Legislature(2003 - 2004)
05/15/2003 08:07 AM House STA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
May 15, 2003
8:07 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Paul Seaton
Representative Harry Crawford
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Holm, Vice Chair
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 27
Relating to support for a federal appropriation for expansion of
the Anchorage Jail.
- MOVED CSHJR 27(STA) OUT OF COMMITTEE
HOUSE BILL NO. 272
"An Act relating to motor vehicle dealers."
- RESCINDED ACTION OF 5/14/03; HEARD AND HELD
HOUSE BILL NO. 40
"An Act relating to issuance of a driver's license."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 158
"An Act eliminating the longevity bonus program and making
related conforming changes; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HJR 27
SHORT TITLE:FEDERAL $ FOR ANCHORAGE JAIL EXPANSION
SPONSOR(S): REPRESENTATIVE(S)MEYER
Jrn-Date Jrn-Page Action
04/29/03 1180 (H) READ THE FIRST TIME -
REFERRALS
04/29/03 1180 (H) STA
04/30/03 1217 (H) COSPONSOR(S): STOLTZE
05/13/03 (H) STA AT 8:00 AM CAPITOL 102
05/13/03 (H) Scheduled But Not Heard
05/14/03 (H) STA AT 8:00 AM CAPITOL 102
05/14/03 (H) Scheduled But Not Heard
05/15/03 1677 (H) STA RPT CS(STA) 5DP
05/15/03 1677 (H) DP: SEATON, GRUENBERG, LYNN,
CRAWFORD,
05/15/03 1677 (H) WEYHRAUCH
05/15/03 1677 (H) FN1: ZERO(COR)
05/15/03 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 272
SHORT TITLE:MOTOR VEHICLE DEALERS
SPONSOR(S): REPRESENTATIVE(S)WEYHRAUCH
Jrn-Date Jrn-Page Action
04/16/03 1009 (H) READ THE FIRST TIME -
REFERRALS
04/16/03 1009 (H) L&C, STA
04/28/03 (H) L&C AT 3:15 PM CAPITOL 17
04/28/03 (H) Scheduled But Not Heard
04/30/03 (H) L&C AT 3:15 PM CAPITOL 17
04/30/03 (H) Scheduled But Not Heard
05/01/03 (H) STA AT 8:00 AM CAPITOL 102
(pending referral)
05/01/03 (H) Scheduled But Not Heard
05/05/03 (H) L&C AT 3:15 PM CAPITOL 17
05/05/03 (H) Heard & Held
MINUTE(L&C)
05/07/03 (H) L&C AT 3:15 PM CAPITOL 17
05/07/03 (H) <Bill Hearing Postponed to
Fri. 5/9/3>
05/09/03 (H) L&C AT 3:15 PM CAPITOL 17
05/09/03 (H) Moved CSHB 272(L&C) Out of
Committee
MINUTE(L&C)
05/12/03 1560 (H) L&C RPT CS(L&C) 6DP 1AM
05/12/03 1560 (H) DP: LYNN, GATTO, CRAWFORD,
DAHLSTROM,
05/12/03 1560 (H) ROKEBERG, ANDERSON; AM:
GUTTENBERG
05/12/03 1560 (H) FN1: ZERO(LAW)
05/13/03 (H) STA AT 8:00 AM CAPITOL 102
05/13/03 (H) Heard & Held
MINUTE(STA)
05/14/03 (H) STA AT 8:00 AM CAPITOL 102
05/14/03 (H) Moved CSHB 272(L&C) Out of
Committee
MINUTE(STA)
05/15/03 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
LORALI CARTER, Staff
to Representative Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of Representative
Meyer, sponsor of HJR 27.
TED POPELY, Majority Counsel
Majority Legal Office
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided comments during the hearing on HB
272.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department Of Law
Anchorage, Alaska
POSITION STATEMENT: Testified to answer questions during the
hearing on HB 272.
LINDA SYLVESTER, Staff
to Representative Bruce Weyhrauch
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented information during the hearing on
HB 272, on behalf of Representative Weyhrauch, sponsor.
STEVE ALWINE
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of the Alaska Auto
Dealers Association during the hearing on HB 272.
JOHN LYBERGER
Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns about HB 272.
SPENCER ALEXANDER, General Sales Manager
Budget Car and Truck Sales, Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified regarding the need to make a
decision whether to focus on protecting consumers or franchised
dealers, during the hearing on HB 272.
PHIL HAWES, Owner
Phil Hawes Auto Outlet
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 272.
DIANA PFEIFFER, President
Alaska Automobile Dealers Association;
President, Alaska Sales & Service in Anchorage and Wasilla
Anchorage, Alaska
POSITION STATEMENT: Offered comments regarding Section 1,
during the hearing on HB 272.
MS. KOSONEN
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of herself regarding
Section 1 of HB 272, to support a consumer's ability to buy new
or used cars at will.
MEL BOWEN
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to Section 1 of HB
272.
CHRIS JOHNSON
Anchorage, Alaska
POSITION STATEMENT: Offered reasons why he disagrees with
Section 1 of HB 272.
DOREEN McADAMS
Anchorage, Alaska
POSITION STATEMENT: As a sales manager for Lyberger's Car &
Truck Sales, LLC, discussed the differences between used-car
dealers and franchised new-car dealers and answered questions by
the committee, during the hearing on HB 272.
JAMES MOORE, Owner
Jim's Muffler & Auto Repair
Anchorage, Alaska
POSITION STATEMENT: Testified to describe HB 272 as an unfair
bill.
RICHARD HYATT, Service Manager
Alaska Sales & Service
Anchorage, Alaska
POSITION STATEMENT: Described the process of selling new cars
and described the distinction between a new and used cars,
during the hearing on HB 272.
DAN COFFEY, Lobbyist
for Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of Lyberger's Car &
Truck Sales, LLC, in opposition to HB 272, and described the
process by which registered importers bring cars into the U.S.
DONALD WALKER, Salesperson
Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified that Section 1 of HB 272 would
not protect the public and would eliminate competition.
CHRIS HESTER
Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Told the committee that HB 272 is a simple
interest bill that does not help the consumer.
CAROL LYBERGER
Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of Lyberger's Car &
Truck Sales, LLC during the hearing on HB 272.
LORRI URBAN, Manager
Member Services
North American Automobile Trade Association (NAATA)
Richmond Hill, Ontario
Canada
POSITION STATEMENT: Testified on behalf of the association to
address myths and half-truths and to describe the regulations
surrounding registered importers of Canadian vehicles, during
the hearing on HB 272.
GEORGE CLARK, Salesperson
Lyberger's Car & Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 272.
DARRELL FRIESS
Anchorage, Alaska
POSITION STATEMENT: Testifying on behalf of Budget Car & Truck
Sales and Budget Rental Car of Alaska, related concerns
regarding Section 1, during the hearing on HB 272.
RICK MORRISON, Owner
Morrison Auto Group
Anchorage, Alaska
POSITION STATEMENT: Described the commitments and investments
of a new-car dealer during the hearing on HB 272.
MIKE McCABE, Fleet Manager
Kodiak Auto Auction in Anchorage
Anchorage, Alaska
POSITION STATEMENT: Recommended specific changes to HB 272.
ACTION NARRATIVE
TAPE 03-64, SIDE A
Number 0001
CHAIR BRUCE WEYHRAUCH called the House State Affairs Standing
Committee meeting to order at 8:07 a.m. Representatives
Weyhrauch, Seaton, Lynn, and Crawford were present at the call
to order. Representatives Dahlstrom and Gruenberg arrived as
the meeting was in progress.
The committee took a brief at-ease.
HJR 27-FEDERAL $ FOR ANCHORAGE JAIL EXPANSION
CHAIR WEYHRAUCH announced that the first order of business was
HOUSE JOINT RESOLUTION NO. 27, Relating to support for a federal
appropriation for expansion of the Anchorage Jail.
CHAIR WEHRAUCH offered a brief history of HJR 27 for the benefit
of Representative Crawford, [who was newly appointed to the
committee].
Number 0183
LORALI CARTER, Staff to Representative Kevin Meyer, Alaska State
Legislature, noted that HJR 27 encourages the federal government
to appropriate $30 million for a 200-bed expansion to the
Anchorage jail.
CHAIR WEYHRAUCH noted that the proposed committee substitute
(CS) does incorporate Representative Gruenberg's suggested
amendment.
REPRESENTATIVE GRUENBERG specified that his amendment appears on
page 2, lines 13-16, and on page 2, lines 24-28.
REPRESENTATIVE CRAWFORD asked if a certain amount of the 200-bed
expansion will be dedicated to federal prisoners.
MS. CARTER answered, "All 200."
REPRESENTATIVE CRAWFORD asked if only federal prisoners would be
able to use those beds, even when those beds aren't in use.
MS. CARTER explained that the state's contract with the federal
government has been exceeded for years, with regard to the
amount of prison beds available for federal prisoners and the
amount of prisoners that are actually housed in Alaska.
Therefore, the federal government doesn't foresee a time when
these 200 beds won't be used. In further response to
Representative Crawford, Ms. Carter explained that the expansion
of the federal capacity will free up beds that are currently
allocated to the Department of Corrections, but are being used
by federal prisoners. Therefore, it effectively frees up some
space for state prisoners.
Number 0564
REPRESENTATIVE CRAWFORD asked if the federal government normally
gives federal funds to house federal prisoners in state and city
jails.
MS. CARTER replied that she didn't know.
REPRESENTATIVE GRUENBERG moved to adopt CSHJR 27, Version 23-
LS1048\D, Luckhaupt, 5/14/03, as the working document. There
being no objection, Version D was before the committee.
Number 0675
REPRESENTATIVE LYNN moved to report CSHJR 27, Version 23-
LS1048\D, Luckhaupt, 5/14/03, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHJR 27(STA) was reported from the House State
Affairs Standing Committee.
HB 272-MOTOR VEHICLE DEALERS
Number 0685
CHAIR WEYHRAUCH announced that the next order of business was
HOUSE BILL NO. 272, "An Act relating to motor vehicle dealers."
Number 0699
CHAIR WEYHRAUCH asked if there was any objection to rescinding
the motion made [during the 5/14/03 House State Affairs Standing
Committee] to report CSHB 272(L&C) out of committee. There
being none, HB 272 was once again before the committee.
CHAIR WEYHRAUCH mentioned that there would be a committee
substitute and an amendment forthcoming.
Number 1011
The committee took an at-ease from 8:20 a.m. to 8:30 a.m.
Number 1018
REPRESENTATIVE SEATON moved to adopt the proposed committee
substitute (CS) for HB 272, Version 23-LS0975\H, Bannister,
5/14/03, as a work draft.
Number 1027
CHAIR WEYHRAUCH asked Representative Crawford if he would object
for the purpose of discussion.
Number 1048
REPRESENTATIVE CRAWFORD said, "Yes."
Number 1153
The committee took an at-ease from 8:33 a.m. to 8:35 a.m.
[Back on record, there was some discussion between the chair and
a forthcoming testifier regarding transmission of Version H by
facsimile.]
The committee took a brief at-ease.
