Can the North Carolina Board of Mortuary Science still enforce its long-standing rule against funeral home advertising of discounts and credits, given recent U.S. Supreme Court cases protecting commercial speech under the First Amendment?

Plain-English summary

For many decades, professional licensing boards across the United States restricted advertising by their licensees: doctors could not list prices, lawyers could not announce specialties, accountants could not solicit, funeral homes could not advertise discounts. The reasoning was always some version of "the profession's dignity is at stake" or "consumers might be misled." Beginning in the 1970s, the U.S. Supreme Court began dismantling those restrictions on First Amendment grounds. Commercial speech, the Court held, is protected speech, even if it is not entitled to the same level of protection as political speech.

By December 2000, the doctrine was relatively settled, and the North Carolina Board of Mortuary Science had a problem. Section 90-210.25(e)(1)f of the General Statutes lists, as one ground for revoking or suspending a funeral service license: "The direct or indirect giving of certificates of credit or the payment or offer of payment of a commission by the licensee, his agents, assistants or employees for the purpose of securing business." Over the years, the Board had interpreted and applied this provision to various activities. Some of those interpretations involved actual referral-fee payments by funeral homes to third parties; others involved funeral home advertising of price discounts or credit offers. The Board's general counsel asked the AG whether the statute and its applications could survive scrutiny under recent First Amendment cases like 44 Liquormart and Edenfield.

The AG drew a sharp line.

Referral fees: not affected by commercial speech doctrine. When the statute is applied to prohibit funeral home licensees from actually paying fees, commissions, or credits to third parties (an insurance agent, a hospice nurse, a hospital social worker) in exchange for referring families to the funeral home, the rule regulates conduct, not speech. The First Amendment commercial speech cases protect the right to communicate; they do not protect the right to engage in commercial conduct that the state has lawfully prohibited. Anti-kickback rules of this kind are widespread across professional licensing schemes (medicine, law, real estate, accounting) and have not been disturbed by the commercial speech cases. The Board's authority to enforce the anti-referral-fee aspect of § 90-210.25(e)(1)f is intact.

Advertising of discounts and credits: protected by commercial speech doctrine. When the same statute is applied to prohibit a funeral home from advertising otherwise lawful discounts or credits, in newspapers, promotional materials, or other channels, the rule regulates speech. The Supreme Court's commercial speech doctrine, articulated in Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York (1980), governs.

The Central Hudson test has four parts:
(1) The speech must concern lawful activity and not be misleading. Truthful advertising of lawful discounts or credits meets this prerequisite.
(2) The State must assert a substantial interest in regulating the speech. Consumer protection interests typically qualify.
(3) The State's regulation must directly and materially advance the asserted state interest. This is where many state regulations fail, because the State has to produce real evidence that the speech restriction is doing what the State claims.
(4) The regulation must be narrowly drawn to advance that interest. Broad bans on truthful, non-misleading speech generally do not satisfy this prong.

In a long string of cases through the 1970s, 1980s, and 1990s (Virginia State Bd. of Pharmacy on price advertising by pharmacies; Bates on lawyer advertising; Zauderer on lawyers advertising specific legal advice; Peel on lawyer certifications; Shapero on targeted lawyer direct mail; Ibanez on accountant credential listings; Edenfield on in-person solicitation by accountants; 44 Liquormart on retail liquor price advertising), the Supreme Court rejected state restrictions on professional advertising as failing Central Hudson. The few exceptions involved in-person solicitation in high-pressure circumstances (Ohralik, accident victims) or narrowly tailored time-limited bans (Florida Bar v. Went For It, 30-day direct mail ban to accident victims).

The pattern is clear: a state board that wants to ban truthful, non-misleading advertising of price information has a steep First Amendment hill to climb. The Board of Mortuary Science's ad-restricting interpretations of § 90-210.25(e)(1)f would face the same skepticism.

