Legislature(2007 - 2008)BELTZ 211
05/08/2007 01:30 PM LABOR & COMMERCE
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
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 $25,000. 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.