Number 1188
TED POPELY, Majority Counsel, Majority Legal Office, Alaska
State Legislature, told the committee that he has been asked
about this legislation throughout "its course through the
House." He mentioned seeing "two amendments that have been
offered." He stated that his concern, from a legal perspective,
is whether Section 1 is a good idea for the legislature to
pursue. He said that he would be interested in continuing to
hear from the attorney general's office about whether or not it
is 100 percent comfortable with the position the state would be
in if it adopted "this language."
MR. POPELY explained that, as he has studied the topic, he has
become increasingly aware of a substantial number of lawsuits
that are currently pending against a variety of defendants -
including the large automobile manufacturers - for doing the
exact thing that the sponsor is now asking the legislature to
do, which is: to cease honoring warranties from the
manufacturers; to allegedly conspire together to prevent
competition from selling current-model used cars; and "a whole
host of other claims that I continue to read about, that give me
cause for concern."
MR. POPELY mentioned a forthcoming amendment that would address
Section 1 and a concern for consumer protection. That amendment
would permit the sale of current-model used vehicles by any
licensed auto dealer, but "it would require a host of
precautionary prophylactic measures that would require people to
disclose - prior to purchase and sale - that it is a Canadian
vehicle, that it's been bought at auction, [and] that it is not
a new vehicle ...[but] ... a used vehicle ..., [for example]."
MR. POPELY stated the following:
The alternative to make it ... permanently illegal in
this state to sell current-model used vehicles - at
least from my brief perspective - has some potential
legal pitfalls that I'm not sure the attorney
general's office has clearly satisfied itself that
it's prepared to advocate in light of that.
Number 1424
CHAIR WEYHRAUCH asked Mr. Popely if he was looking at [Version
H], and if there is any language in it that gives him pause.
MR. POPELY said that his interpretation of the exceptions in
Section 1, Version H, amending AS 08.66.015, is that they would
not allow for independent auto dealers in Alaska to resell
Canadian-acquired vehicles in a current-model year. He stated,
"That's what the bill stands for." He continued:
Conceptually, the idea being, in Section 1, "Will the
bill permit or prohibit the sale of current-model-year
used vehicles?" I think that's the crux of the issue
that this committee is here to discuss.
MR. POPELY, in response to a question by Chair Weyhrauch,
offered his understanding of the definition of "current-model-
year" as follows:
As we sit here in 2003, a 2003 vehicle is a current-
model-year used car. That's my lay understanding.
I'm not in the auto business, but the way I understand
it, the auto dealers would like to see legislation
that prohibits people from selling vehicles ...
[where] the model year is the same as the calendar
year - the very latest model used car you could have.
Number 1580
MR. POPELY, in response to questions by Representative Lynn,
said he thinks that, according to the language [in Version H] a
person could sell a vehicle back to a dealer, either as a trade-
in or a lease buy-back, through the normal course of business.
REPRESENTATIVE LYNN asked what the used-car dealer would do with
a vehicle that is a current-model used vehicle if he/she wants
to sell it.
MR. POPELY stated that he thinks this bill would permit that.
He pointed to [paragraph] (3) in Section 1 to illustrate that.
He reiterated that what the bill specifically precludes is the
acquisition of vehicles through the Canadian market, through
auction - a legal acquisition by itself - to then be resold in
Alaska by a dealer.
Number 1703
REPRESENTATIVE SEATON suggested that Mr. Popely's concern with
[Section 1] as written is that "our action might be in restraint
of trade."
MR. POPELY responded that there are two kinds of conspiracies:
one is ideological, regarding whether or not the legislature
wants to inhibit this kind of competition in the market place;
two is legal, regarding whether or not there is a legal
impediment to pursuing these kinds of "prohibitions on sale."
The latter, he said, is a question for the attorney general's
office.
Number 1785
REPRESENTATIVE CRAWFORD stated that he would like to be fair to
both sides in this issue. He stated his understanding that the
bill would limit the sale of cars "manufactured for sale outside
the United States." He asked Mr. Popely to share what he thinks
about the franchised dealers' contention that many of them don't
have the same access to "these cars, due to their deal with the
manufacturer," and are thereby being undersold in the
marketplace, and that it's unfair competition for them that the
used-car dealers are able to "go over and acquire these cars" at
a much lower price.
Number 1866
MR. POPELY replied that he has heard and understood that
argument. He confirmed that there's a private franchise
agreement between the manufacturers and each of their franchises
that limits certain activity. Conversely, he noted that there's
also the notion of free competition, which has been globalized.
Many of the manufacturers are manufacturing the vehicles in
Canada - taking advantage of the difference in economies of
scale and the market place and using less expensive labor and
parts, for example - for sale both in the U.S. and Canada. He
added, "The same cars you and I are buying at the dealerships
are being built in Canada, but then ... they're attempting to
preclude the same consumers from taking advantage of those
market differentials when it comes time to purchase the
vehicle."
MR. POPELY said that there certainly are some problems
ideologically with manipulating the markets for purposes of
manufacture, [while] at the same time, weighing the law to
prohibit the same manipulation of the marketplace for purposes
of purchase. He said that it is a concern that he has heard and
raised; however, he stated that he is not certain that his
opinion is really relevant to that discussion. He added, "It's
something that [U.S.] Congress has not seen fit to preclude;
there's no federal law that prohibits what's going on."
MR. POPELY noted that the only illicit acquisition of these
vehicles that he's heard about through committee hearings is
illicit from the viewpoint and standpoint of the manufacturer,
because they don't want the competition. They would like to
produce vehicles for sale in certain markets in the northern
hemisphere that stay in those market places and are purchased by
a particular group of people, because they can maximize profits
if those same people buy them here, he said. He added, "If we
put cars in this marketplace and those people buy them here and
these people buy them here, it's very good for the
manufacturers' bottom line - it's very bad for the free-market
competition." He said, "It's a legal activity that these people
are participating in." He revealed that he has received enough
phone calls over the last two weeks to know that there are a lot
of people who are scared about their businesses in Alaska. He
indicated that those people sell a lot of these Canadian
vehicles, and he said there [would be] a "ripple effect,"
[because] they employ a lot of people.
CHAIR WEYHRAUCH expressed a concern as follows: "If you're
coming to us as a majority counsel, who have you talked with and
do you have any conflict in doing all this?"
MR. POPELY listed the names of those who have contacted him by
phone as follows:
Mr. Lyberger that I met yesterday; the woman from
Canada - Lori [Urban] - from the auto dealers has
called me several times; people from Budget Rental Car
have phoned me from Anchorage; a couple of auto
dealerships in Fairbanks have called me; all
independents ...
CHAIR WEYHRAUCH asked Mr. Popely if he is representing those
people here in his testimony.
MR. POPELY answered no.
CHAIR WEYHRAUCH asked who else Mr. Popely spoke with.
MR. POPELY said he would have to go to his office to look up the
names.
CHAIR WEYHRAUCH stated his concern that when someone from the
majority counsel comes to testify that they have at least talked
to "the other side," for example.
MR. POPELY responded that no one from the "dealers association"
spoke with him. He added, "And my door is open to everybody who
wants to come and yak at me. It always has been."
Number 2060
REPRESENTATIVE GRUENBERG stated for the record that he had asked
Mr. Popely to come forward to discuss this issue.
Representative Gruenberg noted that he himself is not a member
of the (indisc.).
Number 2079
REPRESENTATIVE CRAWFORD stated that it is not his intention to
put anybody in a competitive advantage, nor does he want to
disadvantage independents. Furthermore, he doesn't want to
disadvantage "our own franchised dealers here, because they
certainly serve a place in the marketplace here, as well." He
said his aim is to find a balance that both can live with. He
said he was not happy yesterday [when HB 272 passed out of
committee] because he thought it was unbalanced, and he is not
happy [with the legislation] yet. He said he thinks the
committee needs to address whether franchised dealers can
acquire "these vehicles" if they are going to be able to compete
in the marketplace.
Number 2127
REPRESENTATIVE GRUENBERG referred to "the Holm Amendment,"
labeled 23-LS0975\D.2, Bannister, 5/14/03, which read as
follows:
Page 2, lines 2 - 3:
Delete "received as a trade-in"
Insert "manufactured for sale in the United
States and acquired by the dealer"
Page 2, line 6:
Delete ";"
Insert "; or"
Page 2, lines 7 - 10:
Delete all material and insert:
"(3) the vehicle is a current model used vehicle
not manufactured for sale in the United States, the
dealer acquired the vehicle in the normal course of
business, and the dealer complies with AS 45.25.470."
Page 5, following line 19:
Insert a new bill section to read:
"* Sec. 5. AS 45.25.470 is amended to read:
Sec. 45.25.470. Sales of vehicles manufactured
for sale in a foreign country. Before sale of [,] a
motor vehicle not manufactured for sale in the United
States, a motor vehicle dealer shall disclose to the
consumer in writing, in addition to any other
disclosures required for the sale of a used [WHETHER A
MOTOR] vehicle, [WAS ORIGINALLY MANUFACTURED FOR SALE
IN CANADA OR ANOTHER FOREIGN COUNTRY]
(1) that the vehicle was originally
manufactured for sale in Canada or another specified
foreign country;
(2) if applicable, that the vehicle was
originally sold new in the specified foreign country
identified under (1) of this section and imported into
the United States;
(3) that the vehicle's odometer was
converted from kilometers to miles, and shall provide
the consumer with a legal vehicle title, an odometer
verification certificate, or another document that
verifies the mileage reading after the conversion;
(4) if applicable, that the vehicle does
not have a manufacturer's warranty; and
(5) any other information required by
regulations adopted by the attorney general."
Renumber the following bill sections accordingly.
REPRESENTATIVE GRUENBERG said that "the Holm Amendment" uses a
slightly different approach, which is one of disclosure. "The
Holm Amendment," he explained, would divide "these vehicles into
two categories." He noted that the amendment says that it's
okay to sell "these vehicles" if they're manufactured in the
United States for sale. He continued outlining the amendment as
follows:
And it would eliminate these various sources, because
of the theory, "as long as it's manufactured in the
U.S., we don't care whether it was directly from a
consumer acquired, or from a rental fleet, or
repossessed, or in any other manner [acquired]. The
key thing is it has met the federal requirements.
And then, what it does in the rest of the amendment
... is to say that if it was not manufactured for sale
in the United States, ... the dealer must comply with
AS 45.25.470 .... And the rest of the amendment
amends that statute to simply require that the used-
car dealer or the new-car dealer - whoever is the
dealer - must completely disclose that it was
imported, that the odometer was converted from
kilometers to miles, and a legal vehicle title, et
cetera ....
So, it's a disclosure-type of thing, but it's a little
bit different approach than we have in the bill, even
if we were then to engraft "the Holm Amendment" onto
the current language in Section 1 of the bill. And I
think, if we took "the Holm Amendment" and put it into
the bill, that might simplify things."
REPRESENTATIVE GRUENBERG asked Mr. Popely if he had any comments
on that suggestion.
Number 2314
MR. POPELY responded that the way he reads the amendment is the
same way Representative Gruenberg just related it to him. He
stated that it would effectively permit the sale of "those
vehicles" by auto dealers, provided they meet the disclosure
requirements as the sponsor has laid them out.
CHAIR WEYHRAUCH commented that he doesn't know if that really
deals with Representative Crawford's issue.