The opinion's recommended path. The AG advised the Board to:

1. Review § 90-210.25(e)(1)f itself, the Board's rules interpreting the statute, and the Board's past applications of both.
2. If the Board lacks rules reflecting its statutory interpretation, adopt appropriate rules to support the interpretation, or seek legislative amendment if the statute does not support the interpretation.
3. Assess whether the Board's advertising-related interpretations would survive a First Amendment challenge. If not, adjust the interpretations to comply with Central Hudson, or seek statutory amendment.

The opinion did not strike down any specific Board rule or interpretation. It gave the Board guidance for self-assessment, with the implicit warning that a court challenge would not go well if the Board persisted in ad bans that could not satisfy Central Hudson.

The opinion also noted a Fourth Circuit decision, Ficker v. Curran (1997), in which the court struck down a Maryland 30-day ban on targeted direct mail to traffic offense and accident defendants. Lower courts have generally read Florida Bar v. Went For It narrowly. North Carolina is within the Fourth Circuit. So the Fourth Circuit's hostility to professional-advertising restrictions is the binding precedent for North Carolina state courts and federal courts hearing First Amendment challenges to North Carolina state regulations.

Currency note

This opinion was issued in 2000. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The commercial speech doctrine has continued to evolve since 2000, with cases like Sorrell v. IMS Health Inc. (2011) heightening the protection of speech-restricting regulation and Reed v. Town of Gilbert (2015) tightening content-based scrutiny. The Federal Trade Commission's Funeral Rule has also developed since 2000 and imposes substantial price-disclosure obligations on funeral providers that arguably exceed what § 90-210.25(e)(1)f would have permitted. North Carolina's funeral service statutes have been amended periodically. Anyone analyzing current advertising regulation in the funeral industry should consult current state law, current FTC Funeral Rule provisions, and current First Amendment commercial speech case law.

Background and statutory framework

The North Carolina funeral service statute. Article 13A of Chapter 90 governs the practice of funeral service in North Carolina. The Board of Mortuary Science issues licenses to funeral establishments and to individuals practicing as funeral directors and embalmers. The statute lists grounds for revocation or suspension of those licenses, including (in § 90-210.25(e)(1)f) the direct or indirect giving of certificates of credit, or the payment or offer of payment of commissions, by the licensee or its agents, for the purpose of securing business.

The historical purpose of the provision was to prevent kickback-style arrangements in which funeral homes paid third parties (insurance agents, hospital staff, hospice workers, family advisors) for referrals. The kickback practice had been associated with various abuses: pressure on bereaved families to choose more expensive packages, biased referrals that did not reflect the family's interest, and overall inflation of funeral costs. The General Assembly's response was to ban the kickbacks.

The kickback-vs-advertising distinction. Over the decades, the Board's enforcement practice expanded beyond pure kickback cases. Funeral homes that advertised discounted prices, free credit terms, or other promotional offers faced Board scrutiny on the theory that the advertising was an indirect way of giving "certificates of credit" or paying commissions. By 2000, this expanded interpretation was running headlong into the Supreme Court's commercial speech jurisprudence.

The 2000 opinion's distinction (kickbacks are conduct; ads are speech) is conceptually clean and consistent with how federal courts have approached similar issues. The conduct prohibition is well within the State's police power; the speech prohibition is constrained by the First Amendment.

The Central Hudson framework. The 1980 case Central Hudson Gas & Electric Corp. v. Public Service Commission of New York established the modern test for commercial speech regulation. New York had banned electric utility advertising that promoted the use of electricity. The Supreme Court struck down the ban as failing Central Hudson's four-part test. The test has been applied across hundreds of cases since 1980 and is the operative First Amendment framework for any state regulation of advertising by licensed professionals.

The third prong (direct and material advancement of the state interest) is the prong that does the most work in practice. The State cannot just assert that an advertising restriction protects consumers; it must produce evidence that the restriction actually has that effect. In Edenfield v. Fane (1993), the Court struck down Florida's ban on in-person CPA solicitation in part because Florida's evidence of solicitation harm was insufficient. The Court generally requires "studies, anecdotes, history, consensus, or simple common sense" to support the State's claim that the restriction advances the state interest. Bare assertion does not suffice.

