02/13/2008 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HCR21 | |
| HB303 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HCR 21 | TELECONFERENCED | |
| *+ | HB 355 | TELECONFERENCED | |
| += | HB 250 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 303 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 13, 2008
1:13 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative Nancy Dahlstrom, Vice Chair
Representative John Coghill
Representative Bob Lynn
Representative Ralph Samuels
Representative Max Gruenberg
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Kyle Johansen
COMMITTEE CALENDAR
HOUSE CONCURRENT RESOLUTION NO. 21
Supporting the National Crime Victims' Rights Week of 2008.
- MOVED HCR 21 OUT OF COMMITTEE
HOUSE BILL NO. 303
"An Act relating to marine products and motorized recreational
products; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 355
"An Act requiring the disclosure of the identity of certain
persons, groups, and nongroup entities that expend money in
support of or in opposition to ballot initiatives and the
aggregate amounts of significant contributions or expenditures
made by those persons, groups, and nongroup entities."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 250
"An Act relating to children engaging in inappropriate sexual
conduct."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HCR 21
SHORT TITLE: 2008 NATIONAL CRIME VICTIMS' RIGHTS WEEK
SPONSOR(S): REPRESENTATIVE(S) STOLTZE
02/06/08 (H) READ THE FIRST TIME - REFERRALS
02/06/08 (H) JUD
02/13/08 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 303
SHORT TITLE: MARINE & MOTORIZED RECREATIONAL PRODUCTS
SPONSOR(S): REPRESENTATIVE(S) NEUMAN
01/11/08 (H) PREFILE RELEASED 1/11/08
01/15/08 (H) READ THE FIRST TIME - REFERRALS
01/15/08 (H) L&C
01/30/08 (H) L&C AT 1:00 PM CAPITOL 17
01/30/08 (H) Moved CSHB 303(L&C) Out of Committee
01/30/08 (H) MINUTE(L&C)
01/31/08 (H) L&C RPT CS(L&C) 4DP 3AM
01/31/08 (H) DP: BUCH, RAMRAS, NEUMAN, OLSON
01/31/08 (H) AM: GARDNER, LEDOUX, GATTO
01/31/08 (H) JUD REFERRAL ADDED
02/06/08 (H) JUD AT 1:00 PM CAPITOL 120
02/06/08 (H) Heard & Held
02/06/08 (H) MINUTE(JUD)
02/11/08 (H) JUD AT 1:00 PM CAPITOL 120
02/11/08 (H) <Bill Hearing Canceled>
02/13/08 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE BILL STOLTZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HCR 21.
REPRESENTATIVE MARK NEUMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 303.
REX SHATTUCK, Staff
to Representative Mark Neuman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented an explanation of the changes
from Version K to Version E of HB 303 on behalf of the sponsor,
Representative Neuman.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Provided comments and responded to
questions during discussion of HB 303.
TERRY BANNISTER, Attorney
Legislative Legal Counsel
Legislative Legal and Research Services
Legislative Affairs Agency (LAA)
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 303.
CRAIG COMPEAU, Owner
Compeau's Marine
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 303.
KATHY VAN KLEEK, Senior Vice-President
Government Relations
Specialty Vehicle Institute of America (SVIA)
Irvine, California
POSITION STATEMENT: Testified in opposition to HB 303.
PAUL VATRANO, Executive Vice-President and Counsel
Special Vehicle Institute of America (SVIA)
Irvine, California
POSITION STATEMENT: Testified in opposition to HB 303.
LARRY INNIS, Director of Government Relations
Marine Retailers Association of America (MRAA)
Oak Park, Illinois
POSITION STATEMENT: Testified in support of HB 303.
DAVID DICKERSON, Director, State Government Affairs
National Marine Manufacturers Association (NMMA)
Chicago, Illinois
POSITION STATEMENT: Testified in opposition to HB 303.
DUDLEY BENESCH, Owner
Alaska Mining and Diving Supply
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 303.
BUSTER HALL, President
Alaska Marine Dealers Association (AMDA)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 303.
ACTION NARRATIVE
CHAIR JAY RAMRAS called the House Judiciary Standing Committee
meeting to order at 1:13:25 PM. Representatives Dahlstrom,
Lynn, Holmes, Gruenberg, and Ramras were present at the call to
order. Representatives Coghill and Samuels arrived as the
meeting was in progress.
HCR 21 - 2008 NATIONAL CRIME VICTIMS' RIGHTS WEEK
1:14:10 PM
CHAIR RAMRAS announced that the first order of business would be
HOUSE CONCURRENT RESOLUTION NO. 21, Supporting the National
Crime Victims' Rights Week of 2008.
1:15:09 PM
REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, as
sponsor, explained that HCR 21 recognizes the rights of crime
victims and strengthens their rights as guaranteed in our
constitution by supporting the National Crime Victims' Rights
Week of 2008. He offered his understanding that HCR 21 has
overwhelming support.
1:17:28 PM
REPRESENTATIVE DAHLSTROM moved to report HCR 21 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HCR 21 was reported from the
House Judiciary Standing Committee.
HB 303 - MARINE & MOTORIZED RECREATIONAL PRODUCTS
1:18:21 PM
CHAIR RAMRAS announced that the final order of business would be
HOUSE BILL NO. 303, "An Act relating to marine products and
motorized recreational products; and providing for an effective
date." [Before the committee was CSHB 303(L&C).]
1:18:40 PM
REPRESENTATIVE DAHLSTROM moved to adopt the proposed committee
substitute (CS) for HB 303, Version 25-LS1183\K, Bannister,
2/5/08, as the work draft.
REPRESENTATIVE HOLMES objected for the purposes of discussion.