REPRESENTATIVE CRAWFORD said no.
Number 2332
REPRESENTATIVE SEATON proffered that it would deal with
Representative Crawford's issue in that the state would be
allowing either a new-car dealer or a used-car dealer to buy
these Canadian vehicles at auction, "or any other country," for
sale as used cars "as long as they had full disclosure on that."
He added that if those dealers have a private agreement with a
manufacturer that prevents them from doing that, "that's kind of
outside our realm." He stated his belief, based on hearing
previous testimony, that Ford [Motor Company] has already done
away with the requirement that "their dealers cannot buy those
vehicles," which would allow those dealers to purchase [Canadian
cars] at the same competitive rate and auctions as the used-car
dealers.
Number 2394
REPRESENTATIVE CRAWFORD responded that Representative Seaton is
absolutely right; however, those dealers who are [restricted by]
their deals with their manufacturers are still in a
noncompetitive position. He stated that he doesn't know what to
do about that. Representative Crawford continued as follows:
I was never a proponent of [North American Free Trade
Agreement] (NAFTA); I thought it was a bad deal in the
first place. I think it's a bad deal that they can
make cars for the American market in Canada at 30
percent or 40 percent less, because of the exchange
rate. But, be that as it may, we have our homegrown
automobile dealers here in Alaska that we have to -- I
mean, if we don't keep them in business, then we're
going to lose the benefits of the shops that they have
... that a lot of the independents don't have.
REPRESENTATIVE CRAWFORD reiterated his desire to see a level
playing field in the market.
Number 2485
CHAIR WEYHRAUCH announced that "the Holm Amendment" would be
called Amendment 1. [This Amendment 1 was never adopted and
another amendment in the ensuing hearing on HB 272 was named
Amendment 1, ultimately.]
Number 2520
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General, Fair
Business Practices Section, Civil Division (Anchorage),
Department Of Law, first addressed "some comments that were made
about lawsuits in other parts of the country." Although he is
not familiar with all of those lawsuits, he noted that he has
reviewed some of the information sent to his office by the North
American Auto Trade Association, by way of Ms. [Lori] Urban. He
stated that he doesn't think those lawsuits have any relevance
to this legislation, for the fact that they involve claims
against private car manufacturers and dealers for conspiring
with each other to violate anti-trust laws. He continued as
follows:
What we're dealing with here is proposed legislation
that the State of Alaska would like to advance to
address issues that have a competitive impact. But,
there is nothing in any of these lawsuits that I can
see that would implicate the [Alaska] State
Legislature in any way, shape, or form. And whatever
this committee decides to do, I think it should do so
without considering any of those ramifications. The
legislature does have immunity for its actions. If
you do something that turns out later to implicate
some illegal anti-trust behavior, then the legislation
will simply be unenforceable. So, I just wanted to
make it clear that it is the Department of Law's
position that those issues really shouldn't drive the
considerations by this committee or this legislature.
Number 2585
MR. SNIFFEN referred to Amendment 1 - "the Holm Amendment" - and
stated that he thinks Representative Crawford "really hit the
nail on the head" when he said there is a conflict here. Mr.
Sniffen opined that there are two ways to approach this
conflict: proceed with the approach that's been recommended by
the franchised auto dealers, Mr. Alwine, and the Alaska Auto
Dealers Association, to effectively stop the importation and
sale of current-model used Canadian vehicles, unless those
vehicles are required in the ordinary course of business in the
exceptions in [Section 1] of Version H; or [use] the other
approach recommended by Representative Gruenberg, to not stop
the sale, but to let it go forward, while warning the consumers
about the possible (indisc.) of the sale, thereby letting the
consumers take the risk and decide for themselves if they want
to do this. The theory there, he added, is that if there is
full disclosure, another option is placed into the marketplace
for the consumers.
MR. SNIFFEN stated that the department really doesn't have a
"big stake in how this committee decides which way to proceed on
that." He continued as follows:
Our concern is at many levels. Initially, it is for
the consumer. And we have seen a few problems. And I
want to emphasize "few," because this is not a really
... huge problem in Anchorage as far as we know. But,
we do see a couple of issues that come up regarding
the sale of these current-model Canadian vehicles.
And, for the record too, I'd like to clarify a little
bit about when we use this terminology, we mean:
there are new cars and there are used cars. And
everyone knows what a new car is; it's a car that has
not been titled, and it's come from the manufacturer
with a manufacturer's statement of origin.
A used car is a car that has been titled to someone
and has lost the manufacturer's statement of origin,
which is usually given out the first time the vehicle
is titled into someone's name. Now, you can have used
cars that are still in the current-model year. It
could be one you buy today - a 2003 - that you drive
off a lot and bring back tomorrow. It's still a used
car, even though it's the current-model year. And I
think everyone understands that, but I didn't want
there to be any confusion. When we say, "Current-
model used vehicle," we mean a used car, it's just a
used car that's still within the current-model year of
production, so the next-model year has not been
delivered yet by the manufacturers.
MR. SNIFFEN noted that the issues revolving around current-model
used vehicles in Anchorage that have come from Canada are:
warranty issues, odometer-swap issues, and lemon law issues. He
continued as follows:
We've had consumers complain to us that they have
purchased these current-model used vehicles, tried to
make lemon law claims, and were unable to do so, and
we had to tell them, "That's correct, our lemon law
does not apply to these now-used vehicles; our law
only applies to new cars."
The second issues involves odometer swaps, and we
haven't investigated extensively how these swaps occur
[or] whether they're done in accordance with federal
regulations, but we have heard that sometimes they are
not. And the consumer will sometimes not know whether
or not the mileage indicated on the odometer is, in
fact, correct. And I'm not aware of any positive way
to verify that.
And then, the last issue deals with manufacturer
warranties. We've had some consumers complain that
they thought they were getting a manufacturer's
warranty, when in fact some of the manufacturers are
now declining to honor those warranties. And we've
heard testimony from Mr. Lyberger, who ... does a good
job in Anchorage with his business, and we know that
he sells what he calls a "warranty" with his new
vehicles - these Canadian vehicles. It's probably
better characterized as a service contract, but ...
the terminology isn't too important. And those
warranties do come with the vehicle.
[On] some [occasions], I think, consumers think when
they get those warranties that they can take this
vehicle back to the local Chevy, ... Dodge, or
Chrysler dealer and have them do the work on it, when
in fact these franchised dealers are not required to
honor those types of warranties, and the consumer has
to go to an independent mechanic and have work done.
And that mechanic may or may not have the tools, ...
equipment, and training to do the same kind of work
that the franchised and authorized dealer would be
able to do. So those, from the consumer perspective,
are the issues that we are faced with when selling
these current-model used Canadian vehicles.
Now, will those issues be taken care of through an
amendment like number one here, by informing the
consumer that: "Here are the risks, you need to know
these things, if you're willing to take those risks -
hey, buy this car?" ... They might. Who knows?
Consumers sometimes understand these things, sometimes
they don't. The law actually focuses on what we call,
"the least sophisticated consumer test." Whenever we
review a potential consumer protection Act violation,
you have to imagine the least sophisticated consumer
on the planet going into the transaction, and then ask
yourself, "Well, does this protect that level of
consumer?" And these disclosure laws, I think,
certainly will protect the average consumer [and] the
consumer who's really on the ball and has done their
research. The less sophisticated consumers who are
even told these things, may or may not understand
their implications.
So, with that we would leave it to the committee to
decide which way they'd like to proceed. I do
understand the concerns of the franchised car dealers,
and I agree with Representative Crawford: there is a
competitive disadvantage here when a segment of the
car-selling community - these independent used-car
dealers - can obtain vehicles in a manner that the
franchised car dealers simply cannot, without risking
loss of their franchise agreements.
And we've also heard testimony that, "Well, the
franchised dealers have all kinds of other incentives
that they can use to compete with these independent
dealers." This is a relatively new market and new
competitive structure we're seeing here. Twenty years
ago we had used-car dealers selling used cars. And
everyone knew what a used car was, it was your
neighbor's '56 Chevy that he wanted to get rid of
[and] ... took down [to] the used-car lot.
Well, now used car dealers are becoming ... more
sophisticated and they have access to more products,
and this new market for low-mileage, imported Canadian
vehicles is a market that they've tapped into. And
it's an issue that we just haven't had to really deal
with in recent years, that's now come to light. So
there are some competitive concerns there.
I don't know that whatever this committee does, it's
going to be an illegal action. I think if you take
either approach, there are going to be good arguments
to support your decision. But, bear in mind that we
already have - and I know this has been repeated
several times - ... a statute that's been in place
since 1993; a statute that was in place when Mr.
Lyberger opened up his lot [and] when Budget started
selling their cars. And at that time, they knew they
were unable to sell these vehicles ...
TAPE 03-64, SIDE B
Number 3002
MR. SNIFFEN stated that it's not a real genuine argument to say,
"Well, HB 272 is going to do something that we haven't been
faced with in the past," because, for the last ten years, [car
dealers] should already have been aware that the law already
prohibits these kinds of sales. From a legal perspective, he
said, there is not really much that can be changed, other than
to repeal the law. However, Mr. Sniffen opined that if the
legislature wants to make amendments to the law, or "do other
things to it," it will certainly be no worse than it is
currently.
Number 2953
REPRESENTATIVE LYNN commented that the committee has been
addressing HB 272 for two days and many members of the committee
have had trouble understanding the bill. He remarked, "It seems
to me that we must be less than the least sophisticated
potential buyer, because we're having trouble with it, and we
... aren't even in the heat of trying to buy that car that we
just really have to have ...." He questioned how much trouble
someone just coming in off the street would have.
Number 2907
REPRESENTATIVE CRAWFORD asked Mr. Sniffen where in statute is
the language that presently prohibits "the sale."
MR. SNIFFEN answered that it is in Title 8, and is the statute
that Section 1 of HB 272 proposes to amend: AS 08.66.015.
Number 2873
REPRESENTATIVE GRUENBERG said it strikes him that the lemon law
in Title 45 doesn't apply to the purchase of any used car.
MR. SNIFFEN said that is correct.
REPRESENTATIVE GRUENBERG noted that there is nothing currently
in [HB 272] that requires a disclosure of that fact. He asked
Mr. Sniffen if he would support an amendment to HB 272 that
would require that disclosure.
MR. SNIFFEN responded that [the department] is in favor of more
disclosures to consumers; however, he explained that there comes
a point where it is necessary to assume that the reasonable
consumers understand the law, or the list of disclosures would
become so numerous that they would become meaningless.
Notwithstanding that, he posited that disclosure that a current-
model used vehicle may not have lemon law protections is a good
idea. He indicated that he would not limit it to "current-
model" used car, but to any used car.
REPRESENTATIVE GRUENBERG referred to Mr. Sniffen's previous
testimony that some vehicles - whether they're manufactured in
Canada or not - may not have coverage by a manufacturer's
warranty. He referred to [Amendment 1] and said that it would
require "that to be disclosed for a foreign vehicle." He stated
that he doesn't see in HB 272 "anything that would require that
to be disclosed for a domestically manufactured car," which he
said he thinks would be an important disclosure, if applicable.
He asked Mr. Sniffen if he agrees.
