01/29/2007 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB34 | |
| HB49 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 34 | TELECONFERENCED | |
| *+ | HB 49 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 29, 2007
3:07 p.m.
MEMBERS PRESENT
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Berta Gardner
Representative Kurt Olson, Chair
MEMBERS ABSENT
Representative Bob Buch
Representative Mark Neuman, Vice Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 34
"An Act relating to sales of wine by a winery licensee."
- MOVED HB 34 OUT OF COMMITTEE
HOUSE BILL NO. 49
"An Act relating to credit memos, gift certificates, and gift
cards, and to unclaimed property; and making a violation of
certain gift card prohibitions an unlawful trade practice."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 34
SHORT TITLE: SALES BY WINERY LICENSEE
SPONSOR(s): REPRESENTATIVE(s) LEDOUX
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) L&C, FIN
01/29/07 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 49
SHORT TITLE: GIFT CARDS
SPONSOR(s): REPRESENTATIVE(s) GATTO, GARDNER, SEATON, GRUENBERG
01/16/07 (H) PREFILE RELEASED 1/5/07
01/16/07 (H) READ THE FIRST TIME - REFERRALS
01/16/07 (H) L&C, FIN
01/29/07 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
CHRISTINE MARASIGAN, Staff
to Representative LeDoux
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 34 on behalf of Representative
LeDoux, sponsor.
STEVE THOMSEN, Owner
Alaska Wilderness Wines
Kodiak, Alaska
POSITION STATEMENT: Testified in favor of HB 34.
DOUGLAS "DOUG" GRIFFIN, Director
Alcoholic Beverage Control Board ("ABC Board")
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during hearing on HB 34.
HEATH HILYARD, Staff
to Representative Gatto
Alaska State Legislature
POSITION STATEMENT: Presented HB 49 on behalf of Representative
Gatto, sponsor.
RACHEL LEWIS, Project Coordinator
Unclaimed Property Section
Juneau Office
Tax Division
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions during hearing on HB 49.
GLEN PETERSON, CARRS/Safeway
Anchorage, Alaska
POSITION STATEMENT: Offered comments during hearing on HB 49.
JOE GULLEY, CARRS/Safeway
Anchorage, Alaska
POSITION STATEMENT: Testified during hearing on HB 49.
DAVID DURRANT, Vice President
of Legal Affairs & Corporate Council
Black Hawk Network
Pleasanton, CA
POSITION STATEMENT: Testified during hearing on HB 49.
STEVE CLEARY, Executive Director
Alaska Public Interest Research Group (AkPIRG)
Anchorage, Alaska
POSITION STATEMENT: Testified during hearing on HB 49.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:07:24 PM. Representatives
Gatto, LeDoux, Ramras, Gardner, and Olson were present at the
call to order.
HB 34-SALES BY WINERY LICENSEE
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 34 "An Act relating to sales of wine by a winery
licensee."
3:08:06 PM
CHRISTINE MARASIGAN, Staff to Representative LeDoux, Alaska
State Legislature, began by stating that HB 34 encourages wine
production in Alaska. Alaskan wineries are small "mom and pop"
businesses. The intention of HB 34 is to create a level playing
field, in order for in-state wineries to complete with those
out-of-state.
3:09:23 PM
REPRESENTATIVE GARDNER commented that HB 34 "makes a lot of
sense." She inquired as to whether the sponsor is aware of any
private organizations in opposition to the bill.
MS. MARASIGAN replied that there is concern regarding the phone
and internet sale of alcohol. She opined that this is a "very
valid" concern; however, research done [by the Federal Trade
Commission] on the recent supreme court decision regarding
"interstate" wine sales versus "intrastate" wine sales, has
shown that the purchase of wine by minors is unlikely.
3:10:51 PM
REPRESENTATIVE GATTO offered his understanding that currently,
five gallons or less may be sold on the premises or to a person
out-of-state. HB 34 would allow off-premises sales to persons
within the state of Alaska. Referring to a small winery in
Kodiak, he commented that HB 34 would allow a person to call the
aforementioned winery and order a bottle of wine to be shipped.
MS. MARASIGAN replied that this is correct.
3:12:00 PM
STEVE THOMSEN, Owner, Alaska Wilderness Wines, stated that he
is in favor of HB 34, adding that it "would be a great help."
In regard to a previous question regarding out-of-state sales,
he stated that currently, this is not allowed. He said "The
state has said they won't prosecute it ... but ... nobody will
ship it, because it is technically still against the law."
3:13:03 PM
CHAIR OLSON offered his understanding that a person can purchase
wine on the premises and take it home; however, if more wine is
requested later, legal shipment of the wine is unavailable.