1:20:43 PM
REPRESENTATIVE MARK NEUMAN, Alaska State Legislature, sponsor,
relayed that the concept of HB 303 was brought to him by members
of the association for outboard motors, snowmobiles, and ATVs
dealers of Alaska. He explained that HB 303 is intended to
offer dealers some protection, similar to automobile dealers.
Since 1976, dealers have attempted to address issues of concern
with the manufacturers but have yet to receive a response, he
opined. Every outboard motor, snowmobile, and ATVs dealer
supports HB 303. This bill is meant to help protect the
consumer. He offered his belief that Mr. Sniffen, Department of
Law, is now in support of the HB 303.
1:28:22 PM
REX SHATTUCK, Staff to Representative Mark Neuman, Alaska State
Legislature, speaking on behalf of the sponsor, Representative
Neuman, referred to a document labeled "Explanation of Changes
to HB 303 version\E to version\K," and explained that several
duplicative sections were removed at the suggestion of both
Legislative Legal and Research Services and the Department of
Law (DOL). He referred to item 1, which he said deletes
proposed AS 45.27.010. He referred to proposed AS 45.27.020,
which removes the just cause language that was unnecessary, and
changes the cancellation or nonrenewal written notice from 120
days to 90 days. Proposed AS 45.27.030, subsections (b) and (c)
were deleted at the recommendation of the DOL, he said. These
subsections added unnecessary requirements for manufacturers and
were considered duplicative. He referred to proposed AS
45.27.120, and noted that subsection (b) paragraph (2) is
deleted since the DOL suggested it may involve anti-trust
issues. He referred to proposed AS 45.27.230, and advised that
the language allows a dealer up to 24 months to enter into a new
agreement in order to better serve customers. He referred to
proposed AS 25.27.300, and explained that several sections
relating to mandatory repurchases were combined. He referred to
proposed AS 45.27.310, which lengthens the response time from 30
to 60 days, he said. He referred to proposed AS 45.27.330,
which changes the language to include the amount allowed by law,
which will also cover rate changes, he noted.
1:37:59 PM
MR. SHATTUCK referred to proposed AS 45.27.410, and stated that
an effort was made to eliminate duplication and that this
section was included as recommended by the DOL. He referred to
proposed AS 45.27.820, which clarifies the amount of the fine
and penalties allowed, he stated.
REPRESENTATIVE NEUMAN, in response to Chair Ramras, advised that
he is comfortable that Version K addresses the issues of anti-
competitive and constitutionality issues.
REPRESENTATIVE HOLMES removed her objection to the adoption of
Version K as the work draft. There being no further objection,
Version K was before the committee.
REPRESENTATIVE GRUENBERG also noted that members' packets have a
sectional analysis for Version K.
1:42:59 PM
REPRESENTATIVE NEUMAN, in response to Representative Gruenberg,
answered that proposed AS 45.27.010, Formation of Agreement, was
deleted at Mr. Sniffen's recommendation. He offered that the
language is currently contained in AS 45.45.700.
REPRESENTATIVE GRUENBERG referred to proposed AS 45.45.700,
which read: "a distributor may not coerce or attempt to coerce
a dealer ... " He inquired as to whether a manufacturer that
has a separate corporation for distributors is covered under the
statute. He offered that the term, "distributor" is defined in
proposed AS 45.45.790 (2), which read: "distributor" means a
person who enters into a distributorship agreement ...". He
expressed concern that the bill is perhaps too narrow to protect
the dealer.
CHAIR RAMRAS noted that Representative Gruenberg is speaking to
language from a prior version of HB 303. This language is no
longer contained in Version K, he stated.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), answered by referring to the definition
in AS 45.45.790, and stated that a distributor is defined to
mean a wholesaler, a manufacturer, or a person that is a parent
corporation or affiliated corporation of either of those. He
said he believes this language is broad enough to encompass
agreements between manufacturers and dealerships.
1:46:36 PM
TERRY BANNISTER, Attorney, Legislative Legal Counsel,
Legislative Legal and Research Services, Legislative Affairs
Agency (LAA), offered that she has not examined this issue since
she considered AS 45.45 to be a separate chapter, but said she
does think it should be examined. She opined that even if the
term "manufacturer/distributor" is used, it may not apply to the
products in the new chapter.
REPRESENTATIVE GRUENBERG opined that the definition would apply
to a manufacturer, but only if that manufacturer entered into a
distributor agreement.
1:47:57 PM
MR. SHATTUCK referring to the sectional summary for HB 303,
Version K, and explained that proposed AS 45.27 would prohibit a
manufacturer/distributor from threatening to cancel without
written notice. He referred to proposed AS 45.27.020, which
would prohibit a manufacturer/distributor from unreasonably
withholding consent to the sale or transfer of an agreement.
Mr. Shattuck referred to proposed AS 45.27.030, which would
prohibit a manufacturer/distributor from changing an agreement
without providing reasonable notice.
MR. SHATTUCK referred to proposed Article 2, AS 45.27.100, and
pointed out that this proposed section is derived from AS 45.25
which relates to automotive dealers. He noted that this
proposed section refers to geographic areas but mirrors the
automotive dealership statutes and tries to strike a balance to
establish dealer territories without intruding in the
manufacturer/dealer contracts.
1:52:02 PM
MR. SHATTUCK referred to proposed AS 45.27.110, which would
require that a manufacturer or distributor must give a dealer
notice before changing an area of responsibility, he stated. He
explained that proposed AS 45.27.120 would prohibit a
manufacturer/distributor from entering into an agreement to add
a dealer within an existing dealer's area of responsibility
without giving notice. He pointed out that Alaska is unique in
that many dealers offer multiple brands of products. He opined
that some of areas of concern about competition are eliminated
when these elements are recognized.