MR. SNIFFEN replied that he doesn't know that there is really a
problem with the warranty issues on vehicles manufactured for
destination in the United States. Regarding all manufacturers'
warranties that come with the vehicles for sale in the U.S., he
stated that he thinks all of the franchised dealers in the U.S.
are obligated by contract to provide service for those vehicles.
He added, "It's only the vehicles that were manufactured for
sale in Canada or a foreign country." As soon as those vehicles
are no longer registered in that country, he explained, then the
U.S. dealers are not obligated to honor those warranties.
REPRESENTATIVE GRUENBERG commented that he thought previous
testimony had revealed that "some of these dealers in the U.S.
are not honoring warranties when the used vehicle was purchased
not from them, but from an independent [used-car] dealer, even
though the vehicle was manufactured in the United States." He
said he assumed that to be the case, and he asked Mr. Sniffen if
he agrees that that should also be disclosed.
Number 2610
MR. SNIFFEN replied that if it's a disclosure that would correct
an otherwise common misperception, he thinks it would help. He
offered an example where a current-model new vehicle might leave
a consumer with the impression that he/she is buying a new car
that the manufacturer is going to stand behind, and if that is
not the case, then that type of disclosure would be helpful.
Number 2518
LINDA SYLVESTER, Staff, to Representative Bruce Weyhrauch,
Alaska State Legislature, indicated that she would discuss two
sources of information for the committee to consider when
deciding "whether ... full disclosure ... would be an adequate
remedy to this problem." She added, "I'm speaking to the
consumer protection issue of the impediments Canadian market
vehicles have."
MS. SYLVESTER referred to the first source of information: a
letter from the office of the attorney general [to Lori Urban,
included in the committee packet], in response to a letter of
complaint by Jesse B. Waldrop [included on the fourth page of
the same handout]. The complaint was filed after [Mr. Waldrop]
had purchased a "Canadian-market vehicle" and took it to the
Jeep dealer to have some work done. He expected that the Jeep
dealership would honor his "replacement" Heritage warranty, but
the dealership is not allowed to honor that type of warranty,
because of its franchise agreement. Ms. Sylvester read a
portion of the letter, which described Mr. Waldrop's
disappointment in his dealings. She related how Mr. Waldrop
went back to Lyberger's [Auto & Truck Sales, LLC], where an
employee called the Jeep dealership to offer to write a check
for the cost of any repairs for the vehicle; however, the
warranty was not accepted for that particular year/model Jeep at
that Jeep dealership.
MS. SYLVESTER noted that Mr. Sniffen [addressed Mr. Waldrop's]
consumer complaint [in his letter to Ms. Urban]. She
paraphrased a portion of [the third paragraph of that letter],
which read as follows:
The State of Alaska has been monitoring this issue for
a couple years. Alaska statute 09.66.015 was passed
in 1993 to stop this practice. ... We have declined
to enforce this statue, however, because it
unnecessarily prohibits the sale of any [current-
model] vehicle by anyone, including franchised
dealers.
Number 2366
MS. SYLVESTER turned to the second source of information she had
distributed: a [three-page handout beginning with a newspaper
article and followed by a] press release by Senator Robin
Taylor. She told the committee that this is in regard to the
1993 statute [previously referred to by Mr. Sniffen]. The press
release, Ms. Sylvester noted, [announces] Senator Taylor's
[proposal] of [Senate Bill 105 in 1993], which she explained was
a consumer protection bill. She added, "And that is what this
was about."
MS. SYLVESTER indicated that she is sure that Mr. Lyberger and
other people who sell Canadian-market vehicles are very honest
and considerate; however, she suggested that it is possible that
not all people are as ethical and helpful as Mr. Lyberger.
MS. SYLVESTER, regarding disclosure, listed the following to
consider: What would happen [to the consumer] if Mr. Lyberger
and his business "goes away"; what happens if Mr. Lyberger
"doesn't have someone who is going to be willing to step up and
assist him and pay cash when the manufacturer's franchise cannot
honor the substitute warranty"; and what happens "when they go
out of state"? She noted that it's a serious consumer
protection issue. She added, "It's not a small-ticket item;
it's a $40,000 vehicle."
MS. SYLVESTER indicated that the sponsor initially thought that
proposing a full-disclosure amendment might be a good idea, but
then considered, "When you're doing a car deal ..., (indisc.)
amount of forms that you're signing - that you're processing."
She said the question arose as to how the consumer would be
aware of a full disclosure about all of the impediments that a
Canadian-market vehicle might have, noting that Mr. Sniffen, "in
his testimony and his experience, ... is doubtful that that
would happen." She added, "And Mr. Alwine, who's experienced in
... processing the paperwork, ... also feels that it's
doubtful." Even with a cash sale, Ms. Sylvester explained, the
amount of paperwork that a person signs is daunting, including
financing paperwork. She added, "How important is one extra
piece of paper when you're talking about 20 or 30 pages of
paperwork when a person is signing to close the deal?"
Number 2240
MS. SYLVESTER, in response to a question by Chair Weyhrauch,
said that she believes the article in the handout was most
likely released in 1992, because it [is in regard to] the event
that triggered [SB 105]. She said that there was a legitimate
consumer protection issue; unfortunately, [SB 105] was poorly
drafted and had "the unintended consequence of making it illegal
for anyone to sell current-model vehicles." The [intent of SB
105] had been to control who was selling the vehicles and to
"prevent the fraud that occurs."
Number 2200
MS. SYLVESTER, in response to questions by Representative
Gruenberg, noted that an example of a Heritage warranty is
included in the back [of the handout that includes the letter
from the AG's office]. Certain manufacturers, she said, will
not warranty the Canadian-market vehicles that are being sold in
the U.S. To compensate, there are replacement warranties [such
as the one from Heritage]. She compared [the Heritage
replacement warranty] to an insurance card. Ms. Sylvester
confirmed that although Lyberger's offers the warranty, the
Heritage [Administration Services, Inc.] is the company [that
offers the warranty].
Number 2054
MR. SNIFFEN, in response to a request for clarification by
Representative Gruenberg and Chair Weyhrauch, explained
[regarding the previously mentioned case of Mr. Waldrop] that
that consumer purchased a vehicle from Mr. Lyberger, which came
with a "Heritage after-market service contract" that was
purchased by Mr. Lyberger and was included in the price of the
car. The local Jeep dealership in Anchorage, he continued,
"declined on that warranty." He explained that it was not a
factory warranty and there is no law that requires a dealer to
honor after-market service contracts. He added, "And I think
that was the situation that went on in that case."
Number 2007
REPRESENTATIVE GRUENBERG asked if either Ms. Sylvester or Mr.
Sniffen knows the reason that the Jeep dealership involved did
not honor [the Heritage] warranty. He asked whether there
perhaps should be a law requiring [dealers] to accept [a
warranty such as the one from Heritage]. He remarked that this
seems to be a different issue than the one addressed in the
proposed legislation.
Number 1995
MR. SNIFFEN replied that he is not entirely sure why the [Jeep]
dealership declined to honor the warranty. He suggested that it
could have been a directive from the manufacturer that the
dealership would no longer honor these kinds of warranties, or
it [may have been] a local dealer decision. In any event, he
opined, it would be a fundamental violation of contract law to
require a dealership to accept, essentially, any after-market
warranty that came to its shop for work on one of its vehicles.
He added that that would be a difficult thing to do.
REPRESENTATIVE GRUENBERG said that this issue would mean getting
into the relationship between a garage or service dealership and
a third party - in this case - the Heritage company.
MR. SNIFFEN answered, "That is exactly correct." He clarified
that the issues that arose regarding [Mr. Waldrop] and these
warranty issues are far removed from the questions that are
before the committee in HB 272, other than the fact that it
serves to highlight one of the problems that can arise in the
sale of these current-model used vehicles. He stated that the
AG's office responded to that consumer complaint on the basis of
the warranty claim, and it really isn't an issue before the
committee.
Number 1905
STEVE ALWINE, testifying on behalf of the Alaska Auto Dealers
Association, explained that he, as a vendor, has established
credit policies. He opined that it would not be right for the
legislature to dictate who he opens an account with. He said
that that is the underlying philosophy regarding many service
contracts.
MR. ALWINE noted that Mr. Sniffen had commented that this issue
[of the Jeep dealer not honoring the Heritage warranty, for
example] is far removed from HB 272. He stated, "It is, but it
does demonstrate the pitfalls and the issues we've talked about
having to do with manufacturer's warranty, or the absence of
that warranty." He remarked that this [example] demonstrates
that the big losers [in this issue] are the consumer and the
dealer.
MR. ALWINE offered his interpretation of Representative
Gruenberg's understanding of previous testimony, that if a
vehicle was manufactured for sale in the U.S., and was perhaps a
current-model vehicle, a dealer did not have an obligation to
honor that manufacturer's warranty. He said, "That is
incorrect." He continued, "We have an obligation with our
manufacturers ... to honor that manufacturer's warranty. He
offered an example.
REPRESENTATIVE GRUENBERG asked, "Even if it was purchased from
[Lyberger's Car & Truck Sales, LLC] or somebody else?"
MR. ALWINE answered, "Absolutely." He revealed that he and his
wife have a Subaru dealership in town. He noted that his market
place includes Skagway and Haines, yet occasionally, people from
those areas will go to Whitehorse and buy a used Subaru. That
used Subaru still has the manufacturer's warranty, he stated.
He added, "And I still take care of that Subaru as I would
anything else."
REPRESENTATIVE GRUENBERG commented that [Mr. Alwine's answer]
was helpful.
Number 1730
REPRESENTATIVE SEATON asked if the same would hold true [for
other makes of cars.] For example, if someone were to buy a
Toyota in Whitehorse, would the Toyota warranty be honored in
the U.S. as well as in Canada?
MR. ALWINE responded as follows: "I'm not clear on that, but
I'll say it this way: some manufacturers still have
manufacturers' warranties. I do not believe Honda or Toyota do,
but I could be wrong on that. I can only speak with my
experience in my franchises and some of the other domestic
franchises."
REPRESENTATIVE SEATON asked Mr. Alwine to confirm that Subaru
does have a manufacturer's warranty, and "it doesn't matter
where you are, they honor the warranty."
MR. ALWINE replied, "That is absolutely correct."
Number 1686
REPRESENTATIVE SEATON surmised that, regarding "this warranty
problem," the situation exists where different companies decide
to do different things. Some may offer warranties on vehicles
no matter where those vehicles are, and others may decide to
honor warranties only in certain places. Representative Seaton
stated that he is having a difficult time "following this
argument." He said that it is only current-model used cars that
are being restricted [in the proposed legislation], yet "the
same thing applies to something that's two-years old, as far as
a warranty goes."
MR. ALWINE explained that the majority of the new-vehicle
manufacturers that do business in the U.S. "eliminate warranties
when vehicles move in this manner from one country to another."
He clarified as follows:
The vehicles we're talking about are not used vehicles
in the normal course of business. These are
manufactured used vehicles. They go out, they acquire
these things through a fraudulent means. They use a
surrogate buyer. They don't -- the importers aren't
buying these things direct from these dealers.