MR. THOMSEN replied that this is correct. He explained that the
current language states that in order for the sale to occur, the
individual must be "on the licensed premises."
REPRESENTATIVE GATTO noted that the bill contains references to
"more than five gallons," along with "not more than five
gallons." He requested clarification regarding the problem that
is occurring.
MR. THOMSEN replied that "not more than five gallons" applies to
individual buyers, while "more than five gallons" applies to a
person who holds a liquor license, such as a liquor distributor.
REPRESENTATIVE GATTO brought attention to the use of "or" in
line 13 of the bill, and opined that this would not be limited
to "licensed individuals."
3:15:34 PM
MR. THOMSEN replied that according to federal law, this would
still only apply to licensed individuals.
REPRESENTATIVE GATTO commented that HB 34 only applies to state
law. He asked for clarification as to whether federal law
allows the sale of more than five gallons to an individual who
does not hold a liquor license.
MR. THOMSEN replied that the Alcoholic Beverage Control Board
("ABC Board") has interpreted this to mean "only licensees."
3:16:49 PM
DOUGLAS "DOUG" GRIFFIN, Director, Alcoholic Beverage Control
Board ("ABC Board"), Department of Public Safety (DPS), in
regard to the aforementioned question, agreed that the language
is confusing. He explained that usually, quantities over five
gallons would be to a wholesaler, and is not for personal use.
He stated that "licensed under this title" refers to a person
licensed in the state of Alaska, while "or in another state or
country" would apply to a person licensed in another state or
country. He stated that the current law is "somewhat archaic."
The concern regarding the sale of alcohol to underage persons is
not a concern due to the nature of the product, as well as the
price. The wines that will be made in Alaska are unlikely to be
considered by underage drinkers.
MR. GRIFFIN stated that there is also concern regarding the
shipment of alcohol to "dry" communities. He explained that
there are laws allowing package stores to ship by written
orders, adding that the ABC Board works with packages stores to
ensure that they are aware of the communities they may not ship
product to. This information would also be shared with the
wineries, he said. He opined that the winery products are "less
likely to be attractive" to a person attempting to get alcohol
to a "dry" community. The ABC Board has no objection to HB 34.
3:21:00 PM
REPRESENTATIVE RAMRAS said:
I always appreciate it when the ABC Board is
contributing to the economic development of our
communities, and making it easier for us to conduct
commerce, within the parameters and boundaries that we
set. And whenever we venture into these - more vague
areas, where the line is blurred, I appreciate both
the sponsor and the ABC Board helping to clarify that.
So that ... all parties who are parcel to the economic
transaction can participate and keep it clean.
MR. GRIFFIN commented that this is one situation where the
government is playing "catch up" with the industry as it grows.
REPRESENTATIVE GATTO pointed out that HB 34 does not change line
13, with reference to "another state or country." He stated
that this has been allowed and will continue to be allowed. He
asked if this is the ABC Boards interpretation.
MR. GRIFFIN agreed that this is correct.
REPRESENTATIVE GATTO asked whether the ABC Board feels there
should be reference to "legal age to purchase."
MR. GRIFFIN replied that this is a drafting issue. He pointed
out that other provisions in Title 4 contain restrictions
regarding "legal age to purchase," although it is possible to
insert the aforementioned language into HB 34 for emphasis. He
added that the ABC Board would not have a problem with this.
3:25:30 PM
MS. MARASIGAN agreed that it is currently illegal for a person
less than 21 years of age to purchase alcohol in the state of
Alaska. In addition, the statutes affecting breweries and
brewpubs do not reemphasize this restriction.
REPRESENTATIVE GATTO inquired as to whether every state
prohibits the sale of alcohol to individuals who are less than
21 years of age.
MS. MARASIGAN offered her understanding that this is correct.
MR. GRIFFIN agreed that this is correct. He said "in the area
of alcohol law, that's one area that's fairly uniform. Which is
... pretty unusual."
3:27:42 PM
REPRESENTATIVE GARDNER moved to report HB 34 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 34 was reported out of the
House Labor and Commerce Standing Committee.
HB 49-GIFT CARDS
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 49, "An Act relating to credit memos, gift
certificates, and gift cards, and to unclaimed property; and
making a violation of certain gift card prohibitions an unlawful
trade practice."
3:28:33 PM
REPRESENTATIVE GATTO, speaking as the sponsor of HB 49,
explained that gift cards are often purchased as a more
convenient gifting option. He relayed an example of an elderly
person who chooses to purchase a gift card for his or her
granddaughter. These gift cards often have a "dormancy fee"
which is deducted monthly from the remaining balance, as well as
an "activation fee" of $5 or more. Additionally, some cards may
include expiration dates which do not conform to Alaska's
unclaimed property laws. The intent of HB 49 is to protect
consumers from unnecessary fees, in addition to maintaining
purchasing power.