MR. SHATTUCK referred to Article 3, proposed AS 45.27.200, which
would prohibit a manufacturer/distributor from selling or
shipping a product to a dealer prior to the agreement being
signed, he stated. He referred to proposed AS 45.27.210, which
would prohibit a manufacturer/distributor from coercing a dealer
to order or accept deliver of a product, he noted. He stated
that proposed AS 45.27.220 would prohibit a
manufacturer/distributor from refusing to deal or ship product.
He referred to proposed AS 45.27.230, which would require a
manufacturer/distributor to continue to sell a dealer parts for
a specific length of time after the agreement is termination, he
stated. He offered that this provision is needed in Alaska due
to the remote areas that dealers serve and to provide consumer
protection. He referred to proposed AS 45.27.240, which would
prohibit a manufacturer/distributor from delaying, refusing, or
failing to deliver reasonable quantities of products, he stated.
MR. SHATTUCK stated that proposed AS 45.27.250 would prohibit a
manufacturer/distributor from refusing to allow a dealer to
select the method and carrier for product delivery. He
explained that Alaska is unique due to the distances from the
manufacturer and this provision would recognize that the dealers
have the necessary expertise to know which shipping method is
best. He said that proposed AS 45.27.260 would make
manufacturers solely responsible for damaged products. He
surmised that this provision may need more discussion between
manufacturers and dealers.
Mr. SHATTUCK referred to proposed AS 45.27.300, which would
require a manufacturer/distributor to repurchase parts from a
dealer's inventory when a dealer stops being a dealer. He
explained that some members of the House Labor and Commerce
Standing Committee expressed concern about Article 4 and
suggested that it may need more focus.
MR. SHATTUCK referred to proposed AS 45.27.310, which would
require a manufacturer to repurchase products within a certain
timeframe. He noted that many products do not leave the state,
but are redistributed to other dealers. He referred to proposed
AS 45.27.320, which would allow the dealer to retain some
discontinued products and parts. He referred to proposed AS
45.27.330, which would require the manufacturer to pay interest
to the dealer if the manufacturer/distributor fails to
repurchase products, he stated. He referred to proposed AS
45.27.340, which would base the repurchase amounts on the
dealer's landed cost at the dealer's facility, he noted. He
referred to proposed AS 45.27.350, which would place the
responsibility for transportation and storage costs of
repurchased products on the manufacturer, he said. He referred
to proposed AS 45.27.400, which would require the manufacturer
to provide a product's ultimate purchase from a dealer, he
stated. This provision relates to a warranty aspect due to a
federal requirement that the dealer provide a warranty to the
customer at the time of purchase, he offered.
1:57:18 PM
REPRESENTATIVE NEUMAN pointed out that many of the remaining
provisions of HB 303 set out the requirements between the
manufacturer and the dealer. He stated that Article 4 sets out
product replacement requirements, such as the responsibility for
replacement of defective products. He conveyed that Article 6
provides for liability of a manufacturer/distributor or dealer
for audits and agreements, and on competition issues. He noted
that Article 7 pertains to agreement provisions. He said that
Article 8 sets out the general provisions, which are modeled
after the statutes that assist automobile dealers.
REPRESENTATIVE NEUMAN referred to Article 5, which pertains to
defective parts and the return of the defective parts, he
stated. He conveyed that HB 303 takes into account what is
realistic for Alaska with respect to the distribution system.
He pointed out that the manufacturers' concerns were also
factored into HB 303.
CHAIR RAMRAS pointed out that the committee is aware of some of
the potential competitive and unconstitutional issues that are
raised in HB 303 that are being addressed in the sectional in
Version K.
2:01:25 PM
MR. SNIFFEN, in response to Chair Ramras, posited that Version K
has resolved much of the DOL concerns about HB 303. The DOL
neither opposes nor supports HB 303, although he said he cannot
pinpoint any provision that causes him concern. He offered that
the DOL always has some concern with legislation that tends to
restrict manufacturer/distributors from activity. He opined
that the DOL likes to see the marketplace determine the outcome.
He further offered that Version K contains some good consumer
protection measures. Other provisions, as noted by Ms.
Bannister's memo, may still encounter a few constitutional
"snags" that the DOL has not had an opportunity to review. He
surmised that he would need to rely on some of the manufacturers
and dealers to explain the impacts some of these restrictions
might have on their relationships since the DOL does not
consider itself to be an expert in this industry with respect to
the terms of the agreements.
2:03:53 PM
CHAIR RAMRAS disclosed that Mr. Compeau resides in his community
of Fairbanks. He further disclosed that he previously purchased
a boat from Compeau's Marine and that he also has had his "Sea-
Doo" repaired at Compeau's Marine.
2:05:23 PM
CRAIG COMPEAU, Owner, Compeau's Marine, related that his company
is a fourth generation family business that sells boats,
snowmobiles, four wheelers, and outboard motors. He stated that
their customers are primarily from the interior and bush
communities of Alaska. He said that over the past 64 years
manufacturers have come and gone. He opined that he has seen
vast differences in how some manufacturers treat their dealers
and consumers. He characterized some manufacturers as honorable
and others as less interested in customer satisfaction than in
short term profit at the expense of consumers. He opined that
HB 303 levels the playing field and helps manufacturers who need
guidance in playing fair. Boats, snowmobiles, and four-wheelers
are commonly referred to as recreational products. In Alaska,
many rely on these vehicles as the primary means of daily
transportation. He stated that it is no wonder that every state
in the union has passed laws to protect dealers and consumers
from abuses from giant automobile manufacturers in the same
manner that HB 303 protects dealers and consumers from the
manufacturer of recreational vehicles.