The 44 Liquormart decision and price advertising. 44 Liquormart, Inc. v. Rhode Island (1996) struck down a Rhode Island ban on advertising retail liquor prices. The Court was particularly skeptical of "complete bans" on truthful, non-misleading speech about lawful activity. After 44 Liquormart, blanket bans on price advertising by licensed professionals or businesses face very high scrutiny. The Board of Mortuary Science's interpretation of § 90-210.25(e)(1)f to ban advertising of funeral discounts would fall squarely within 44 Liquormart's hostile zone.

The history of professional-advertising cases. The 2000 AG opinion catalogs a series of Supreme Court cases since Virginia State Bd. of Pharmacy in 1976. The pattern is consistent: state restrictions on truthful advertising by professionals (pharmacists, lawyers, accountants, doctors) are generally struck down. The exceptions are narrow:

• Ohralik v. Ohio State Bar (1978) upheld a ban on in-person solicitation of accident victims by lawyers, because in-person solicitation involves coercive aspects (the lawyer's presence, the victim's vulnerability) that justify regulation beyond what pure advertising would.
• Florida Bar v. Went For It, Inc. (1995) upheld a 30-day ban on targeted direct mail solicitation of accident victims by lawyers. The Florida Bar had produced a study showing that direct mail in the immediate aftermath of accidents created public hostility toward lawyers and the legal profession.

These exceptions are narrow and fact-specific. The 2000 AG opinion noted that Florida Bar v. Went For It "cannot be extrapolated to uphold other time-limited bans" (per the Fourth Circuit's Ficker v. Curran decision). The Supreme Court has been generally hostile to extensions of the exception.

The Fourth Circuit context. Ficker v. Curran is binding precedent on federal courts in the Fourth Circuit (which includes North Carolina). The case involved a Maryland 30-day ban on targeted direct mail solicitation of persons charged with crimes or traffic offenses and persons involved in accidents. The Fourth Circuit struck down the ban, distinguishing Florida Bar v. Went For It in part because the affected persons "often needed legal services promptly." A North Carolina mortuary services advertising ban would face the same kind of Fourth Circuit scrutiny if challenged.

The FTC Funeral Rule overlay. The Federal Trade Commission's Funeral Rule (16 C.F.R. Part 453) imposes affirmative price-disclosure obligations on funeral providers across the United States. The Rule requires funeral homes to provide itemized price lists, to disclose required-by-law goods and services, and to refrain from misrepresenting service packages. The FTC's policy framework presupposes that funeral price information should be available to consumers, which is conceptually inconsistent with state board bans on price advertising. The 2000 opinion did not extensively address the FTC overlay, but it is a significant background factor for current analysis.

Why the Board's task is hard. The Board faced a difficult assessment in 2000 and remains in a difficult position today. The kickback portion of § 90-210.25(e)(1)f is enforceable; the advertising portion is constitutionally vulnerable. But policing kickbacks without policing advertising can be evidentiarily challenging, because indirect kickback arrangements can be dressed up as advertising relationships. The Board's enforcement decisions in any specific case have to be careful to distinguish actual kickback conduct from protected commercial speech.

Common questions

Q: Can a North Carolina funeral home advertise its prices and discounts?
A: Generally yes, under federal commercial speech doctrine and the FTC's Funeral Rule (which actually requires price disclosure). The 2000 AG opinion did not specifically endorse all forms of funeral advertising, but it strongly signaled that ad bans face Central Hudson scrutiny that they will usually fail. Specific advertising practices should be reviewed against the current state of the law and the Board's current rules.

Q: What about advertising of credit terms or financing options?
A: Similar analysis. Truthful, non-misleading information about lawful credit or financing arrangements is commercial speech protected by the First Amendment. A state board ban on such advertising would have to satisfy Central Hudson, which generally requires evidence of substantial harm from the speech and a narrowly drawn restriction. Most ad bans of this type would not survive.