3:31:50 PM
REPRESENTATIVE RAMRAS voiced support for HB 49. He commented
that this issue affects all consumers, regardless of age.
3:33:19 PM
MR. HILYARD, Staff to Representative Gatto, Alaska State
Legislature, in response to a question from Representative
LeDoux, explained that two different types of gift cards exist.
The first is an "electronic gift certificate," which contains a
"pre-loaded" amount, and works in the same way as a paper gift
certificate. The second type is a "credit logo" card, which
works like a credit card. These are issued by banks, and
contain a specified amount that can be used in various
locations. The electronic gift certificates do not typically
have activation or dormancy fees, which are more common with
credit logo cards.
REPRESENTATIVE LEDOUX offered her understanding that prepaid
phone cards also expire. She inquired as to why this was not
included in HB 49.
MR. HILYARD replied that the focus was gift cards, therefore
this was not considered.
REPRESENTATIVE RAMRAS stated that, as a small business owner, he
receives at least one solicitation per month offering to convert
paper gift certificates to electronic form. While he has not
chosen to pursue this, many features are available. His
business sold $50,371 in gift certificates during the month of
December [2006], while redeeming $8,611 worth of gift
certificates. He explained that in January or February, this is
reversed, with more guests redeeming gift certificates. He
noted that the gift certificates do not expire, although they do
have an "issuance date."
REPRESENTATIVE GATTO, in regard to airline miles, offered his
understanding that 50 percent are never redeemed. He commented
that Alaska Airlines does not have an expiration date for its
mileage plan. He surmised that a "fair amount" of gift cards
are never redeemed. This, he said, becomes a "gift to the
seller."
3:39:46 PM
REPRESENTATIVE GARDNER pointed out that under current law,
unclaimed property belongs to the state. The value of any
unredeemed gift cards should, she said, revert back to the
state. The state would then attempt to find the original owner.
She opined that "this never happens." She suggested that the
bill be amended to address this issue.
3:42:00 PM
RACHEL LEWIS, Project Coordinator, Unclaimed Property Section,
Juneau Office, Tax Division, Department of Revenue (DOR),
explained that the state acts as a custodian, holding unclaimed
property until the owner or the owner's heir is located. The
Unclaimed Property Section ("Unclaimed Property") currently
holds the following: bank accounts, un-cashed payroll checks,
insurance reimbursement, stocks, mutual funds, cashiers and
travelers checks, and estate distributions. Last year, she
said, there was $58 billion in gift card sales in the United
States, of which an estimated 5-10 percent will never be used.
In addition, around $8 billion in gift cards will either expire,
be misplaced, or will simply not be redeemed. Approximately 45
percent of adults have purchased gift cards within the last
year, she said. There are various reasons for purchasing gift
cards, and they are used for many different types of purchases.
Currently, she said, 10 states are working on gift card
legislation. Last year, 19 states addressed gift cards. She
expressed concern with removing language from the Unclaimed
Property Act.
3:45:35 PM
CHAIR OLSON inquired as to how much unclaimed property is
recovered.
MS. LEWIS replied that $58 thousand in unclaimed gift cards has
been recovered.
REPRESENTATIVE LEDOUX questioned why the consumer would purchase
a gift card rather than simply writing a check.
MS. LEWIS replied that many consumers find gift cards to be more
appropriate.
REPRESENTATIVE GATTO opined that giving a child a gift card is
easier, as the parent does not have to go to the bank in order
to cash it.
CHAIR OLSON asked what percentage of the total unclaimed
property were unclaimed gift cards.
MS. LEWIS replied that she does not have this information.
However, the current year has resulted in $6.6 million in
unclaimed property thus far. She added that oftentimes, gift
certificates are "bypassed" during the reporting cycle. In
response to an additional question, she agreed that gift cards
do not account for a very large percentage of unclaimed
property.
3:48:03 PM
GLEN PETERSON, District Manager, CARRS/Safeway, commented that
as one of the largest sellers of gift cards in Alaska,
CARRS/Safeway recognizes and shares the states interest in
consumer protection.
3:49:02 PM
JOE GULLEY, District Manager, CARRS/Safeway, explained that
CARRS/Safeway issues its own gift cards, as well as "third-
party" gift cards; however, no "closed universe" gift cards with
expiration dates are sold. Gift cards are generally defined as
"instruments that contain value that may be redeemed for goods
and services sold by the retailer, which includes cards used by
the purchaser or by another person to whom the card was given."