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]
MR. COMPEAU went on to inform members that he has never
testified before the legislature prior to HB 303. He surmised
that legislators have seen the power and influence that
manufacturers can muster by their sheer size, economic power,
and clout. He argued that is why HB 303 is important to help
small businesses. He stressed that HB 303 would provide
safeguards that ensure manufacturers who wield significant power
over dealers and consumers cannot use that power to take unfair
advantage in their business dealings. Nothing in HB 303 would
insulate dealers from impacts of their bad business decisions or
practices, he opined. The bill would still allow manufacturers
to terminate dealers for just cause. He opined that HB 303 also
helps to ensure that manufacturers don't act in an arbitrary
manner or in bad faith. This bill would add to the list of
states that have enacted similar legislation such as California,
Missouri, Georgia, Louisiana, Texas, and New York. This bill
would help dealers in all parts of the state, he opined.
2:08:47 PM
REPRESENTATIVE COGHILL offered that he is sympathetic to the
concerns expressed by dealers. Outside of the legal issues that
were raised, he noted that one of the criticisms is state
involvement in negotiations between manufacturers and dealers.
MR. COMPEAU answered that one provision in HB 303, is that the
manufacturers treat the dealers fairly when it pertains to
warranty reimbursement. He pointed out that for years his
company has sold products with a warranty. However,
unfortunately the reimbursement rates are extremely
questionable, he opined. He further added that dealers in rural
Alaska incur high costs since the manufacturer refuses to cover
any of the transportation costs. He opined that dealers absorb
those costs. He characterized the problem as one that hurts the
consumer since the dealer must pass on the costs of warranty
work. He said, "We're obligated by the contract to do the
warranty work and we want to do the warranty work. We just
don't want to do it at a loss."
REPRESENTATIVE COGHILL related his understanding that HB 303
would supply the dealer with legal tools. He inquired as to
whether dealers currently have any recourse on warranty costs.
MR. COMPEAU answered that it is impossible to complete the
warranty work in the timeframes for some of the warranty
repairs. For example, some warranty reimbursement claims are
set at .3 hours, or 20 minutes, which does not allow dealers to
get the machine in the shop, and replace the part, let alone to
do the necessary paperwork, he noted. One of the provisions in
HB 303 would require manufacturers to pay the dealers one hour
of administrative charge for the warranty, which he surmised
would help dealers. He offered that the dealers don't want to
argue about manufacturers using flat rates for warranty repairs,
but the dealers must have some means to offset these costs.
2:12:58 PM
REPRESENTATIVE COGHILL related his own experiences in living in
Nenana, Alaska and the reality and necessity to fix ones own
equipment even if it is under warranty. He expressed concern
with the practical aspects of HB 303 for dealers. He surmised
that under HB 303, the dealers would still need to hire an
attorney to assert their contractual terms. He acknowledged
some cases in which the dealer must negotiate with an egregious
manufacturer.
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]
MR. COMPEAU offered his belief that passage of HB 303 would
effectively force manufacturers to focus on quality control of
their products. He opined that the dealers want a higher
quality product and fewer warranty issues so the dealer and
consumer can enjoy the products. He characterized HB 303 as a
safeguard for dealers against poor quality distributors. He
surmised that the only manufacturers that would be affected by
the bill are those that currently do not cover warranties or
build defective products.
2:15:29 PM
REPRESENTATIVE GRUENBERG referred to proposed Section 1, AS
45.25.920 and characterized AS 25 is a complex title that covers
motor vehicle repairs, distributorships, and other provisions
that relate to motor vehicles. He noted that the chapter covers
the Uniform Commercial Code.. He pointed out that Section 1
resolves at least one conflict between proposed AS 45.25.920 and
AS 45.25, which pertains to motor vehicle transactions. Since
conflict of laws is a complex subject, which he opined often
troubles judges, he surmised that the question will be which of
these various state laws applies. He speculated that a court
might view that Section 1, if enacted, would make AS 45.25.920
"trump" the motor vehicle transactions. However, it is
difficult to sort through which provision will apply. He
inquired as to whether Mr. Sniffen or Ms. Bannister could answer
if other sections need to be added to HB 303 to resolve these
conflicts of law issues.
2:17:51 PM
MS. BANNISTER offered her belief that it would be a good idea to
include a statement in AS 45.45.700 to AS 45.45.790 to describe
which chapter governs if a conflict between statutes arises.
The committee has addressed AS 45.25 to explain that this new
chapter would govern, but it is desirable to outline the
authority in case a conflict exists.
REPRESENTATIVE GRUENBERG noted that the Uniform Commercial Code
(UCC) has several provisions pertaining to sales, such as
warranty section. It would be useful to have the legal drafter
review potential conflicts and ensure resolution of the
conflicts to avoid legal problems for dealers and consumers.
REPRESENTATIVE NEUMAN referred to page 1, line 5-6, of proposed
AS 45.25.920, which read:
If a provision of this chapter conflicts with a
provision in AS 45.27, the provision in AS 45.27
governs.
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]
REPRESENTATIVE GRUENBERG pointed out that proposed AS 45.25.920
only covers one chapter. He noted that AS 45.25 , which
pertains solely to motor vehicle transactions and does not cover
distributorships addressed in proposed AS 45.27. He cautioned
committee members should resolve the governing authority for all
chapters covered in HB 303.
REPRESENTATIVE NEUMAN opined that HB 303 does address the legal
authority for the proposed chapter under Title 27.
REPRESENTATIVE LYNN inquired as to the magnitude of the issues
that dealers face. He further asked for clarification of any
detrimental impact HB 303 will have on manufacturers and
expressed concern that some manufacturers may no longer wish to
do business in Alaska.
