Batesville Casket, producer of 45 per cent of the coffins sold in the US, has been accused of engaging in a price-fixing conspiracy with funeral homes that has cost consumers hundreds of millions of dollars.

A lawsuit, filed yesterday on behalf of the Funeral Consumers Alliance, also names as defendents three leading funeral companies - Service Corp (NYSE: SCI - News) oration International, Alderwoods Group and Stewart Enterprises (NASDAQ: STEI - News) - which together operate 2,150 funeral homes across the US, with combined revenues of over $3bn.

The suit accuses the funeral homes of refusing to handle Batesville and other coffins supplied more cheaply by online discounters, saying this is in violation of federal regulations. It also says the defendents have conspired to keep prices artificially high, and sought to keep out lower-cost caskets and coffins.

Online discounters, such as FuneralDepot.com, have been offering dramatically lower prices on Batesville coffins, threatening both its sales and the traditional margins of the funeral homes. In a sign of the increased competition in the sector, Costco, the discount warehouse club, launched online sales of stainless steel caskets last year for $925, and yesterday launched a new range of light-weight urns for transporting ashes.

Joshua Slocum, executive director of the FCA, said funeral homes had conspired for years to inflate prices. "We expect this lawsuit will put an end to these conspiracies, that it will bring free and fair competition to the casket market, and that consumers will be compensated for the damage this behavior has wrought," he said.

The FCA, which has some 400,000 individual memmbers, and a number of consumer plaintiffs also accuse the funeral homes of mounting a disinformation campaign against other low-cost caskets. "Some of the most commonly used lines...include "the handles fall off", "the bottoms drop out", "they're made by prisoners", "they are tin cans" and "they are all seconds", it says.