Legislature(2007 - 2008)BELTZ 211

05/08/2007 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 155(FIN) Out of Committee
Moved CSHB 228(L&C) Out of Committee
Moved CSHB 205(FIN) Out of Committee
Moved SB 165 Out of Committee
Scheduled But Not Heard
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
             SB 165-TOURISM DISCLOSURES AND NOTICES                                                                         
2:19:53 PM                                                                                                                    
CHAIR ELLIS announced SB 165 to  be up for consideration. He said                                                               
it is companion  legislation to house legislation  that is coming                                                               
over shortly. His  goal was to hear  this bill and move  it on to                                                               
the Judiciary Committee and expect  the House legislation to meet                                                               
it there. He said that  Representative Holmes had done the lion's                                                               
share of the work and would speak for Senator Elton.                                                                            
REPRESENTATIVE  LINDSEY  HOLMES, sponsor  of  the  HB 217,  asked                                                               
JAMES WALDO, her staff person, to help present the bill.                                                                        
MR.  WALDO said  SB  165,  which is  the  companion  for HB  217,                                                               
addresses  concerns  of  the local  vendor  tour  businesses.  It                                                               
alters and  improves the  disclosure section  that was  passed in                                                               
the  cruise  ship  initiative,  Ballot Measure  2,  in  the  last                                                               
election.  It adds  several requirements  for disclosure  for on-                                                               
board sales  and alters the  commission rate disclosure;  it also                                                               
adds a  section that  applies that  to advertisements  for shore-                                                               
side  retailers as  well. He  said  the on-board  tour sales  are                                                               
changed to  require a  disclosure under every  sale that  the on-                                                               
board sale is a wholesale/retail relationship between the shore-                                                                
side tour  vendor and the  cruise line. This basically  helps the                                                               
passengers  to be  informed  that  the cruise  line  will keep  a                                                               
percentage of the  money paid for a tour. The  disclosure is also                                                               
required to  include information on other  alternatives available                                                               
at  future ports  of  call with  different  prices and  different                                                               
features. It also  requires the cruise ships  to provide vendors'                                                               
contact  information to  the visitors'  bureaus in  each port  of                                                               
call so  that the passengers  can contact them  independently and                                                               
compare prices.                                                                                                                 
2:21:51 PM                                                                                                                    
MR.   WALDO  said   this   legislation   alters  the   disclosure                                                               
requirement  that was  in the  initial initiative.  It originally                                                               
said  the  cruise   line  is  required  to   disclose  the  exact                                                               
commission  rate in  all written  materials when  they sold  that                                                               
tour. However, that threatened the  local Alaskan business on the                                                               
shore-side because  it would expose their  pricing structures and                                                               
they  had a  very  really worry  that this  would  lead to  price                                                               
undercutting.  This  price  undercutting would  only  affect  the                                                               
Alaskan  businesses because  they  would be  competing with  each                                                               
other  for  lower  and  lower   prices  while  the  cruise  ships                                                               
maintained the higher commission rate.                                                                                          
After  working with  the initiative's  sponsors, Mr.  Waldo said,                                                               
they  came to  a  good fix  in requiring  a  disclosure when  the                                                               
commission reaches a  certain threshold of over  20 percent. This                                                               
helps the  consumer realize they  are paying a commission  over a                                                               
certain rate.                                                                                                                   
2:24:19 PM                                                                                                                    
Finally,  it  adds  a  new  section that  was  left  out  of  the                                                               
initiative.  That section  applies these  disclosure requirements                                                               
to shore-side  retailers as well.  Right now on-board  the cruise                                                               
ships   shore-side   retailers,  like   Diamonds   International,                                                               
advertise,  but they  charge  extremely  steep advertising  rates                                                               
that  amount to  a  percentage  of the  sales.  This would  allow                                                               
passengers to  see that  a percentage of  those retail  sales are                                                               
being recouped by the cruise  ship and effectively allows them to                                                               
realize that  there are other  stores and other  alternatives for                                                               
them to use.                                                                                                                    
2:25:10 PM                                                                                                                    
SENATOR BUNDE  asked if  sponsors of  the cruise  ship initiative                                                               
agree with this legislation.                                                                                                    
MR. WALDO replied  yes. He said that Joe Geldhof  is on record in                                                               
the House  Judiciary Committee  speaking in favor  of HB  217 and                                                               
Kirsten  Cohen,  another  sponsor  of the  initiative,  had  also                                                               
written a letter in support.                                                                                                    
SENATOR BUNDE  said he  heard from a  number of  constituents who                                                               
said they knew what they voted for and didn't want it changed.                                                                  
MR. WALDO  responded that  to assuage  those concerns  even more,                                                               
one of the more significant final  pieces in the bill corrects an                                                               