Q: Can the Board still prohibit kickbacks to insurance agents or hospital staff?
A: Yes. The kickback prohibition regulates conduct, not speech. Anti-kickback rules are common across professional licensing schemes and have not been disturbed by the commercial speech cases. § 90-210.25(e)(1)f, properly interpreted to reach actual referral fees and commissions, is constitutional and enforceable.

Q: What is the FTC Funeral Rule, and how does it interact with state law?
A: The Federal Trade Commission's Funeral Rule (16 C.F.R. Part 453) is a federal consumer protection regulation that imposes affirmative price-disclosure obligations on funeral providers nationwide. It requires itemized General Price Lists, Casket Price Lists, and Outer Burial Container Price Lists; it prohibits requiring purchase of one item to obtain another; and it prohibits various misrepresentations. State law can supplement the FTC Funeral Rule but cannot reduce the protections the FTC Rule provides. A state advertising ban that conflicted with the FTC Rule's price-disclosure regime would be preempted to the extent of the conflict.

Q: What should a funeral home do if it wants to advertise discounts?
A: Consult an attorney about current state law and current Board rules. Make sure advertised discounts are truthful, not misleading, and reflect actual discounts off identified base prices. Verify compliance with FTC Funeral Rule price disclosure requirements. Document the basis for the advertised pricing in case of regulatory inquiry. The First Amendment provides strong protection for truthful commercial speech, but the protection does not extend to false or deceptive advertising.

Q: Is the AG opinion still useful as guidance?
A: Yes, as a conceptual framework. The 2000 opinion's central distinction (kickbacks are conduct, ads are speech) and its overview of the commercial speech doctrine remain accurate. The specific Supreme Court cases the opinion cites are still good law, and subsequent decisions have only strengthened commercial speech protection. The Board's regulatory practice should account for both the 2000 opinion's framework and the post-2000 developments (especially Sorrell v. IMS Health Inc. in 2011, which heightened scrutiny of speech-restricting regulation).

Q: Did the Board change its rules in response to the 2000 opinion?
A: The 2000 opinion does not direct any specific rule changes; it advises the Board to undertake its own review. Whether and how the Board acted is a matter of subsequent Board record. Anyone interested should consult the Board's current rules at 21 NCAC Chapter 34 and any explanatory materials the Board has published.

Citations

Statutes
- N.C. Gen. Stat. § 90-210.25(e)(1)f — grounds for revocation or suspension of funeral service license; direct or indirect giving of certificates of credit, or payment of commission, for the purpose of securing business.
- Article 13A of Chapter 90 — North Carolina practice of funeral service.

Constitutional provision
- First Amendment to the U.S. Constitution — protection of speech, including commercial speech.

Federal regulation (background)
- 16 C.F.R. Part 453 — FTC Funeral Rule; federal price-disclosure obligations on funeral providers.

Cases (in approximate chronological order)
- Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976) — Supreme Court struck down a Virginia ban on pharmacist advertising of prescription drug prices.
- Bates v. State Bar of Arizona, 433 U.S. 350 (1977) — Court invalidated Arizona ban on lawyer advertising.
- Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447 (1978) — Court upheld ban on in-person solicitation of accident victims by lawyers (narrow exception).
- Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York, 447 U.S. 557 (1980) — established the four-part test for commercial speech regulation.
- Bolger v. Youngs Drug Products Corp., 463 U.S. 60 (1983) — heightened scrutiny for speech restrictions.
- Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) — Court struck down bans on lawyer advertising of specific legal advice and on use of illustrations.
- Shapero v. Kentucky Bar Ass'n, 486 U.S. 466 (1988) — Court struck down ban on attorneys' targeted direct mail solicitation.
- Peel v. Attorney Registration & Disciplinary Comm'n of Illinois, 496 U.S. 91 (1990) — Court struck down ban on advertisements stating lawyer certifications.
- Edenfield v. Fane, 507 U.S. 761 (1993) — Court struck down Florida ban on in-person CPA solicitation.
- Ibanez v. Florida Dep't of Bus. & Professional Regulation, Bd. of Accountancy, 512 U.S. 136 (1994) — Court struck down restrictions on listing CPA credentials.
- Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995) — Court upheld 30-day ban on targeted direct mail solicitation of accident victims by lawyers (narrow exception, supported by Florida Bar's evidentiary study).
- 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) — Court struck down Rhode Island ban on retail liquor price advertising.
- Ficker v. Curran, 119 F.3d 1150 (4th Cir. 1997) — Fourth Circuit struck down Maryland 30-day ban on targeted direct mail solicitation of persons charged with crimes or traffic offenses or involved in accidents.

