what the statute authorizes.'' \34\ At present, 
the Board cannot demonstrate clear articulation under Virginia statutes 
by either means.
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    \32\ Omni, 499 U.S. at 372.
    \33\ See Southern Motor Carriers, 471 U.S. at 63-64 (Mississippi 
state statute requiring the public service commission to prescribe 
just and reasonable rates is a sufficiently clear expression of 
intent to displace competition for the determination of prices to 
allow the commission to encourage private firms to engage in 
collective rate-making and to allow adequately supervised private 
firms to do so.).
    \34\ Omni, 499 U.S. at 373, quoting Hallie, 471 U.S. at 42.
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    First, it does not appear, from the current statute granting the 
Board the authority to act, that the state intended that there be a 
broad displacement of price competition with regulation in the market 
for preneed funeral services.\35\ Unlike the case of Mississippi in 
Southern Motor Carriers, the Virginia General Assembly did not single 
out price determination and assign responsibility for that 
determination to the agency rather than the market. Instead, the 
legislature was silent on how prices and price-related advertising were 
to be determined in the funeral services market, aside from emphasizing 
that ``general advertising and preneed solicitation, other than in-
person communication, shall be allowed.'' \36\
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    \35\ The Board's legal authority to promulgate restrictions on 
advertising stems from VC 54.1-2803(1), which gives the Board the 
authority to ``establish standards of service and practice for the 
funeral service profession in Virginia.''
    \36\ See Va. Code Ann. section 54.1-2806(5) (Michie 2003). By 
way of contrast to its treatment of advertising and price 
competition in the market for preneed services, the General Assembly 
did displace competition with regulation by the Board regarding 
certain other aspects of the preneed funeral transaction. See Va. 
Code Ann. section 54.1-2803(9) (Michie 2003) (``VC 54.1-2803(9)''). 
A close look at the regime established by the statute indicates that 
Virginia intended that certain types of competition be displaced by 
regulations: (1) the state intended that the forms for preneed 
contracts be specified by the Board, Id.; see also Va. Code Ann. 
section 54.1-2820 (Michie 2003); (2) the state intended that the 
disclosures made to consumers purchasing preneed services be 
established by regulations, VC 54.1-2803(9); and (3) the state 
intended that ``reasonable bonds'' be required to ensure performance 
of the preneed contract at-need. Id.
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    Therefore, as in Omni, the question will be whether the type of 
anticompetitive regulation at issue is foreseeable from the 
Commonwealth's grant of authority to the Board. Unlike either Hallie or 
Omni, the regulation is not a foreseeable consequence of the Board's 
existing grant of authority. Instead, the relationship of the Board's 
regulation to its grant of authority--to ``establish standards of 
service and practice for the funeral service profession''--``is one of 
precise neutrality.'' \37\ Further, a review of Virginia's overall 
statutory scheme demonstrates that this type of restriction is not 
foreseeable. First, the General Assembly, in passing the statutory 
scheme, showed no indication of a state policy to restrict price 
competition or advertising. Second, the Virginia statute itself 
prohibited in-person solicitation relating to preneed services, but 
made it clear that ``general advertising and preneed solicitation, 
other than in-person communication, shall be allowed.'' Finally, the 
1989 Act did not change the Virginia statutory requirement that an 
itemized statement and general price list of funeral expenses be 
furnished to consumers, which is a similar requirement to that 
prescribed by the FTC Funeral Rule.\38\

[[Page 52283]]

That section of the Virginia statute requires that ``[a]ll regulations 
promulgated herewith shall promote the purposes of this section.'' 
Because the purpose of the Funeral Rule is to increase the availability 
of information to consumers to improve price competition,\39\ and 
because this section of the statute expressly incorporates that rule, 
it appears unlikely that the General Assembly intended to authorize a 
regulation inhibiting price competition as a foreseeable result of the 
Board's general authority to regulate the funeral industry.\40\
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    \37\ See Community Communications Co., Inc. v. City of Boulder, 
455 U.S. 40, 54-56 (1982) (holding that ``the general grant of power 
to enact ordinances'' does not satisfy the clear articulation 
requirement.).
    \38\ Virginia adopted the Rule's requirements of disclosure, 
including price disclosure by statute, referencing the FTC Funeral 
Rule explicitly. See Va. Code Ann. section 54.1-2812 (Michie 2003). 
Under Virginia statute the Board may suspend or revoke the license 
of, or otherwise punish, a licensee for ``[v]iolating or failing to 
comply with Federal Trade Commission rules regulating funeral 
industry practices.'' See Va. Code Ann. section 54.1-2806(19) 
(Michie 2003). Virginia is one of 18 states that has adopted at 
least part of the requirements of the Funeral Rule. AARP, The 
Deathcare Industry 7 (Public Policy Institute, May, 2000).
    \39\ See e.g., 1990 FTC Staff Report at 12; Comments of AARP on 
the Commission's Review of the Funeral Rule, 16 CFR Part 453 
(September 14, 1999), available at http://www.ftc.gov/bcp/rulemaking/funeral/comments/. Comment A-55-AARP Funeral Rule 
Comments.htm. (``Certainly, one of the intended effects of 
implementing the Rule was to spur on competition, by making it 
easier for consumers to make an educated decision.'').
    \40\ Indiana Movers Analysis at 5.
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V. Opportunity for Public Comment

    The proposed Order has been placed on the public record for 30 days 
to receive comments from interested persons. Comments received during 
this period will become part of the public record. After 30 days, the 
Commission will again review the Agreement and comments received, and 
will decide whether it should withdraw from the Agreement or make final 
the Order contained in the Agreement.
    By accepting the proposed Order subject to final approval, the 
Commission anticipates that the competitive issues described in the 
proposed Complaint will be resolved. The purpose of this analysis is to 
invite and facilitate public comment concerning the proposed Order. It 
is not intended to constitute an official interpretation of the 
Agreement and proposed Order or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-19445 Filed 8-24-04; 8:45 am]
BILLING CODE 6750-01-P