News of the Competition and Markets Authority’s plans to investigate the funeral market sent shares in one of the UK’s biggest funeral providers Dignity (LON: DTY) tumbling almost 11 percent.
The competition regulator will review the £2 billion a year market to investigate issues including the rate at which prices have soared in recent years.
James Daley, managing director at consumer group Fairer Finance, said: “Profit margins in the ‘at-need’ funeral market have been inflated for years.”
“Customers who buy funerals are grieving and have no idea what a fair price for a funeral is. And sadly they have proved far too easy to take advantage of. This market needs tighter regulation and better protections for consumers.”
“Everyone will need a funeral eventually, and it’s important that we can be confident we are paying a fair price for a good quality service.”
UK funeral provider Dignity issued a profit warning in January and has seen shares slide 50 percent over the past year.
Retail analyst Nick Bubb said: “The Dignity share price has recovered a fair way of late, after the bashing it took at the beginning of the year on the back of the price war, so it will be dismayed to hear this morning that the wretched CMA has the time (despite having to look at the Sainsbury’s/Asda merger) to launch a review into the £2 billion funerals market ‘to ensure that people are not getting a bad deal’.”
“An interim report, presenting initial findings and views on potential remedies, will be published in six months, ahead of the final report in a year’s time,” he added.
The FTSE 350 company cut its cheapest funeral package by 25 percent in 2016 following Co-op’s rival funeral service.
The Treasury will also be launching an investigation into the pre-paid funeral sector.
“People can understandably be very emotionally vulnerable when planning a funeral,” said Daniel Gordon, the senior director of markets at the CMA.
“We therefore think it is important that, at what can be a particularly challenging time, the process is made as easy as possible.”