error   in  the   initiative  that   cited  violation   of  these                                                               
requirements as  an unfair trade  practice - with a  maximum fine                                                               
of $100 - which  for a cruise line, is just a  slap on the wrist.                                                               
Any  other unfair  trade  practice  has a  penalty  of $1,000  to                                                               
$25,000, a  significant deterrent. So,  SB 165 and HB  217 remove                                                               
the requirement  the $100-penalty and  replace it with  $1,000 to                                                               
2:27:58 PM                                                                                                                    
DON  HESS, Chilkat  River Adventures,  supported SB  165. He  was                                                               
once  in the  logging business,  then he  turned to  trucking and                                                               
being a heavy equipment operator. In  1973, he decided to start a                                                               
river tour  business in  Haines. He said  his current  company is                                                               
successful only because  of the cruise ships and now  it is being                                                               
drastically affected by  the initiative's disclosure requirement.                                                               
He  urged  them  to  pass  SB 165  out  of  committee  today;  50                                                               
businesses have  testified in  support of  these changes  and not                                                               
one business has testified in opposition.                                                                                       
CHAIR ELLIS  said he personally  thought a good balance  had been                                                               
struck between the spirit of  the initiative and the sponsors and                                                               
some of the practical implications.                                                                                             
2:32:37 PM                                                                                                                    
JOHN DUNLAP,  Manager, Allen Marine  Tours, supported SB  165 and                                                               
thought the  language met  the intent of  the voters  better than                                                               
that in the ballot initiative.                                                                                                  
2:34:16 PM                                                                                                                    
STEVE HEIGHTS,  Skagway Streetcar  Company, supported SB  165. He                                                               
agreed  with  the previous  two  testifiers  and said  that  most                                                               
importantly, the committee should  understand that tour operators                                                               
don't  pay commissions  to the  cruise lines.  Rather the  cruise                                                               
lines customers pay them. He explained:                                                                                         
     We  create, manufacture,  tour  products,  and we  sell                                                                    
     those  at wholesale  net price  to the  cruise ship  or                                                                    
     retail store.  We sell our  products at a  volume rate,                                                                    
     too, because blocks of seats  - we can produce for less                                                                    
     than  the  cost of  a  single  seat.  Some of  us  sell                                                                    
     retail, as  well, at  our windows, but  those are  at a                                                                    
     retail price, not at the wholesale volume price.                                                                           
He knows of  no other retail business that has  to disclose their                                                               
retail  markups.  He  is  not  opposed  to  disclosure,  but  the                                                               
disclosure he wants  to see is the  truth. He said point  4 in SB
165 is  still wrong  in that  it still  includes an  arbitrary 20                                                               
percent  figure; it  still uses  the incorrect  word "commission"                                                               
and this is not true. Rather:                                                                                                   
     The  truth   is  that   there  is   a  retail/wholesale                                                                    
     relationship  here  and  having  been so  stated  in  a                                                                    
     statute, there should be no  more that needs to be said                                                                    
     - because that in and  of itself in business states the                                                                    
     truth  of  commerce.  HB  217  and  SB  165  may  be  a                                                                    
     temporary fix,  but they still  do not state  the truth                                                                    
     and truth  and honesty  in disclosure for  the citizens                                                                    
     of Alaska, for  the consumer, is what  the people voted                                                                    
     for.  Thank you  so much  for my  opportunity and  I do                                                                    
     hope you pass this along.                                                                                                  
2:37:10 PM                                                                                                                    
ALLEN LEMASTER testified  from Gakona in support  of Mr. Heights'                                                               
testimony. This bill  is the best fix  we can have for  what is a                                                               
bad idea initially.                                                                                                             
2:38:46 PM                                                                                                                    
KELLY  DINDINGER, Alaska  Travel Adventurers  and Alaska  Cruises                                                               
Inc., said  she is  very concerned  that this  bill may  not move                                                               
forward  quickly.  She  said Alaska  Travel  Adventurers  is  her                                                               
livelihood and  it doesn't  start making money  until July  - and                                                               
"We're out of money now. We  need to start making our sales." She                                                               
just  got an  announcement  that some  cruise  lines are  telling                                                               
their customers if  they don't buy a tour  before hitting Alaskan                                                               
waters, they are  not going to get to buy  it, because they don't                                                               
know what is legal.                                                                                                             
2:42:19 PM                                                                                                                    
SENATOR  STEVENS  moved  to  pass  SB  165  from  committee  with                                                               
individual recommendations and attached  fiscal note. There being                                                               
no objection, it was so ordered.                                                                                                

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