They're hiring people or they're paying people and
using that person's name. And that's fraud. And the
whole transaction starts as fraud. These vehicles,
when they hit Mr. Lyberger's lot, have 7 miles on them
or 20 miles on them; you have a document that proves
that.
... I'm hard-pressed to get a vehicle on the ground
from the manufacturer that has seven miles on it.
These are not used vehicles. These come under the
guise of a used vehicle; these are a "manufactured
used vehicle." That's how that transaction starts.
Number 1525
REPRESENTATIVE GRUENBERG asked Mr. Alwine to clarify "what's
going on in Canada." He asked Mr. Alwine if he was saying that,
for example, a vehicle is manufactured at a Ford [Company] plant
in Canada not as a new vehicle, but as a used vehicle.
MR. ALWINE answered as follows:
I misspeak, but I've now coined a phrase that I seem
to be very comfortable using. These vehicles are
manufactured by the manufacturers for sale in another
country. They are distributed to the dealers in that
country, and that's where the legitimacy in this
transaction stops.
What happens then is: someone, who is on the payroll
of an importer, makes a purchase from that dealer, and
then turns around and gives the car to the importer.
The importer imports the car to the United States and
may sell it through an auction - and in a lot of cases
that happens. By the way, auctions do disclose that.
They sell them through the auctions. And when Mr.
Lyberger buys that vehicle, it already has a
fictitious name as the owner from Canada.
And in my research with our vehicles, when I have
encountered Canadian vehicles, they have run all the
way to Toronto. This is a rampant thing. These cars
-- I cannot believe that there's this many people in
the world, but right now I think the statistic that
was in testimony was there's a quarter of a million of
these cars out there, where a quarter of a million
Canadians went out and bought these cars and one day
later decided they just didn't like them.
REPRESENTATIVE GRUENBERG asked, "What's wrong with that?" He
said that he realizes that, technically, "this may not have
belonged to 'Joe Canadian'; and it may be, essentially, a new
vehicle that's been auctioned in the United States." But, from
the consumer's point of view, he asked, "So what?"
MR. ALWINE asked, "How do you justify a transaction when it
begins with fraud?"
REPRESENTATIVE GRUENBERG explained that he is "going to the meat
of this thing." He said that, in fact, the consumer is getting
what is being sold through a used-car dealer, but is getting,
essentially, a new car.
MR. ALWINE responded that the problem is that the consumer's
perception is that he/she is getting a new car. Furthermore,
that consumer is expecting all of the benefits that go with that
new car, and ultimately, he/she is not receiving those benefits.
REPRESENTATIVE GRUENBERG said that the consumer is maybe not
getting a warranty, but is getting a car that may only have a
couple of miles on it and paying less for it than he/she would
pay a new-car dealer in the U.S. He posited that that sounds
like a good deal.
MR. ALWINE commented that that consumer might be paying less,
but noted that if the selling price in Anchorage of a Ford
vehicle, for example, is a certain price, than his "colleague in
Anchorage" is [not pricing much lower than that].
Number 1290
CHAIR WEYHRAUCH asked, "If they're buying the car in Canada,
then ... they'll have titled it, and they'll have a
manufacturer's statement of origin. Is that correct?"
MR. ALWINE answered, "That is correct. It will not have a
manufacturer's statement of origin; it will have a title." In
response to a follow-up question by Chair Weyhrauch, he
clarified, "It will have a title that will be titled to that
original owner."
MR. ALWINE, in response to a request for clarification by Chair
Weyhrauch, stated the following:
The means by which it's accomplished is: it is a
retail purchase at an automobile dealership in Canada.
At that point, that vehicle would be titled to the
"surrogate" ... purchaser. So there's your title, and
at that point, the manufacturer's statement of origin
has gone away.
Then that would be turned to the importer, and the
importer would bring it to the United States market,
and they would ultimately convert that title to a U.S.
title, in some form.
CHAIR WEYHRAUCH brought the focus back to Section 1 of HB 272.
Number 1166
MR. SNIFFEN said that he thinks Mr. Alwine adequately described
some of the problems that the franchised car dealers are faced
with. He added, "And those are consistent with our observations
that ... consumers are in a situation where sometimes they may
not understand that the purchase of these vehicles don't
necessarily come with all the accoutrements that a typical new-
vehicle purchase would have." He said he understands the
comment previously made by Representative Gruenberg [regarding
looking at the issue of Canadian vehicles from the eyes of the
consumer]. He said it's a powerful statement to the extent that
the consumer has another choice and another option. He offered
the following response as follows: "But for the things that we
have already described, the problems that come along with some
of these new-vehicle purchases - and some of them may be cured
through disclosure - those are the consumer fall-backs."
MR. SNIFFEN stated that the other question that needs to be
resolved is in regard to the competitive disadvantage that "this
might place some of the new-vehicle dealers in." He reiterated
that the AG's office has not taken a position on whether or not
that is occurring, but it is an issue for the committee to
consider.
CHAIR WEYHRAUCH apologized for the record for not being able to
hear Mr. Lyberger's testimony yesterday, and invited him to
speak.
Number 1060
JOHN LYBERGER, Lyberger's Car & Truck Sales, LLC, told members
he'd presumed that people who come before the legislature [to
testify] would tell the truth. Indicating that hadn't happened,
he suggested the need for a sworn oath and asked how legislators
can make a proper judgment if they aren't told the truth.
Referring to testimony by [Mr. Alwine], he noted that more than
31 new-car dealers are registered this year in Alaska, and said
there are hundreds of used-car dealers. He asserted that only a
few dealers came up with this bill, and questioned the number of
dealers actually being represented by [Mr. Alwine as president
of the Alaska Auto Dealers Association]. He suggested that this
bill [would] make the wealthy people even wealthier, to the
detriment of others, and proposed that this isn't something that
members or others want for the United States.
MR. LYBERGER mentioned a warranty and Jeep dealer discussed
earlier, saying he knew that gentleman. He explained:
We knew that the Jeep place would not honor that
warranty. The customer knew that. The customer knows
the gentleman there. He does not care, most of it.
He was bled. He took the vehicle down there, and they
got the head man out there and really ... put the law
down. You see, this Heritage warranty, they can call
on the telephone and they can receive a credit card.
Say they're short on money or something and need the
money to pay, or doubt they'll ever get the money.
They can get their money immediately - immediately -
by credit card ... on it. So we know there's no
problem there. But ... why he was there was because
of bad things with them ... previously. I could see
it's gone, and I see it was sent to the attorney
general; I see the ... statements that he made that
was the wrong thing of me to do, to ask him or permit
him to ... go ahead with that. But my goodness ...
Number 0701
MR. LYBERGER brought attention to "lemons" and recalls, noting
that this isn't his field with regard to importing and
"transferring." He told of reading that the time period for
response is 10 years if there is a recall. He mentioned
shipping in [automobiles] from the Lower 48 because people could
buy for less there than in Anchorage. He indicated owners [of
dealerships] don't like that, however. He also indicated it may
be weeks or months before a vehicle is taken care of [if there
is a problem]. He pointed out that repair shops are repairing
new vehicles, which he said the factories honor and pay for.
Number 0449
MR. LYBERGER stated that he is familiar with the terms "used
cars," and "new cars," but not with the use of the word
"current," as it [applies to cars]. He mentioned the factories'
bringing cars across the line, and emphasized that the factories
do this themselves and sell them at auctions. He continued as
follows:
Even his company ..., his warranty said they would
bring it here - it would not be good at his place,
right? But still, you go to this auction sale and buy
that that the factories brought that vehicle over
there - and I'm not saying always or at all of them -
but possibly, at that sale, at that time, on that
group of vehicles they have, they will honor warranty
on those vehicles that the factory has sold that
they've brought across.
MR. LYBERGER said that he was not talking about any one
particular company or factory. He continued as follows:
In fact, the new car dealers up here go over there and
purchase these vehicles also. I can also prove that
they have been sold as new vehicles, which they cannot
be sold as new. Any time that the vehicle comes out
of Canada and has an MSO [manufacturer statement of
origin], like [they] mentioned here about a title in
Canada, that's impossible. Why? Because they don't
even have a title in the state - it's a non-titled
state. So, don't tell me they have a title over
there. You follow me? They don't even have one in
the state, how can they have one?
Number 0312
CHAIR WEYHRAUCH acknowledged that this issue is a passionate
concern of Mr. Lyberger's. He told Mr. Lyberger that the
committee is considering the issue as a policy matter and trying
to strike a balance between protecting the used- and current-
auto dealers. He asked Mr. Sniffen to distinguish between the
terms current and new for Mr. Lyberger's benefit.
Number 0262
MR. SNIFFEN defined a new vehicle as one that has been delivered
by the manufacturer to a franchised car dealer that has a
relationship with the manufacturer. He continued as follows:
And once that vehicle is sold - it is either titled
or, perhaps if it's in a state that's a non-titled
state, as Mr. Lyberger suggests - the first
transaction involving that vehicle ... changes its
character from a new vehicle to a used vehicle. So
you can have used vehicles of all model years. You
can have ... current-model-year used vehicles, you can
have next-model-year used vehicles, we have ten-year-
old-model used vehicles, but they are all used. The
problem with the current-model used vehicle is that's
the particular niche of the franchised car dealer.
MR. SNIFFEN noted that the franchised car dealers have
agreements with the manufacturers that, within their territory,
they will be the only ones authorized to sell "these new cars."
Therefore, he pointed out, a current-model used-car salesperson
is competing directly with the franchised car dealer who has
that promise with the manufacturer. He offered his
understanding from what he's heard from the new-car dealers that
once the car is no longer of the current-model year, they are
not as concerned, because they are not competing with last
year's-model new cars. He added, "And then you can still have a
new car that's last-year's model; that's not a current-model new
car, but it's still a new car, because it hasn't been titled."
Number 0091
REPRESENTATIVE SEATON noted that the 2004 [cars] will come out
in August or September. He asked what the current-model car
will be in September 2003.
MR. SNIFFEN answered that in August 2003, when the 2004-model
year [cars] come out, then all of the 2003-model-year cars will
not be current-model year anymore, even though it is still 2003.
TAPE 03-65, SIDE A
Number 0001
MR. SNIFFEN clarified that, in August, when the 2004 [cars] come
out and become the current-model-year vehicles, the 2003 [cars]
will still be new vehicles, but they won't be current-model-year
new vehicles.
MR. SNIFFEN announced that he had to leave to testify at another
meeting, but would be available to the committee later for
questions.
Number 0129
MR. LYBERGER remarked that there are actually 2004 vehicles out
already that have been out for a while. He referred to previous
discussion regarding dealers' savings and the Canadian [exchange
rate]. He mentioned [an article] in what he believed was the
Automotive News in the past 1-2 months, which showed a number of
vehicles from different manufacturers, that were identically
equipped. He continued as follows:
And like our colleague here, Mr. [Alwine], you know,
his vehicle that has the largest on it of any of them.
The vehicles that are not selling. That's why that
they took these rebates on in (indisc.). ... The
Caravan is very high - rebates - yes. However, the
Durango, it will be the highest at this moment. Now
last year they went to $7,000, and then it went to
$10,000 on that Lincoln, see, for the dealer here in
the U.S. Now like whenever they receive these dollars
here in the U.S., that rebate's subject to the public,
and/or even the dealer. This is something that's very
misleading to all public. You know they think of
rebate, and the rebate's on and the rebate's off.