MR. COMPEAU offered his understanding that other states have
adopted similar legislation. He pointed out that manufacturers
have not decreased conducting business in those states. He
opined that the legislation is better for consumers. Initially,
these states held similar concerns about the impact legislation
would have on the number of manufacturers that would operate,
but they found that manufacturers did not leave the state or
quit selling products in their states. He acknowledged that
while it may cost manufacturers more to do business, it provides
an incentive for them to build better quality products so
dealers are not burdened with warranty costs and consumers are
not burdened with non-functioning motors.
2:23:08 PM
REPRESENTATIVE LYNN inquired as to why manufacturers do not
support the bill.
MR. COMPEAU offered his belief that HB 303 is aimed at those
manufacturers that don't such as those that pay half the labor
amount for repairs. In further response to Representative Lynn,
Mr. Compeau opined that those who do not support HB 303, may be
manufacturers that are not doing a good job of working with
dealers. He also acknowledged that some manufacturers are
performing well with dealers.
2:23:59 PM
REPRESENTATIVE COGHILL inquired as to the regular length of
dealer contracts with manufacturers.
MR. COMPEAU advised that most dealer contracts are annual
contracts that are typically signed during the annual meeting.
However, contracts vary in length and some span a two or three
year period of time.
2:24:21 PM
MR. COMPEAU, in response to Representative Holmes, noted that HB
303 does not change the current territorial limitations for
dealers and manufacturers, which tends to be driven by demand.
Most manufacturers realize that it isn't a good business
practice to set up too many dealers in an area. In further
response to Representative Holmes, Mr. Compeau answered that HB
303 codifies what is current practice with respect to limits on
dealer territories.
2:26:46 PM
REPRESENTATIVE HOLMES referred to proposed AS 45.27.440(d),
which refers to reimbursement rates, and reads:
A manufacturer or distributor shall reimburse the
authorized dealer for product parts at the current
manufacturer's full suggested retail price and shall
ship each part to the authorized dealer without cost
for freight or handling. The reimbursement shall be
calculated at 1.5 times the authorized dealer's landed
cost.
MR. COMPEAU answered that it is very unusual that manufacturers
would not list a suggested retail price for parts. He surmised
that the language is in this subsection would cover instances in
cases in which a product price is not listed.
REPRESENTATIVE HOLMES inquired as to whether dealers are
currently reimbursed at the full retail price.
MR. COMPEAU answered that dealers are currently reimbursed
closer to the actual dealer cost with a small increase.
However, problems arise when dealers must perform warranty work
in lieu of selling the same products at full price to retail
customers. He characterized this situation as literally
"chasing business away."
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]
2:30:20 PM
KATHY VAN KLEEK, Senior Vice-President, Government Relations,
Specialty Vehicle Institute of America (SVIA), stated she has
not had an opportunity to review the committee substitute and
would like to do so. Thus, her remarks may not be applicable to
Version K, but she is making her comments based on the earlier
version of HB 303. She stated that SVIA opposes HB 303 as
overreaching and simply "bad public policy." She related that
SVIA believes the bill would have a negative effect on ATV
manufacturers, distributors, and consumers. The other seven
states referenced as having similar legislation perhaps are boat
laws since she is not aware of any state with an ATV law with
the some of the egregious provisions of HB 303. She related
that SVIA has concerns with a number of the bill's provisions,
but offered to only highlight a few. She offered that SVIA
believes that these issues are more appropriately addressed
between the individual manufacturers and their dealers than by
statute. She stated that SVIA has never been contacted to
discuss these issues since 1976. In fact, the ATV industry did
not even start until the 1980s. She offered that SVIA was
formed in 1983.
MS. VAN KLEEK noted that the issues involve competitive
considerations and the majority of the dealerships are multi-
brand dealers. Every dealer signs an agreement with the
manufacturers stating the terms of agreement. She related that
SVIA would welcome the opportunity to discuss specific concerns
with dealers. She pointed out that HB 303 mandates lengthy
notice agreements before a dealer can be terminated so
materially underperforming dealers will be allowed to continue
with seriously deficient behavior for an overly long period of
time causing high levels of customer dissatisfaction, costing
manufacturers money in sales revenue and unreasonably raising
business costs. Even more egregious, she opined, is that the
manufacturers must continue to provide the dealers with parts
for 2 years after termination and allow any dealer who
discontinues business to retain discontinued parts and products
effectively ensuring that the underperforming dealer will
continue to represent the brand names.
MS. VAN KLEEK noted that SVIA's dealerships are full line
dealerships that are designed to sell and service its products
and provide its customers with the highest quality experience,
in terms of product choice, after-sale service, and customer
support. She added that dividing product sales from part sales,
and enabling dealers to provide one vital function but not the
other, is unacceptable to SVIA. This practice would only allow
unfair competition, would cause customer confusion, would have a
negative impact on the permanent investment of full-line
dealers, and would disrupt distribution channels. She noted
that replacement parts represent a significant profit center for
SVIA dealers, who make a sizeable permanent investment in
facility, inventory, staffing, and advertising. She opined that
a parts only dealer could, and likely would, capture the
lucrative profit opportunity while making little to no permanent
investment.
MS. VAN KLEEK offered that parts could even be sold online in
which case facility or customer interface is not required, which
would allow terminated dealers to continue to engage in the sale
of parts undercutting all the valued dealers in Alaska, who
carry a full line of products and parts and provide quality
service to the consumer. She said that SVIA manufacturers
reasonably reimburse dealers for the required warranty service.
While each manufacturer establishes its own reimbursement rate,
agreed upon by the dealer in its agreement, the ATV industry
generally reimburses dealers at the posted retail rate for
warranty and recall work, and at least the dealer cost for parts
plus a 10 percent markup depending on the certified technicians.