Referring to Section 3(f)(2)(A), he expressed concern that the
seller and issuer of the card would not know whether the card
was purchased for personal use or as a gift for another person.
In addition, he expressed concern with the new definition of
"gift card" versus the definition of "gift certificate," which
is removed by the bill. In regard to the new definition for
"gift card," he stated that this does not address "re-loadable"
cards.
MR. GULLEY then brought attention to Section 3(e). This
section, he said, does not specify a fixed amount, and would
therefore "impose a substantial administrative burden on all
parties associated." He surmised that this is taken from
Massachusetts state law, which many states have used as a
reference, including Washington State. He explained that
currently, CARRS/Safeway follows the Washington state law, which
requires that cash be refunded at the request of the cardholder,
if the remaining gift card value is less than $5. He opined
that consumers are better protected when state laws are
consistent. If the original card value was less than $50, this
would require cash redemption at lower levels than CARRS/Safeway
currently offers. He stated that this would "potentially harm"
the card holder. Additionally, he reiterated that the purchaser
of the card is "not necessarily the final ... user of the card,"
which is not addressed in the bill.
MR. GULLEY expressed concern regarding the treatment of paper
gift certificates in [Section 2(11)(A)], in addition to the
"interplay" between the aforementioned section and [Section
2(11)(B)(iv). Moving on, he stated that HB 49 does not
differentiate between "open universe" cards and "closed
universe" cards. He explained that "open universe" cards may be
redeemed at locations other than those appearing on the face of
the card, while "closed universe" cards may not. Other states,
he said, have addressed expiration date issues with regard to
the difference between the aforementioned cards. Finally, he
said "Consumers ultimately vote with their dollars, and if a
business does not treat their customers ethically and correctly,
they will certainly not get very many votes, and most likely
will not be in business in the future." CARRS/Safeway, he said,
is available to assist with research and interpretation as to
how these changes may affect the end-user. He stated that
CARRS/Safeway wishes to protect the consumers of Alaska.
3:54:04 PM
MR. HILYARD expressed willingness to work with CARRS/Safeway and
address any concerns in order to "craft a better bill."
CHAIR OLSON stated his intention to hold the bill in order to
allow any concerns to be addressed.
REPRESENTATIVE GARDNER requested to see Mr. Gulley's written
testimony, in order to address specific concerns.
MR. GULLEY agreed to make this information available to the
committee.
3:56:09 PM
DAVID DURRANT, Vice President of Legal Affairs & Corporate
Council, Black Hawk Network, explained that Black Hawk Network
is a subsidiary of Safeway which handles third-party gift cards,
in addition to prepaid instrument distribution. He stated that
any gift card which does not have an expiration date or dormancy
fee, will remain open "for the life of the card." This, he
said, is one concern regarding the interplay between the
provisions mentioned by the previous speaker. He stated that he
is familiar with the laws of many states, and would be willing
to work with legislators to craft a bill which takes the best
provisions from each. He noted that over the 2006 holiday
season, abuse of gift cards was reported by the press. While
consumer protection is important, it is also important for
consumers to have a satisfactory experience.
3:59:35 PM
MR. DURRANT, in response to a question from Representative
Ramras, stated that the 90 percent rule included in Section 3
would "tend to be administratively burdensome," as this may
require the card issuer to track the amount of funds remaining
on the card. This would be a challenge if the card was "re-
loadable," rather than having a fixed denomination. "Open
universe" cards are oftentimes not fixed denomination cards. He
explained that if a card does not have a fixed denomination,
this would require the seller to track any additional funds
"loaded" on. He stated that the $5 rule which is currently
applied in Washington State "protects the consumer well," in
addition to being "easy to administer."
REPRESENTATIVE RAMRAS stated that this is more difficult for
smaller businesses, adding that this may become more of a
problem when "trying to reconcile the day's activity." He
suggested that the 90 percent rule be removed or a fixed dollar
amount be used.
4:03:24 PM
REPRESENTATIVE LEDOUX inquired as to whether the lack of
expiration date would pose a problem to businesses.
MR. DURRANT replied that this would not be a problem. When
there is no expiration date, this liability is carried on the
books.
REPRESENTATIVE GATTO, in regard to the 90 percent payback
requirement, opined that it would be "in the merchants best
interest" to refund cards with small percentages, as these are
unlikely to be redeemed. He asked if this would be considered
beneficial.
4:05:21 PM
MR. DURRANT replied that it is possible to do "split-tender"
transactions. He explained that this allows the customer to use
the remainder of the card to make a partial payment, using
another form of payment to make up the difference. This, he
said, would be the ideal approach. He reiterated that using a
fixed dollar amount would be preferable to a percentage.