Well, it may be, and that's what ... they're printing
at the time; however, possibly they're showing no
rebate, or showing, say, maybe $1,000 ... [for
example].
Say, like you take one of these vehicles - a Durango -
... [with a $4,500 rebate], and then they have another
$1,000 on top of that for loyalty, see. Or possibly
for receiving another customer over from another
company, to get them on their line. Plus they still
have their holdback, you know, that the factory gives
them ... at the end of the year - February, usually.
You know what, they owned the vehicle ... way, way,
way back. At the same time -- that's the extreme of
them now, this year. Like I say, Lincoln was the high
one last year, but this Durango at this moment anyway,
as far as I know, ... [is] the highest this year up
... [to] this point - on the rebates and the dealer
participation.
But most of the vehicles, as I noticed, will be very
few dollars difference in Canada and here. ... I
mean, considerably less than $1,000 - maybe $400,
$300, $200, or $57, or something that way. So that
they're just about the same there as here. ... I wish
I had those figures with me to show you accurately on
each of them. ... See, they have the rebates and
things going on here in the U.S. and in Canada. It
may be here that they have so much rebate on, and/or
dealer participation - ... whichever way the factory's
going at that given moment - and there [may] not be
any in Canada, or there might be just a little bit.
However, it is always [that] the U.S. has more than
they do in Canada.
MR. LYBERGER admitted he just made a broad statement, but told
the committee that he feels his statement is "pretty" accurate,
or he wouldn't have made it.
Number 0614
MR. LYBERGER referred to Representative Lynn's mention yesterday
of a young man, and he said, "You see, I'm not perfect either,
but still again, as I said earlier, I wish to be different than
all other dealers - not different, but as close to the exact
opposite." He noted that he has managers and salesmen that have
been with him for years. He commented that he has very low
turnover. He said he hires more people because he does more
business. He emphasized that he does not seek out professionals
to hire, but, for example, he hired an engineer who is now one
of his managers. He met the man when he sold a vehicle to him,
he added. He gave another example of an employee who started
out as a customer. He indicated this may or may not have been
the man to whom Representative Lynn had referred in his previous
testimony. He pointed out that [no one gets where they are
overnight].
Number 0849
MR. LYBERGER continued as follows:
As I mentioned the other day, I do not want any
customer at any time taking one dollar out of their
pocket. If they have taken a dollar out of their
pocket, or it's necessary, like it would have been for
this gentleman here, which he offered to pay, would
not receive, and come back down there and Bubba -
Bubba's one of my sons - he offered to pay, he would
not except the money either. Which is the customer
knows. He would prefer taking it to one of these
other places and have them to fix it anyway. Why?
Because he says is they have better equipment, they're
more knowledgeable than they are there. But he was
just "jackin'" with him, whenever he took the vehicle
there to him, and figured that it would be something
this way, that's why.
MR. LYBERGER referred to "that dollar thing there between those
vehicles" and said he should bring that information to the
committee. He continued as follows:
Like anything that we redid, it would be 'x' amount of
dollars, it'd be [$1,000] on this particular vehicle.
However, we will never see - here I'm sticking my neck
out again, right? - we will never see there be three
or four of them - different makes or kinds, or what -
with that great big difference between there and here.
It'll be just a little bit ....
MR. LYBERGER solicited questions from the committee.
Number 0970
REPRESENTATIVE GRUENBERG referred to the Heritage [warranty].
He asked if he is correct in his understanding that a dealer
could simply have called Heritage, which would have ascertained
what the work was going to be and then would have given "them" a
Heritage credit card, and they could have done the work and it
would have been "done by that credit card."
MR. LYBERGER responded, "Immediately, right there, not later."
REPRESENTATIVE GRUENBERG commented that it is too bad that
Mr.Sniffen is not present. Notwithstanding that he stated that
he thinks it is illegal not to accept payment in that manner.
He clarified that that has nothing to do with the vehicle laws
that are elsewhere in the statutes.
MR. LYBERGER stated that he concurred with Representative
Gruenberg. He added that although he could impose a limit on
the credit card, he must accept it.
Number 1075
REPRESENTATIVE SEATON said he thinks this subject is not to the
point of the legislation being discussed.
CHAIR WEYHRAUCH agreed and said he would like to try [to focus
on] the bill. He thanked Mr. Lyberger for his comments. He
asked the committee if they had any more comments on Section 1.
Number 1173
REPRESENTATIVE LYNN asked Mr. Alwine if "all these things"
wouldn't violate franchise law, if there is such a thing.
MR. ALWINE answered that there is franchise law, there are
franchise agreements, and "we are required in our agreements
with the manufacturers to honor those agreements." He mentioned
a bill that had been sponsored last year by now-Senator Lisa
Murkowski, which dealt with manufacturer and dealer relations
and the obligations [between them].
Number 1253
REPRESENTATIVE LYNN asked if the "Canadian situation" would be
coming in from the outside and interrupting established
franchise law. He added, "Is the franchise law only between the
franchiser and the franchisee, or does that effect people who
are totally outside the franchise?"
MR. ALWINE answered that the franchiser and the franchisee are
the people directly impacted by that contract, not the people
outside of that distribution chain.
REPRESENTATIVE LYNN asked if that meant that a dealer such as
Mr. Lyberger would not be liable in any way to the franchise law
itself.
MR. ALWINE replied that [Mr. Lyberger] has no obligation or
responsibility whatsoever, save the sale of that current-model
used vehicle.
Number 1336
MS. SYLVESTER, regarding the bill that passed last year, noted
that the state regulates by statute how close a manufacturer can
establish a second franchise. She stated that that's clearly
protecting the interest and the relationship between the
manufacturer and the franchisee. She noted that there is a
loophole by which secondhand car dealers are able to get new
stocks and come in under that law and put themselves right next
to another franchised dealer, which she stated is a concern to
the state [and the reason for HB 272].
REPRESENTATIVE LYNN commented that that is very illuminating.
He compared the situation to McDonald's franchises.
MS. SYLVESTER said that one important distinction is that the
state does not, by law, regulate where McDonald's franchises can
come in, while it does regulate where these motor vehicle dealer
franchises can be.
Number 1446
MR. LYBERGER referred to large, multi-million dollar lawsuits
against factories and dealers. He noted that recently in
Europe, Chrysler Corporation and General Motors were fined over
$73 million [for] "doing what we're trying to do now between
Canada and the U.S./Alaska." He told the committee that there
is a new Dodge "place" to the side of his own business. He said
that his business was there prior to that. He mentioned "the
other Dodge place" that was there years ago, which was there
just over 10 years. Regarding the rules of proximity, he said,
"That store there had the area for a whole bunch of miles
around, I mean, more than 100 miles. But regardless, they built
that new one right there." He said he thinks they cannot do
that. He continued as follows:
But see, it's factory, factory, factory; ... it isn't
people. What I think it is: we need to take care of
John Doe consumer. John Doe consumer's the one that
all of us [need] to be thinking about. Gee whiz...
CHAIR WEYHRAUCH asked Mr. Lyberger if he feels like he's had
enough time to talk about his feelings and views about the
issue. He added, "I don't want you to feel like you've been
shut down."
MR. LYBERGER complimented Chair Weyhrauch and all his colleagues
as "the greatest in the world," and thanked them.
Number 1586
SPENCER ALEXANDER, General Sales Manager, Budget Car and Truck
Sales, Fairbanks, opined that a decision must be made whether
the focus is to protect consumers or franchised dealers. He
said it seems to him that the issue of the "Canadian thing" is
something between the manufacturers and their franchised
dealers, and he said he doesn't see why the legislature needs to
get involved in helping those dealers fight that battle if the
manufacturer is unwilling to.
MR. ALEXANDER, in regard to current-model vehicles, stated that
as the [proposed legislation] is written, it would prevent him
from buying same-model-year bank repossessions, for example.
Regarding the broader issue of Canadian vehicles, he asked, "Are
we protecting the consumer from paying less for vehicles?" He
said that is really what is being talked about here.
MR. ALEXANDER referred to the issue of franchise agreements and
what they will and won't allow their dealers to do. He revealed
that 18 months ago he worked for the Jeep dealer in Anchorage as
a sales manager, and unless that dealer's agreement has changed,
the dealer can take any warranty it wants and work on any
vehicle it wants, and the manufacturer doesn't prevent them from
doing so. He added that that's a decision that's made on site
by the general manager. He continued as follows:
When we're talking about these franchise agreements
and what they are or are not allowed to do by the
manufacturer, I think we need some real clarity on
that, because all the new car dealerships that I've
worked for didn't prevent us from doing anything. So,
you know, we sold Canadian vehicles off the Jeep lot
in Anchorage and, unless something's changed, they're
probably still doing it.
If I'm a ... franchised janitor service and ... my
competition ... is going to Canada and buying his
brooms and soaps and buckets and coming over here and
beating my prices, as a business owner I have a choice
to make whether I want to continue to be a franchised
cleaning business, or whether I want to go
independent.
So, if we're after consumer protection, I think maybe
some disclosure would solve it. ... If we're after
protecting the dealers - I don't [know] if that's
necessarily the right thing to do. I mean, I've heard
the word loophole for the used-car dealers mentioned,
... that they have a loophole that they can sell
current-model-year vehicles. I don't call that a
loophole, I call that a free market, and I think
that's a ... good thing, because ultimately the
consumers end up winning.
Number 1814
REPRESENTATIVE SEATON said that, unfortunately, the committee
has had to deal quite a lot with warranty issues.
MR. ALEXANDER, in response to questions by Representative
Seaton, confirmed his previous testimony that he was a sales
manager at the Chrysler dealerships Jeep store in Anchorage, and
the manufacturer allowed him to honor whatever warranties that
that local dealership decided upon.
Number 1869
The meeting was recessed at 10:22 a.m. to a call of the chair.
[A new tape was inserted at this point.]
TAPE 03-66, SIDE A
Number 0001
CHAIR WEYHRAUCH called the meeting back to order at 9:48 p.m.
Present at the call back to order were Representatives
Dahlstrom, Lynn, Crawford, Gruenberg, and Weyhrauch.
Representative Seaton rejoined the meeting as it was in
progress.
The committee took an at-ease from 9:49 p.m. to 9:50 p.m.
Number 0245
PHIL HAWES, Phil Hawes Auto Outlet, testified that he has been
listening to much of the previous testimony regarding Canadian
vehicles, and he told the committee that he sells quite a few of
them himself. He stated that he goes to the auctions and stands
side by side with [new-car] dealers, who are buying "them" all
the time. He indicated he doesn't understand why when [used-car
dealers] buy those cars, the customers are punished. [Regarding
the new-car dealers], Mr. Hawes said, "Don't let them kid you,
they're [placing warranties on] Canadian cars; they buy them
right here at the auction." Mr. Hawes said that he's seen them
do it, and he added that they can warranty any vehicle.