MS. VAN KLEEK said that furthermore, HB 303 requires that
warranty service work be reimbursed at the dealer's retail rate,
which is not a discount rate, as well as reimbursement of an
additional hour at the retail rate for the dealer's
administration, and an additional 25 percent mark-up of the
dealer's handling fee to cover the shipping costs for parts
replaced under warranty. She noted that replacement parts
represent a significant profit center for SVIA dealers, who make
a sizeable permanent investment in facility, inventory,
staffing, and advertising. She opined that a parts only dealer
could, and likely would, capture the lucrative profit
opportunity while making little to no permanent investment.
MS. VAN KLEEK offered that parts could even be sold online with
no facility or customer interface, which would allow terminated
dealers to continue to engage in the sale of parts and undercut
all the valued dealers in Alaska, who carry a full line of
products and parts and provide quality service to the consumer.
Basically, HB 303 requires manufacturers to insulate dealers
from all risks normally associated and assumed by business
owners in the free enterprise system. She suggested that if a
dealer decides to go out of business and terminates his
franchise, under HB 303 the manufacturer is responsible for
repurchasing his inventory.
2:36:00 PM
MS. VAN KLEEK opined that manufacturers strive to make parts
available for warranty repairs as quickly as possible and she
said she was not aware of any state law that mandates that
manufacturers provide the part within 30 days or offer a full
product replacement or full refund to the dealer. She opined
that [setting] an absolute time for supplying the repair part is
not only extremely problematic, but unreasonable. The
overriding objective of warranty repair and recall is customer
safety. Curing a defect may involve reengineering and
manufacturer in addition to distribution and these functions
can't be rushed to meet an unrealistic deadline.
MS. VAN KLEEK reiterated that she was not aware of any other
state statute that [allows] a dealer to dictate the method and
carrier for product delivery. Manufacturers have established
delivery systems and to use another carrier or shipping method
raises costs, in terms of the delivery itself and also manpower
costs and costs to administer different shipping systems. Ms.
Van Kleek opined that proposed HB 303 disproportionately
protects underperforming dealers who aren't providing
appropriate levels of service and sales support to customers at
the expense of other dealers and Alaska consumers. Therefore,
dealers who invest in the brand are harmed because
underperforming dealers remain in the network and offer buyers
poor experiences, both in terms of service and availability of
product, she opined. Such dealers hurt SVIA brand names and
hurt the consumers since higher operation costs for
manufacturers and increased litigation costs lead to higher
product costs. Regulating dealerships in this manner will only
increase the business cost for all, will reduce consumer choice,
decrease competition and ultimately increase the cost of
recreation products to Alaskans.
2:38:01 PM
REPRESENTATIVE NEUMAN referred to a letter in committee members
packets from the Marine Retailers Association of America (MRAA)
He read a portion of the letter, as follows:
I'm very pleased to report MRAA has not heard of any
loss of business or jobs in any of these states.
Actually, to the contrary of what many boat
manufacturers thought, we now see dealers in those
areas investing in new facilities and hiring new
employees, because the long-term legal agreements have
given them security. We see dealers increasing
inventories and expanding business, because the lack
of fear of unforeseen cancellations by manufacturers.
And, most importantly we see happier customers,
because their boats are being serviced in a vastly
improved time period and because the state legislation
provides for warranty reimbursement on labor and parts
at a fair level to the dealers.
REPRESENTATIVE NEUMAN pointed out that allowing a dealer to
stock parts for up to 24 months after the termination of a
contract provides consumer protection by ensuring that parts are
continually available. Under HB 303, when a dealer loses
his/her dealership, he/she can retain product parts for up to 24
months so that consumers have the parts available for repairs.
He noted that the consumer also is entitled to know what date to
expect the warranty part. He characterized the provisions in HB
303 as "fair to consumers."
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]
2:40:41 PM
REPRESENTATIVE GRUENBERG noted that Ms. Van Kleek's testimony
outlines SVIA's concerns with a prior version of HB 303. He
surmised that some of those concerns may have been addressed in
Version K. He inquired as to whether Ms. Van Kleek could review
Version K and provide the committee with any outstanding
concerns she may have with the bill.
MS. VAN KLEEK agreed to provide the committee with written
comments.
2:43:37 PM
PAUL VATRANO, Executive Vice-President and Counsel, Special
Vehicle Institute of America (SVIA), stated that he has also not
had an opportunity to review Version K. He noted that many of
the industry's legal concerns were addressed in Mr. Sniffen's
letter of February 6, 2008. He noted that several provisions
of the bill address obligations, conduct and remedies in
conjunction with sales transactions between dealers and
manufacturers. First, these provisions are not necessary
because Alaska has adopted the Uniform Commercial Code (UCC)
which already addresses the same subjects, he opined. Proposed
AS 45.27.410 would restrictively mandate the response by
manufacturers and distributors to defects. This bill's approach
is inconsistent with the Consumer Product Safety Act (CPSA)
regulatory scheme, he opined.
MR. VATRANO also pointed out that the applicable CPSA
regulations provide manufacturers and distributors the option of
submitting to the Consumer Product Safety Commission (CPSC) a
corrective action plan outlining remedial action to protect the
public from substantial product hazards. The regulations
specifically require "a statement of the action which will be
undertaken to correct the product unit in the distribution
chain, including a timetable and specific information about the
number and location of such units." Recognizing that
appropriate and efficient responses depend on particular
circumstances, CPSA regulations permit manufacturers and
distributors to develop a flexible situation specific response
for units within the distribution chain and that response shall
be approved by CPSC. This bill mandates an unreasonably short
initial response time and punitive remedies for a late initial
response, which is inconsistent with the letter and spirit of
the CPSA regulatory scheme, he opined.
