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Australian funeral industry ‘on notice’ as Propel Funeral (ASX:PFP) fined by ACCC

funeral provider share price

The Propel Funeral Partners Ltd (ASX: PFP) share price has risen slightly today, despite news that the Australian Competition and Consumer Commission (ACCC) fined two of the company’s regional businesses.

WT Howard Funeral Services in Taree and Coventry Funeral Homes in Townsville both continued to advertise themselves as “proudly local and independently owned” after they were bought by Sydney-based Propel in 2015 and 2019, respectively. 

The ACCC fined both businesses $12,600 for making false and misleading representations about their ownership, which led the Commission to warn the funeral sector that it plans to crack down on the industry.

ACCC cracks down on ASX funeral companies

The ACCC publicly hit out at the industry last month in its Compliance and Enforcement Priorities report.

Competition and consumer issues in the funeral services sector have long provoked complaints from the public, governments and generated stories in the media. Not least because many consumers engage with the funeral sector at a time when they are grieving, vulnerable and thereby at a disadvantage.

This is a concentrated sector with some players having significant market power. As some funeral service providers also have a large share of different services across the funeral home, cemetery and crematoria markets, there is an opportunity for these providers to bundle services and block new entrants to the market. There have been reports from people within the sector of anti-competitive conduct such as misuse of market power and exclusive dealing. We strongly encourage whistleblowers to come forward.

Propel share price outperforming Invocare ahead of uncertain future 

The fines come as Propel’s strong performance over recent months has drawn attention from the market. The Propel share price was one of the best performing ASX funeral shares on Monday. It holds about 6.3% of Australia’s funeral market, with a price-to-earnings ratio of 19.12 and a 12-month return of 2.41%.

Australia’s biggest funeral company, InvoCare Ltd (ASX: IVC), which owns brands like White Lady Funerals, is down 17.04% over the past year to $11.38 per share. InvoCare posted a 4.7% decline in revenue in the 12 months to 31 December 2020. 

While these two companies dominate the Australian funeral industry, the future of the sector appears more uncertain, with the ACCC voicing its intention to prevent further monopolisation.

“There are allegations that some funeral operators inflate the price of services, and take advantage of consumers at a vulnerable time,” ACCC Chair, Rod Sims, said at ACCC’s Committee for Economic Development Australia (CEDA) conference in February.

“Complex and opaque pricing, product bundling and other strategies adopted by some funeral operators are also issues we will be examining more closely.”

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare Limited and Propel Funeral Partners Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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