04/26/2002 03:25 PM House L&C

HB 512-UNFAIR CIGARETTE SALES                                                                                                 
                                                                                                                                
CHAIR MURKOWSKI announced that the  final order of business would                                                               
be HOUSE BILL  NO. 512, "An Act relating to  cigarette sales; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 1206                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG moved  to  adopt CSHB  512, Version  22-                                                               
LS1646\F, Ford,  4/26/02, as the  working document.   There being                                                               
no objection, Version F was before the committee.                                                                               
                                                                                                                                
DALE  ANDERSON,  Legislative  Assistant   to  the  House  Finance                                                               
Committee, Alaska  State Legislature, testified on  behalf of the                                                               
sponsor of  HB 512,  the House Finance  Committee.   Mr. Anderson                                                               
provided the following testimony:                                                                                               
                                                                                                                                
     This  CS   came  as  a  collaborative   effort  between                                                                    
     industry  and the  Department of  Revenue  and ...  our                                                                    
     drafters.   House Bill  512 was  introduced to  start a                                                                    
     discussion on  the effects on business  practices that,                                                                    
     to  some,   have  been  looked   upon  as   unfair  and                                                                    
     predatory.   House Bill 512 encourages  fair and honest                                                                    
     competition and  safeguards the public  against unfair,                                                                    
     dishonest, and  fraudulent business  practices existing                                                                    
     in  transactions involving  the sale  of cigarettes  in                                                                    
     the  wholesale and  retail trades  in the  state.   The                                                                    
     bill  creates  a   general  trade  practice  regulation                                                                    
     prohibiting sales  below cost.   The law  considers the                                                                    
     practice of selling below cost  to attract patronage in                                                                    
     the  form  of   deceptive  advertising,  which  diverts                                                                    
     businesses  from dealers  who maintain  a fair  pricing                                                                    
     policy   [and]   ultimately   [results]   in   lessened                                                                    
     competition and  market disruption.  The  basic purpose                                                                    
     of [HB] 512 is to  prevent predatory pricing and ensure                                                                    
     that  fair  competition  among   both  the  retail  and                                                                    
     wholesale distributors of cigarettes  in the state.  It                                                                    
     is difficult for us to  sort out the intricacies of the                                                                    
     tobacco  business so  we've asked  several people  that                                                                    
     are on-line now to help us with the discussion.                                                                            
                                                                                                                                
Number 1309                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  inquired as  to what has  brought about  HB 512.                                                               
Does Alaska have a problem  with predatory pricing and cigarettes                                                               
being used as a loss leader, she asked.                                                                                         
                                                                                                                                
MR. ANDERSON said  that is what has been told.   The CS clarifies                                                               
the intent  of the statute.   Furthermore, Section 1  [of Version                                                               
F] broadens  the language to  refer to all sales  [of cigarettes]                                                               
by  licensed sellers  in  the  state.   [The  CS] also  addresses                                                               
enforcement issues that  were of concern to the  department.  Mr.                                                               
Anderson pointed out  that [Version F] changes  the percentage of                                                               
sales from two percent to four  percent.  One of the large issues                                                               
that is addressed  by the fiscal note is the  cost survey issues.                                                               
With the changes  encompassed in Version F, Mr.  Anderson said he                                                               
believes there will be significant changes in the fiscal note.                                                                  
                                                                                                                                
MR.  ANDERSON, in  response to  Chair  Murkowski, specified  that                                                               
Title 43 deals with business practices.                                                                                         
                                                                                                                                
REPRESENTATIVE MEYER  recalled that  at one point  retailers were                                                               
paid to place [cigarettes] on  prime shelf space.  Representative                                                               
Meyer asked if that is still the case and what this legislation                                                                 
attempts to balance.                                                                                                            
                                                                                                                                
MR. ANDERSON said he didn't know the answer and would defer to                                                                  
those on-line.                                                                                                                  
                                                                                                                                
CHAIR MURKOWSKI announced that HB 512 would be held over.