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]
MR. VATRANO continued by stating that proposed AS 45.25.410 is
problematic because it is vague and overly broad. The term
"defective" is not defined in HB 303 so it could be interpreted
to encompass significantly more products than those that are
considered substantial hazard products under the CPSA. It is
incongruous for state law to provide onerous and restrictive
responses in connection with all defects while federal law
provides for a flexible situation for response in connection
with potentially dangerous defects, he opined.
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]
MR. VATRANO continued by stating that proposed AS 45.27.600
would exempt dealers from paying manufacturer or distributors
for items identified by an audit, if the underlying transaction
occurred more than two years prior to the beginning of an audit.
This provision would create a special statute of limitations
without justification, he opined. Currently, AS 09.10.053
provides a 3-year special statute of limitations for expressed
or implied contractual claims, he stated. This bill would alter
established Alaska law regarding contractual limitations for a
single class of claimants that is manufacturers or distributors,
he opined. He concluded that there is no need or justification
for such unique and discriminatory treatment.
REPRESENTATIVE GRUENBERG asked Mr. Vatrano to key his comments
to the specific page and line number of Version K in his written
testimony. He characterized Mr. Vatrano's testimony as raising
important legal issues to review.
2:49:05 PM
REPRESENTATIVE SAMUELS inquired as to the fundamental problem
that HB 303 tries to address. He posed a scenario in which a
new Yamaha dealer would receive a contract. He surmised the
contract would be a standard contract prepared for all dealers.
He surmised that the problem Alaska dealers encounter may be due
to its geography and the associated shipping costs.
MR. COMPEAU agreed.
REPRESENTATIVE SAMUELS asked whether a Yamaha Dealers
Association exists for dealers to outline the unique problems
for Alaska's dealers that are different than in other states.
MR. COMPEAU explained that these issues have been brought up on
numerous occasions, but manufacturers have not addressed the
dealer's concerns.
REPRESENTATIVE SAMUELS expressed concern with the state being
involved in negotiations of contracts between two private
businesses.
2:52:35 PM
LARRY INNIS, Director of Government Relations, Marine Retailers
Association of America (MRAA), said that MRAA strongly supports
HB 303. He read prepared testimony as follows [original
punctuation provided]:
Thank you for giving the Marine Retailers Association
of America (MRAA) the opportunity to testify in strong
support of H.B. 303. MRAA is the national trade
association representing small businesses in the
retail-side of recreational boating. MRAA represents
approximately 3,000 boat dealerships, marinas, and
marine retail stores. In addition, MRAA works closely
with local, state, and regional marine trades
associations, such as the Alaska Marine Dealers
Association.
Since MRAA was founded 35-years ago, we have worked to
protect the investments and to promote fair business
practices of the boat dealer and other retailers.
Dealers are clearly the contact point between boat
manufacturers and consumers, and boat dealers work
hard to enhance the buying and boating experiences to
make recreational boating safe and enjoyable.
By way of background on the MRAA position on
dealer/manufacturer agreements and legislation, as
early as in 1976, MRAA first prepared a model
dealer/manufacturer agreement that contained about 20
specific clauses that we believed would have made a
fair and level playing field between dealers and boat
manufacturers. The model agreement was circulated to
boat manufacturers, and MRAA and boat dealers
encouraged manufacturers to use the model agreement.
We received virtually no response to our request.
In 1996, 20-years later, MRAA authored a second
version of the model dealer/manufacturer agreement
with several updates and additions. We went through
the same communication process and encouraged boat
manufacturers to use the model agreement to establish
and improve the business relationship with dealers.
We again received virtually no response.
In 2002, responding to numerous requests from our
membership, MRAA prepared a model dealer/manufacturer
agreement legislative bill. The model bill was
intended to be used as a basis for enactment of state
legislation. Any state marine trades association
could use the model bill in total or in part, and
several have, including Missouri, Georgia, and New
York.
There are now seven states that have
dealer/manufacturer legislation in place, and I'm very
pleased to report MRAA has not heard of any loss of
business or jobs in any of these states. Actually, to
the contrary of what many boat manufacturers thought,
we now see dealers in those areas investing in new
facilities and hiring new employees, because the long-
term legal agreements have given them security. We
see dealers increasing inventories and expanding
business, because the lack of fear of unforeseen
cancellations by manufacturers. And, most importantly
we see happier customers, because their boats are
being serviced in a vastly improved time period and
because the state legislation provides for warranty
reimbursement on labor and parts at a fair level to
the dealers.
In 2004, the National Marine Manufacturers Association
(NMMA) responded to the increasing concern expressed
by dealers over the business relationships with their
manufacturers, the increased number of forced and
unforeseen dealer cancellations by manufacturers, and
the increased number of dealer/manufacturers bills
being introduced in state houses by organizing a
special task force to once again study the language of
dealer/manufacturers agreements. The task force
consisted of both boat dealers and boat manufacturers
with the clear purpose to provide a usable document
that would address the major areas of concern. 12
dealers and 12 manufacturers worked for many months on
the project with the result that a new model agreement
containing 10-sections, which addressed most of the
items of concern, was created. A large number of
manufacturers made promises to honor the agreement,
however, in actuality the long history of broken
promises remains with only one manufacturer indicating
it planned to use the model language in its 2007
agreement. As a result, dealers are again going to
their state houses to ask for a legislative fix.
H.B. 303 addresses many concerns expressed by dealers
throughout the history of this issue, including fair
and timely payment of warranty claims, product by-
backs due to manufacturer cancellations, assurances of
territorial rights, the long-term security of multi-
year contracts, and protection from unwarranted
cancellations by manufacturers, such as a failure to
re-new for no cause. The dealer ability to cancel a
manufacturer is the right of any small business that
we have not seen abused in other states.