Source

• Landing page: https://ncdoj.gov/opinions/funeral-service/

Original opinion text

Re: Advisory opinion: Validity of N.C.G.S. § 90-210.25(e)(1)f and Board's interpretation

Dear Mr. Weisel:

You have inquired about the validity of N.C.G.S. § 90-210.25(e)(1)f, which is part of Article 13A, Chapter 90 of the General Statutes of North Carolina, governing the practice of funeral service. Specifically, that section specifies that "[t]he direct or indirect giving of certificates of credit or the payment or offer of payment of a commission by the licensee, his agents, assistants or employees for the purpose of securing business" is grounds for revocation or suspension of a license by the Board of Mortuary Science. You indicated in your letter that the Board has interpreted and applied this provision to various situations over the years in the course of its duties. Your letter expressed concern about how the provision, and the Board's interpretations and applications of that provision, would fare under current first amendment case law such as 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484 (1996) and Edenfield v. Fane, 507 U.S. 761 (1993).

First, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit fees or discounts paid to third parties for referring clients to licensees, the first amendment cases such as Liquormart do not apply. Prohibitions on licensees paying such referral fees are addressed to conduct, not to speech. These types of provisions are commonly found in various types of licensing laws and professional ethical codes, and we are not aware of any constitutional barrier to their application when authorized by statute and applied in a reasonable manner.

On the other hand, to the extent N.C.G.S. § 90-210.25(e)(1)f is applied to prohibit advertising of otherwise lawful discounts or credits through promotional materials, newspaper advertisements, or other means, then the issue would appear to be one concerning the validity of the State's regulation of commercial speech under the First Amendment. As you mentioned, the Liquormart case struck down a complete ban on advertising liquor prices. There, the Court noted, "[w]hen a State regulates commercial messages to protect consumers from misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer information," the purpose of its regulation "is consistent with the reasons for according constitutional protection to commercial speech and therefore justifies less than strict review." 517 U.S. at 501.