REPRESENTATIVE GATTO clarified that the payback requirement was
intended to help the businesses by allowing small amounts to be
"taken off the books."
MR. DURRANT, in response, explained that if a gift card is
purchased and given as a gift, there would be no mechanism by
which to identify the holder of the card, until it is presented
in a store for a purchase. Therefore, the business would be
unable to refund small amounts until this occurred.
REPRESENTATIVE GATTO said "I'm trying to make it easy for the
merchant to zero out a card that has too little value, that
might be carried around in perpetuity, because no one will want
to carry it around."
REPRESENTATIVE RAMRAS stated that his business currently has $98
thousand in gift certificates on the books. This number, he
said, increases by about $5,000 per year, with 90-95 percent
redemption. A credit of $60 thousand was inherited from the
previous owner, which was carried over because the
aforementioned gift certificates do not expire. He said:
We don't want to redeem a card that has a fractional
amount left on it. We want that guest to come back.
...Studies ... show [that] people ... no matter what
increment they have, ... are going to spend a little
bit more than the face value of the [gift cards]. And
frankly, that's what the business community wants. ...
And if you leave a fractional amount, then for us,
it's a little bit like you're going back out with a
coupon.
4:10:18 PM
STEVE CLEARY, Executive Director, Alaska Public Interest
Research Group (AkPIRG), stated that HB 49 is a "good step
towards consumer protection for Alaskans." He cited a recent
Washington Post article, which stated that almost $25 billion in
gift cards had been sold. This article also pointed out various
problems with fees, many of which were previously mentioned. He
referred to a study by the Montgomery County, Maryland Office of
Consumer Protection, titled "Gift Cards 2006: Retail Cards
Continue to Improve (with Prodding); Bank Cards Still Have
Problems," which compares the various types of gift cards, and
stated that he would forward this to the committee. This study
shows that, in general, stores have a better policy than banks,
which typically have fees. The following fees may apply:
dormancy, latency, administrative, periodic fees, and service
fees. He also pointed out information regarding 18 other states
that have recently passed similar legislation, which is
contained in members' packets. He said "I'm excited to see
Alaska taking this step, and ... it's good to see that the
business community isn't ... against this bill." He commented
that while some areas need further clarification, both for
consumers and businesses, the basis of the bill is "what
everybody wants." If consumers lose money on cards purchased
for a certain value, regardless of the amount, this will add up
to money that consumers should be receiving.
4:13:34 PM
REPRESENTATIVE GATTO inquired as to whether gift cards that will
never be used can be given to non-profit organizations, to be
cashed in for the value of the card.
MR. CLEARY replied that non-profits often have silent auctions
using donated gift certificates, although he is unsure whether
these can be cashed in for the dollar value.
4:15:01 PM
MS. LEWIS explained that under the Unclaimed Property Act, if a
gift certificate is not used within three years, this must be
turned over to the state.
REPRESENTATIVE GATTO asked if the issuer of the gift certificate
is required by law to turn the gift certificate over to the
state.
MS. LEWIS replied yes.
REPRESENTATIVE LEDOUX asked if a consumer who did not wish to
use a gift certificate is able to wait three years and then turn
the gift certificate in to Unclaimed Property for a refund.
MS. LEWIS replied that this is correct.
REPRESENTATIVE LEDOUX asked whether this actually occurs.
MS. LEWIS replied that consumers often call regarding gift
certificates that are not being honored. She explained that a
phone call to the retailer typically takes care of the issue.
REPRESENTATIVE LEDOUX asked if the business has to turn the gift
certificate over, or if the consumer is able to do this.
MS. LEWIS replied that the consumer is able to turn in the gift
certificate.
4:18:12 PM
REPRESENTATIVE GATTO asked whether a person who spends $300 on a
"lifetime oil change" promotion at an automobile repair and
service garage which closed shortly thereafter would be able to
turn this in to Unclaimed Property for a refund.
MS. LEWIS replied that this would not apply.
REPRESENTATIVE GARDNER inquired as to what steps are taken,
should the merchant decline to cooperate. In addition, she
asked how often this law is enforced.
MS. LEWIS replied that the first step is to make a phone call to
the merchant requesting that the certificate be honored. She
stated that in her experience, this has worked each time. The
next step, she said, would be to send a certified letter
informing the merchant that the gift certificate is reportable
as unclaimed property, and that interest and penalties may be
assessed.
CHAIR OLSON announced his intention to hold bill until next week
in order for conceptual amendments to be addressed.
4:20:12 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:20:17 PM.
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