MR. HAWES said that maybe half of the 60-70 cars that he sold
last month were Canadian vehicles that are all under warranty,
and they are "2002s." He continued:
If they want to warranty them, they can. And they get
paid for that. But they're (indisc.) the public and
telling you guys that that's not happening? They can
warranty any of those cars. They're franchised --
what they're doing is punishing the customer. I've
had some of them I've had to call over there, and
hassle them a little bit, and they go ahead and
finally do it, but they were just real rude to the
customers. And I'm a little fed up with that.
... There's a couple of dealers here in town that are
trying to run the little dealers out of town, and you
know, I put my whole life in this thing. All my money
that I've saved for years and years.
And let me tell you this: I worked for Cal
Worthington for 17 years as general sales manager, and
I ... did all the buying for the store for years, and
I bought a lot of Canadian vehicles - all under
warranty. Just lately, just this last year or so, ...
there's a lot of hassling, and I don't understand what
the big deal is. I mean, they got dealers from out of
state - Dave Smith Auto Sales - that are taking a lot
of business, selling brand new cars advertised in our
newspaper, our [television], ... [for example] here in
Anchorage, and stealing all the new-car customers from
them.
MR. HAWES noted that many of his customers are frustrated new-
car buyers who do not want to go through five hours of hassle at
the new-car [dealership]. He indicated that he has a loyal
following; many of his customers followed him over from Cal
Worthington's when he started his business. He added, "And the
same with Lyberger."
MR. HAWES concluded by reemphasizing that [new-car] dealers can
warranty Canadian vehicles, and stating, "This bill needs to go
away."
Number 0600
DIANA PFEIFFER, President, Alaska Automobile Dealers
Association; President, Alaska Sales & Service in Anchorage and
Wasilla, noted that the changes proposed in the language [of HB
272] pertain to better consumer protection, as well as
enforcement. She told the committee that she is also a dealer
who has invested a great deal for the right to sell new General
Motors automobiles in an area designated by the manufacturers.
MS. PFEIFFER indicated that there are a lot of used-car dealers
who are selling used automobiles [that are] current-model-year
vehicles that "smell, look, and have mileage like a new
automobile." Ms. Pfeiffer described the process as follows:
The vehicles are coming through a pipeline of
individuals, where they're working with a broker or an
importer. They start out with an illicit transaction
- a "straw" purchase of a new vehicle from a
manufacturer in Canada. They sell them to a broker or
an importer who makes modifications to the odometer
and speedometer, and then they resell them through an
auction, or directly to the dealers here in Alaska and
to other states.
These vehicles are current-model-year vehicles, which
our current statute, [AS] 08.66.015, says can only be
sold by a dealer with a manufacturer's statement of
origin.
MS. PFEIFFER told the committee that new-franchised-automobile
dealers like her invest a lot of money to buy the exclusive
rights to sell automobiles within an area assigned by a
manufacturer. She noted that [AS] 45.25.180 says that the
manufacturers cannot establish a new-motor vehicle dealer within
the relevant market area where the same line is represented.
She explained that relative market area is that which is within
a 14-mile radius of any existing vehicle dealer.
MS. PFEIFFER noted that, in the last four to five years,
thousands of "these automobiles," primarily from Canada, have
been brought into Alaska for resale under the guise of being
used automobiles. She pointed out that those vehicles are often
marketed with very few miles on them and with a warranty, which
implies to the consumers that they are new vehicles with a
manufacturer's warranty. She said that, essentially, the used-
car dealers have tried to set themselves up as a new-car dealer,
but they only have a showroom. What they don't have, she noted,
is: the rest of the investment in the facility; personnel
training; and tools and equipment to service the automobile.
She opined, "It's more or less an illicit way of selling
current-model-year vehicles." She added, "A lot of times they
can acquire new-model vehicles before the dealers in Alaska get
them."
Number 0824
MS. PFEIFFER noted that in Anchorage, a pawnbroker and a used-
car dealer with a display lot have to have a merchant license,
which used to be known as a "second-hand" merchant license.
Used merchandise, including automobiles, she said, has obvious
signs of wear and tear, as well as "distinct characteristics."
Ms. Pfeiffer noted that franchised automobile dealers are not
required to have a merchant license.
MS. PFEIFFER told the committee that when a person buys a new
automobile, he/she has a lot of expectations of the benefits of
that new automobile. [When a consumer buys a current-model-year
used vehicle, for example], Ms. Pfeiffer listed all the things
he/she does not get as follows: a manufacturer's warranty on
many of the vehicles; the protection of the state's lemon law;
notification by the manufacturer of recall notices or, more
importantly, "stop-driving" or "return to the dealer" [notices];
notifications to the dealers to stop delivery of a new vehicle
that has a severe safety defect; operational training on the
automobile by a factory-trained sales representative or service
technician; and no assurance that the vehicle does not have a
Canadian lien, because Canadian titles apparently don't note the
liens on the title.
MS. PFEIFFER said she is aware that [on Canadian automobiles]
the lights may have been disconnected, because the illumination
is greater than is allowed in the U.S. In addition to that, she
noted, there have been a lot of documented cases of odometer
fraud with excessive mileage rollback, [resulting in] numerous
lawsuits in the last couple of years.
MS. PFEIFFER concluded her testimony by stating that the injured
parties are the consumers and the franchised automobile dealers.
She thanked the committee for "the additional consideration
providing that provision for the rental cars." She noted that
she also has a large rental fleet in Anchorage, with over 1,000
automobiles that will be running this summer. She added that
with the short tourist season, there will be a need for the
outlet of some of those automobiles.
Number 0996
REPRESENTATIVE LYNN offered his understanding that a previous
testifier alleged that Chevrolet dealers, for example, do in
fact buy Canadian vehicles. Representative Lynn said that he
assumed "that's for the used-car lot." He asked Ms. Pfeiffer if
he may have misunderstood.
MS. PFEIFFER replied that she believes there [may be] some
franchised automobile dealers that are "buying their products
when they cannot get them through the manufacturer at that
time." She added, "I wouldn't know that." In response to
follow-up questions by Representative Lynn, she said that Alaska
Sales & Service does not do that.
The committee took a brief at-ease.
Number 1087
REPRESENTATIVE GRUENBERG asked Ms. Pfeiffer if she is aware of
any employees at service centers who work on a sales commission
and therefore would earn more depending on how many "repairs"
they sell.
MS. PFEIFFER affirmed that that is a practice in the industry.
Number 1128
JEANNE KOSONEN, testifying on behalf of herself, told the
committee that she is a consumer who is addressing Section 1 of
HB 272. She told the committee that she bought a vehicle from a
used-car salesperson who told her that the car was used. She
said she had comparison shopped and had gotten prices from
various car dealers. She said, "The price that we were quoted
by the gentleman that we purchased our car from was considerably
higher. They did not have the make that we wanted, ... with the
equipment that we wanted, but we bought the car."
MS. KOSONEN said that she has another car that she purchased
from a local new-car dealer. She noted that she is a repeat
customer of that dealer. She pointed out that she has bought
both new and used, and she remarked, "I guess I don't see the
difference." She said she thinks [HB 272] is bad for the
economy and bad for the consumer. She opined that consumers
should be able to buy vehicles from any dealer they choose. She
posited, "It shouldn't have to be a [new-car] dealer or a [used-
car] dealer; if they sell new and used cars, and we find one we
like, and they quote the price that we like, we should be able
to purchase that car."
Number 1255
MEL BOWEN, testifying in opposition to Section 1 of HB 272, told
the committee that he is a long-time teacher in the Anchorage
School District, who also sells cars part-time at Lyberger's Car
& Truck Sales, LLC. He opined that consumers should have a
choice of where to buy automobiles, and that choice should never
be legislated. He said, "Mandating this by law is only favoring
special-interest groups, and not the public or the consumer."
He added that laws should be passed to make [Alaska] a better
place, not to limit consumer choices. He said he hopes that HB
272 fails, because the legislature should be voting for the
public and not special-interest groups.
Number 1322
REPRESENTATIVE LYNN commented that his special-interest group is
called "the constituents of District 31," as well as the rest of
the state.
Number 1364
CHRIS JOHNSON, Finance Manager, Lyberger's Car & Truck Sales,
LLC, stated that he disagrees with [Section] 1 of HB 272 for the
primary reason that "people are going to buy cars and want to
save money, no matter what." He clarified that if those people
are not going to [get good deals on vehicles] in Alaska, then
they will go to a dealer in another state. Mr. Johnson noted
that he as worked in the car business for approximately 14 years
- 7 years as a salesman and 7 years as a finance manager.
People don't want to pay $10,000 more for a car that they could
buy, for example, out of state, or from Lyberger's or Phil
Hawes, he said. He referred to Dave Smith [previously referred
to by Mr. Hawes' as an out of state dealer]. He asked, "You
know what you get from him when you get the car? Nothing. You
get an owner's manual, keys, and less than one quarter tank of
gas." Lyberger's, he noted, has devised checklists to check the
vehicle, and has employees who have "been to every car lot on
the planet" and understand how the cars operate. He indicated
that people are "getting gouged left and right" by "all the big
car dealerships," whereas Lyberger's gives a "personal touch in
customer service."
MR. JOHNSON turned to the issue of a competitive market. He
noted that there are dealerships in other states that are
located directly across the street from each other, where a
customer can cross the street for a better deal. He compared
that to [Alaska's] "silly law" regarding 14 miles to the next
dealership.
Number 1513
REPRESENTATIVE LYNN asked Mr. Johnson if the $10,000
differential he previously mentioned applied to vehicles of
similar year and make that are also similarly equipped.
MR. JOHNSON responded, "Almost exactly equipped. If not, you
could probably put them side by side [and] not tell the
difference ...." In response to a follow-up question by
Representative Lynn, he said that this usually applies to the
more expensive cars. For example, he said that a $44,000 car at
Cal Worthington may be $34,800 at Lyberger's.
Number 1591
DOREEN McADAMS (ph) told the committee that she is one of the
sales managers at Lyberger's Car & Truck Sales, LLC. She noted
that, as Mr. Lyberger had previously testified, the franchised
dealers could sell their vehicles to "very close to what we
can," but they don't want to work on a small profit margin like
Lyberger's does. She noted that Lyberger's doesn't have a big
showroom, and she said, "We keep it simple." Furthermore, Ms.
McAdams revealed that [the franchised dealers] mark their
vehicles up over and above the manufacturer's suggested retail
price. She asked, "Who are they to say they can charge more
than what the manufacturer asks?"
MS. McADAMS mentioned that [Lyberger's] has disclosure
statements that she said she knows the committee members have
seen. She stated that when she asks her customers to sign them,
most of them are thrilled, because they don't have to go to the
[franchised] dealers, but instead can go to "somebody that they
feel comfortable with."
MS. McADAMS opined that HB 272 would be bad for the economy and
the customer, [because] more and more people would go Outside to
buy a vehicle. She stated that people will buy vehicles from
people that they like and trust. She added, "And that's what
we're doing here; it's people liking us and trusting us." Ms.
McAdams concluded by saying that there are only two kinds of
vehicles: new or used.
Number 1688
REPRESENTATIVE GRUENBERG referred to Ms. McAdams' previous
mention of having customers sign disclosure statements. He
asked if those are statements that are easily readable by the
customer and are clear, or if they are buried in other
paperwork. He surmised that a number of the committee members
strongly favor disclosure statements, but want to be sure that
[consumers] can read them.
