Legislature(2001 - 2002)
04/05/2002 01:11 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 393 - SALES OF BUSINESS OPPORTUNITIES Number 1273 CHAIR ROKEBERG announced that the next order of business would be HOUSE BILL NO. 393, "An Act relating to unfair and deceptive trade practices and to the sale of business opportunities; amending Rules 4 and 73, Alaska Rules of Civil Procedure; and providing for an effective date." Chair Rokeberg noted that Doug Letch, staff to Representative Gary Stevens, Alaska State Legislature, sponsor, was present. Number 1318 REPRESENTATIVE MEYER moved to adopt the proposed committee substitute (CS) for HB 393, version 22-LS1356\J, Bannister, 4/3/02, as a work draft. There being no objection, Version J was before the committee. Number 1335 HEATHER M. NOBREGA, Staff to Representative Norman Rokeberg, House Judiciary Standing Committee, Alaska State Legislature, explained that Version J incorporates the amendments that were discussed during the previous hearing on HB 393. She mentioned that the language regarding the exemption limit of $200 is located on line 5 of page 13, and that the sponsor and the Department of Law (DOL) recommend that this limit be raised to $250. REPRESENTATIVE JAMES, referring to business opportunities (biz opps) that she has seen advertised on television, asked how the DOL determines whether the provisions of HB 393 would apply to those biz opps. Number 1450 CYNTHIA DRINKWATER, Assistant Attorney General, Fair Business Practices Section, Civil Division (Anchorage), Department of Law (DOL), remarked that it is difficult to make a general statement without knowing which ads Representative James is referring to. However, once a person calls in and is told how much the initial payment is, if it is more than $200, Ms. Drinkwater explained, then it can be determined that the provision of HB 393 would apply. CHAIR ROKEBERG noted that the language in HB 393 specifies that in order to qualify for the exemption, the total amount of the payments cannot exceed $200. REPRESENTATIVE JAMES remarked that according to her observation, the price paid for a biz opp grows over time: only a small amount of money may be required at first, but folks are subsequently talked into making further payments. She asked how the DOL plans to handle those kinds of operations, particularly those that use interstate television advertising. Is the DOL going to wait for people to make individual reports, or will it take those advertisements off of the television if those companies don't do what HB 393 requires? How is HB 393 going to be implemented? MS. DRINKWATER offered that the way HB 393 would work is similar to how Alaska's telemarketing law currently works: when the DOL becomes aware - either through consumer complaints or through other means - of businesses who are operating in the state without registering, the DOL can send those businesses a cease- and-desist letter notifying them that they are in violation of the law and that they have to register. REPRESENTATIVE JAMES mentioned that she still has concerns that neither the public nor the entities selling biz opps will have any idea that this law exists. She posited that the goal ought to be to educate the public so that folks don't contact fraudulent biz opps to begin with. MS. DRINKWATER noted that by requiring companies to register, consumers will be provided with more information about the companies, and the DOL will have an additional enforcement tool to use when fraudulent businesses try to evade the law. REPRESENTATIVE JAMES opined that Alaska's television stations should be notified of the provisions in HB 393 [if it becomes law] so that those stations can prohibit such advertisements. Number 1663 REPRESENTATIVE MEYER, referring to the $200 limit, opined that fraudulent biz opps should be prohibited regardless of the amount charged. He also opined that regardless of what the limit is, the provisions of HB 393 would not apply to legitimate businesses such as Mary Kay [Inc.], Amway [Corporation], or Avon [Products, Inc.], for example. He asked why the DOL is recommending a $250 limit. MS. DRINKWATER said that the $250 limit is offered as a compromise to ensure that the Direct Selling Association (DSA) and other legitimate businesses do not oppose HB 393. She offered that some sort of limit was called for because although the DOL wants to provide as much protection as it can to consumers, it would not be possible for the DOL to pursue every case, and a $250 limit is used in other states and seems to be a reasonable limit. She pointed out that HB 393 would not cover products that appear to be scams; rather, HB 393 is intended to cover fraudulent biz opps, which are marketing schemes that may include selling products. REPRESENTATIVE MEYER noted that if, for $199, a company is selling faulty software which supposedly enables people to start their own businesses, those companies would not be covered under HB 393 because of the $200 or $250 exemption. MS. DRINKWATER pointed out, however, that even if the cost of the software was above the exemption threshold, in the aforementioned example, the software by itself would not be considered a business opportunity unless the person/entity that sold the software promised "to do something else with it." For example, she said: If they promised to sell you medical billing software by which you could do medical billing from your home and make thousands of dollars, and ... they promised, then, to provide you [with] the names of doctors who wanted to use outside medical billing services, that would be a business opportunity. But if they're just selling you the software, it would not be. And if they were selling you just software that was defective or fraudulent, it may well be that our general consumer protection law would cover that scenario, but not necessarily the business opportunity statute. MS. DRINKWATER, in response to questions about the limit that other states have, explained that those limits range from $200 to $500: nine states have a threshold between $200 and $300, and 13 states have a $500 threshold as does the Federal Trade Commission (FTC). She added that 23 states - including Alaska - have business opportunity [bills/statutes], but not all of those states require registration. Number 1928 STEVE CONN, Executive Director, Alaska Public Interest Research Group (AkPIRG), testified via teleconference, noting simply that AkPIRG, AARP, and the Better Business Bureau (BBB) could assist in disseminating information about HB 393 and the scams that it is intended to target. Number 1965 CHAIR ROKEBERG made a motion to adopt Amendment 1, which would replace "$200" with "$250" on page 13, line 5. There being no objection, Amendment 1 was adopted. Number 1983 REPRESENTATIVE MEYER moved to report the proposed committee substitute (CS) for HB 393, version 22-LS1356\J, Bannister, 4/3/02, as amended, out of committee with individual recommendations and the accompanying fiscal note. There being no objection, CSHB 393(JUD) was reported from the House Judiciary Standing Committee.
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