Liquormart, however, is merely one of a number of commercial speech first amendment cases the Court has decided over the last twenty-four years, since Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976). In that case, the Court struck down a Virginia statute making a pharmacist guilty of professional misconduct if he published or advertised fees, prices, or discounts for prescription drugs. The Court expressed concern not only for the right of the pharmacist to communicate, but also for the right of the consumer to receive the communication, which in this case would be helpful information about fees. Similarly, in Bates v. State Bar of Arizona, 433 U.S. 350 (1977), the Supreme Court invalidated Arizona restrictions on lawyer advertising, in significant part because of concern about the consumer's right to receive helpful information. In recent years, the Court has emphasized that a State which wants to ban or restrict commercial speech has a heavy burden of demonstrating the constitutional validity of the restriction. Bolger v. Youngs Drug Products Corp., 463 U.S. 60, 71, n.20 (1983); Edenfield, 507 U.S. at 770-71 Unless the speech involves illegal activity or is itself false or misleading, the State can succeed in defending its speech restriction by showing that it has a substantial legitimate interest underlying its regulation, that the restriction on the speech directly and materially advances that interest and that the regulation is "narrowly drawn." See Central Hudson Gas & Electric Corp. v. Public Service Comm'n of New York, 447 U.S. 557, 564-65 (1980); see also Florida Bar v. Went For It, Inc., 515 U.S. 618, 624 (1995). Applying the Central Hudson test, the Supreme Court has not readily accepted states' justifications for banning or restricting commercial speech, rejecting various restrictions on professional advertising in cases such as Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626 (1985) (ban on advertisements providing advice regarding specific legal problems and on use of illustrations in advertisements); Peel v. Attorney Registration & Disciplinary Comm'n of Illinois, 496 U.S. 91 (1990) (ban on advertisements stating lawyer certifications, with narrow exceptions, as applied to lawyer certified as civil trial specialist by National Board of Trial Advocacy); Shapero v. Kentucky Bar Ass'n, 486 U.S. 466 (1988) (ban on attorneys' targeted direct mail solicitation relating to specific events, applied to letter concerning foreclosure proceedings); Ibanez v. Florida Dep't of Bus. & Professional Regulation, Bd. of Accountancy, 512 U.S. 136 (1994) (restrictions on listing qualifications applied to ban listing of certified public accountant credentials by an attorney); Edenfield, 507 U.S. 761 (ban on in-person solicitation by accountants). Among the few exceptions are Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447 (1978) (ban on in-person solicitation of accident victims by attorneys) and Florida Bar v. Went For It, 515 U.S. 618, in which the Court upheld a thirty-day restriction on targeted direct mail solicitation by attorneys to accident victims and persons who had lost loved ones in accidents, distinguishing the case from Shapero.[1] Thus, except for attorneys soliciting accident victims, either in-person or by targeted mail during a very limited period of time, the Supreme Court has tended to conclude in most cases that the State's interest in protecting consumers from potentially misleading or overreaching advertising did not advance legitimate State interests in a manner sufficiently related to those interests or sufficiently restricted to them to outweigh the advertiser's right to communicate and the consumer's right to learn about the qualifications, services, and pricing practices of the advertising professional. Moreover, the State generally can convince a court of the harms from which it seeks to protect consumers only by producing evidence of those harms resulting from the banned or restricted types of advertising, such as a study that the Florida Bar relied on in Went For It.

In sum, to the extent that the Board of Mortuary Science interprets and applies N.C.G.S. § 90-210.25(e)(1)f to ban advertising of discounts or promotions, it can do so lawfully only under the standards set out above. If challenged in litigation, under current case law it would have to meet that heavy burden of convincing the court, presumably by producing substantial evidence, that the ban was narrowly drawn to further a legitimate interest.

We are not sure exactly how the Board has interpreted and applied N.C.G.S. § 90-210.25(e)(1)f in the past. Therefore, we suggest that the Board may want to review the statute itself, the rules of the Board interpreting the statute, and the past applications of both the statute and any relevant rules by the Board. If the Board lacks rules reflecting its interpretation of the statute, it will need to adopt appropriate rules to support its interpretation or, if the statute does not support that interpretation, seek legislative amendment. Further, if it appears that the Board may have difficulty supporting its interpretation in court in the event of a first amendment challenge, the Board may want to reconsider its interpretation and adjust its rules accordingly or, in the event the problem appears to be with the statute itself, seek statutory amendment.

We hope this advisory opinion provides assistance to you. Please let us know if there are further questions about this matter.

Signed by:

Ann Reed
Senior Deputy Attorney General

Charles J. Murray
Special Deputy Attorney General

Norma S. Harrell
Special Deputy Attorney General

[1] Significantly, lower courts have concluded that Florida Bar v. Went For It cannot be extrapolated to uphold other time-limited bans. For example, the United States Court of Appeals for the Fourth Circuit held that Maryland could not impose a thirty-day ban on targeted direct mail solicitation to persons involved in or suffering an accident or disaster or charged with crimes or traffic offenses, in part because those persons often needed legal services promptly. Ficker v. Curran, 119 F.3d 1150 (1997).