I fear that once again the 35+ years of frustration
continues. It is clear to MRAA that dealers have
again been misled and their only alternative to find
protection and the fair treatment they deserve in the
business relationship they have with their
manufacturing suppliers is to seek a legislative
answer. We applaud the work of the Alaska House to
look into this problem and to offer an outstanding
solution with H.B. 303. We thank especially
Representative Mark Neuman, as the primary sponsor of
H.B. 303.
Again, thank you for allowing me to testify in strong
support of H.B. 303.
2:57:57 PM
DAVID DICKERSON, Director, State Government Affairs, National
Marine Manufacturers Association (NMMA), characterized Mr.
Innis's testimony as not recognizing the progress that has been
made through the task force process. He argued that far more
than one manufacturer has adopted the plan. He opined that the
fair market and open market works and that a tremendous number
of the elements within the dealer agreement have been adopted.
He pointed out that Mr. Innis's claim insists that every single
word must be adopted in order for the agreement to be held in
compliance. He argued that the free market has shown that a
number of provisions have been adopted by more than 100
[manufacturers]. However, HB 303 does not cover the
reimbursement to manufacturers for travel to an offsite location
to provide warranty service, he noted. He pointed out that when
any the warranty request is approved, the person must bring in
the product for repair, just as they would with an automobile
repair. He offered that of the 354 warranty requests on Mercury
engines last year, only 3 requests were made for distance travel
and all were approved at the standard rate.
3:00:13 PM
MR. DICKERSON inquired as to whether Version K provides for the
"buyback" of products in the event that the dealer cancels the
annual agreement.
REPRESENTATIVE NEUMAN answered that the reason for the buyback
provision is that the manufacturers changes the numbers of
products shipped, which results in the consumer paying a higher
price. Primarily, this provision would help dealers cover costs
when the business closes, he opined.
MR. DICKERSON pointed out that under HB 303, manufacturers could
be required to buy back 3 year old boats on 30 days notice.
This provision would remove the dealer's risk for inventory
decisions, decisions to stock certain parts, or the amount of
parts to stock. He opined that the responsibility is totally
shifted from the dealer to the manufacturers such as with
respect to arbitrary cancellation by the dealer without notice.
He characterized HB 303 as a bill that has "cherry picked"
provisions from the franchise laws that benefit dealers and
ignores the equality that a franchise law attempts to provide to
both parties. Additionally, as far as renewal of contracts, if
a boat dealer decides he needs to sell his business, the
manufacturer is not allowed to drop that market area due to low
sales, if necessary. He opined these types of restrictions are
unfair to the free market process and do not accurately follow
what happens in the marketplace. He concluded by stating that
NMMA is opposed to HB 303.
3:04:24 PM
DUDLEY BENESCH, Owner, Alaska Mining and Diving Supply, opined
that HB 303 is necessary to protect the Alaskan consumers and
small businesses. Over time, the manufacturers in the marine
industry and power sports industry have created one-sided dealer
agreements containing conditions that benefit them, he opined.
He offered that the manufacturers use their legal departments to
craft agreements that benefit the manufacturer. Additionally,
he noted that the manufacturers set the allowable warranty labor
rates, the flat rate repair times, and have written policies for
defective products and warranty repairs that benefit the
manufacturers, he opined. He emphasized that the dealer does
not have any input in developing the manufacturer's policies,
which he characterized as "one size fits all." He offered that
seven states have already passed legislation similar to HB 303
to address these issues. Contrary to earlier testimony,
Louisiana covers ATVs in the same manner as boats in its motor
vehicle act, he opined. He also pointed out that Montana
introduced specific legislation aimed at ATVs and snowmobiles.
He opined that the dealers attempt in HB 303 to provide Alaskan
dealers and consumers with protection from current
manufacturer's practices. He argued that the reason
manufacturers strongly oppose HB 303 is because the bill
requires the manufacturers to bear the cost of design and
manufacturing defects. He opined that HB 303 would require
manufacturers to treat dealers and consumers in a fair and
equitable manner. He characterized HB 303 as a bill that is
"all about fair play" and will provide the dealer and consumer
with quality products.
3:07:26 PM
BUSTER HALL, President, Alaska Marine Dealers Association
(AMDA), stated that he also owns Buster's Professional
Upholstery, and that his business makes custom boat tops. He is
a 49 year resident of Alaska. He said that AMDA was organized
as a not-for-profit organization to help dealers work together.
He explained that the AMDA board requested legislation, similar
to other states' legislation to address long standing issues
that dealers have had with manufacturers. He has been pleased
that ATV and snowmobile dealers have joined the boat dealers in
supporting HB 303, he stated. He predicted that when HB 303
passes that the "real winners will be the consumers of Alaska."
He offered his support and the AMDA's support for HB 303.
3:08:38 PM
VICE CHAIR DAHLSTROM, after first determining no one else wished
to testify, closed public testimony on HB 303.
REPRESENTATIVE GRUENBERG inquired as to whether any association
representatives are aware of any legal decisions that have
construed the questions in these contracts of adhesion between
manufacturers and dealers that have determined that the
contracts are contracts of adhesion. If so, these contracts are
most strictly construed against the drafter of the contract.
VICE CHAIR DAHLSTROM advised that any association
representatives who wish to respond could provide their
responses in writing for the committee.
[HB 303 was held over.]
ADJOURNMENT
The House Judiciary Standing Committee was recessed at 3:11 p.m.
to be continued at 1:00 p.m. on February 14, 2008.
| Document Name | Date/Time | Subjects |
|---|