Number 1739
MS. McADAMS explained that, before customers sign [disclosure
statements], a salesperson would have already told them that
they were buying a Canadian vehicle and that there would be a
replacement warranty on it. After the credit applications were
filled out, she said, the paper that the customer would sign
would be the only piece of paper at her desk, and she would have
spoken to them about it. In response to a follow-up question by
Representative Gruenberg, she described the [disclosure] as "one
paragraph on an 8 1/2 x 11 sheet of paper."
Number 1826
REPRESENTATIVE LYNN asked Ms. McAdams to clarify when the
customer is actually told that the vehicle is Canadian.
MS. McADAMS replied that the customer is told in the beginning
by the salesperson, then [sees that information again when]
signing the form with the sales manager.
REPRESENTATIVE GRUENBERG mentioned that a copy of the disclosure
was available for Representative Lynn to view.
REPRESENTATIVE LYNN noted that he has been involved in real
estate, and disclosure forms are not done after going through
"14 inches of other paper."
MS. McADAMS reiterated that [Lyberger's disclosure form] is the
only form the consumer signs at the sales manager's desk;
therefore, it is not shuffled around with a bunch of other
signatures.
Number 1900
CHAIR WEYHRAUCH asked Ms. McAdams to clarify at what point the
consumer is told if he/she is being shown a Canadian vehicle.
MS. McADAMS answered that the salespeople tell the consumer on
the lot.
CHAIR WEYHRAUCH asked if that was part of [Lyberger's] policy
manual.
MS. McADAMS responded, "Well, it's just common knowledge, so
they tell everybody." She noted that not all of Lyberger's
vehicles are from Canada. In response to a follow-up question
by Chair Weyhrauch, she said that the salespeople tell the
consumer about the replacement warranty up front.
Number 1933
REPRESENTATIVE CRAWFORD asked what the difference is between
Canadian cars sold at Cal Worthington [or] Alaska Sales &
Service [and those sold at Lyberger's], for example.
MS. McADAMS said [a Canadian vehicle] from Lyberger's would be
used. In response to a follow-up question by Representative
Crawford, indicated that the car could have a few too many miles
on it.
REPRESENTATIVE CRAWFORD asked, "And how many miles would an
Alaskan Sales & Service new vehicle have?"
MS. McADAMS answered that it depends on how many test drives
it's been on.
REPRESENTATIVE CRAWFORD said, "So, they might have 10, 20, or
100 miles, right?"
MS. McADAMS said, "Right, [or it] could have 200."
REPRESENTATIVE CRAWFORD said, "So, it's virtually the same car."
MS. McADAMS concurred.
Number 2000
REPRESENTATIVE CRAWFORD said, "So, you know that here in this
state, for a number of years, we've had a franchise law that
says that ... another dealer can't sell new cars within a 14-
mile radius of that franchise holder, right?"
MS. McADAMS responded, "We're not selling new cars."
REPRESENTATIVE CRAWFORD said, "But it's virtually new in every
respect, other than it doesn't have a ... manufacturer's place
of origin."
MS. McADAMS explained that they're used vehicles that have been
titled before.
REPRESENTATIVE CRAWFORD asked, "That's the only ... loophole
that you have going for you, right?"
MS. McADAMS answered as follows:
It's not a loophole; it's the facts. The fact is
they're used vehicles. Now, I could buy a car today
down at Alaska Sales [& Service] and decide that I
don't like it, and sell it tomorrow. What would make
that any different? I buy a vehicle and, God forbid,
my husband drops dead. I don't need a truck. I have
to go sell it. What would make that different?
REPRESENTATIVE CRAWFORD said, "You're a consumer, and then
that's selling it from a consumer. What we're talking about are
dealerships here." He clarified that what he is talking about
is [the difference between] the spirit of the law or the letter
of law. He said, "You may not be violating the letter of the
law, but it's certainly the spirit of the law if you're selling
a car that's virtually identical to the ... new-car dealer's
car. Nobody can tell the difference looking at it [or] driving
it. They're all exactly the same, aren't they?"
MS. McADAMS said, "Except ours are used."
REPRESENTATIVE CRAWFORD said that's what he calls a loophole.
MS. McADAMS reiterated that it's the difference between a new
and used car.
REPRESENTATIVE CRAWFORD suggested that maybe the law is fouled
up.
MS. McADAMS said, "This is a very simple bill. You either have
a new car or a used car. Our vehicles are used."
REPRESENTATIVE CRAWFORD responded, "That's my contention: it is
a very simple bill."
Number 2177
REPRESENTATIVE GRUENBERG asked, "Lyberger's isn't violating that
franchise law, is it?"
MS. McADAMS said, "Of course not."
REPRESENTATIVE GRUENBERG asked Ms. McAdams to confirm that that
franchise law only applies to holders of franchises.
MS. McADAMS answered that [it applies to] franchised people and
people that are selling new cars; however, she added that the
only people who can sell the new cars are franchised [dealers].
REPRESENTATIVE GRUENBERG said that's right. He asked her to
confirm that [the law] doesn't prohibit used-car dealers from
selling used cars.
MS. McADAMS answered, "Right."
Number 2190
REPRESENTATIVE GRUENBERG suggested to Representative Crawford
that if he has a problem with that law, then the remedy may be
to [change the law] to prohibit used cars from being sold,
because it doesn't do that now.
Number 2200
REPRESENTATIVE CRAWFORD said, "That's what the law that
Representative Weyhrauch has here does." He mentioned current-
model years.
Number 2240
JAMES MOORE, Owner, Jim's Muffler & Auto Repair, Anchorage,
Alaska, told the committee that he doesn't think [HB 272] is a
fair bill, and he said that he thinks things should be left as
is. He opined that [HB 272] is bad for business, economy, and
the consumer. He commented that everybody's picking on Mr.
Lyberger. He noted that when Mr. Lyberger moved [to his present
location] there was no Dodge Dealer or Tony Chevrolet.
MR. MOORE noted that he has been in the automotive business in
Anchorage for 35 years and has repaired every car that's made.
He said, "What I don't understand is, Alaska Sales [& Service]
is probably losing a lot of business to Tony Chevrolet, because
they sell Chevrolets and Buicks, and they sell Cadillacs." He
said he owns two Cadillacs, one of which he bought from Alaska
Sales & Service. He noted the number of miles that was on each
of the cars when he bought them.
MR. MOORE said he fixes cars for Alaska Sales & Service,
Chrysler, and Cal Worthington Ford. He noted some of the places
he has worked, including Alaska Sales & Service and Lyberger's
Car & Truck Sales, LLC. He vouched for Mr. Lyberger as being
the most honest businessman he's ever seen in his life. He also
noted that he started the I/M program [inspection and
maintenance program for automobile emissions] with former
Governor Tony Knowles.
MR. MOORE returned to the subject of his Cadillacs and told the
committee that one was made in Texas and one was made in Mexico,
and they both came through Canada through an auction sale. He
said, "So, somebody down in some other part of the country sold
these vehicles and then they went into Canada, and then they got
out of Canada into Alaska."
REPRESENTATIVE LYNN recalled that it was fairly recently that he
started noticing Lyberger cars and Mr. Lyberger's dealership.
MR. MOORE said, "No, ... I've been doing business with him for
over, probably, three or four years, and he worked at Anchorage
Chrysler as a car dealer."
Number 2465
RICHARD HYATT, Service Manager, Alaska Sales & Service in
Anchorage, said that the difference between new and used cars is
the issue. He said, "The only way that they're trying to call
this a used car is by finding a fictitious owner in Canada to
put on the title as the first owner, so he can sign off and then
sell it as a used car."
MR. HYATT opined that there should be a distinction between a
car that has never been used by anybody and has 20 or 30 miles
on it, and a used car that has actually been out in service.
MR. HYATT noted that there is a new Cadillac Roadster coming out
in the fall, which is called the "XLR" Cadillac. He revealed
that all Cadillac dealers don't automatically get to sell that
car. Before [Alaska Sales & Service] can get the vehicle, it
will send its sales staff Outside to train so that it will learn
how to sell the car. Then it will send its service staff out to
train and learn how to diagnose and repair the vehicle. He
noted that the essential tools have already been ordered at a
cost of approximately $4,000. The company has signed an
agreement to stock the parts that may be necessary to repair it,
he said. All of this, he explained, is in preparation before
these vehicles are even delivered. He estimated that if things
go as they have in the past with other vehicles, he expects to
see this vehicle in a local lot "long before we ever get the
vehicle."
MR. HYATT turned to the subject of customer satisfaction and
taking care of the customer. He continued as follows:
It's simple: If you're going to sell a new car,
especially one ... that costs as much as these do, you
need to have the facility and the equipment and the
training to take care of the customer. It's a simple
deal to take his money and toss him his keys, and then
tell him to go over to his dealer so they can explain
how to use all of the features on your car. And
frankly, that's what has been going on.
There's a service that comes from the dealer when you
buy a car that isn't reimbursed by the factory or
anybody else. It's the service after the sale, where
you take the customer out and show them how to use
their [antilock braking system] (ABS) brakes, or you
help them hook up their OnStar. You show them how to
use the memory seats and the memory mirrors. You show
them all the options on the car and how they're
properly used.
And this is what we have been doing as a courtesy to
Mr. Lyberger and the customers, because they're not
being told. They buy a car with 20 miles [on it].
They don't know how these things work, or they're not
capable of programming them, or using them. So I meet
them in the service aisle. And it's a courtesy to
them and Mr. Lyberger and the other used-car dealers,
as we're calling them. We provide that service for
the customers and properly instruct them and show them
how they work.
The matter of fact is that a car with 20 miles on it
is not a used car. Nobody has used that car. They
used somebody's name so they could turn in the
[manufacturer's statement of origin] (MSO) and get a
title to it; but everybody knows it hasn't ever been
used.
Number 2632
Right now the law says you cannot sell the cars
without the manufacturer's certificate of origin.
They're already is a law in the books. What is trying
to be done with this amendment is make it possible for
them to sell legitimate used cars that are actually
taken in the due coarse of business: somebody trades
them in; they buy them from a rental agency that turns
them in; or, like somebody said just a minute ago, you
buy it one day and don't like it the next, and you
sell it. That's all allowed in the amendments to this
bill.
It's just a matter of somebody has gone to the well a
few too many times. This thing started out very
slowly. They saw how they could make enormous amounts
of money by selling the cars and not providing any of
the service or facilities. And now businesses have
built up just to sell these particular kinds of
vehicles.
Number 2683
DAN COFFEY, Lobbyist for Lyberger's Car & Truck Sales, LLC,
referred to a [three-page] letter sent to Chair Weyhrauch [dated
May 15, 2003 and included in the committee packet], and he said
that it outlines what he will talk about. He informed the
committee that the methodologies by which "these cars" come into
the country is established by treaty with Canada and Mexico, and
then subsequently controlled by the code of federal regulations.
He noted that it's a legal and lawful practice associated with
NAFTA, and the methodologies used are prescribed by regulations
to protect the customer and to ensure the vehicles meet U.S.
standards, for example.
MR. COFFEY referred to [Mr. Hyatt's] previous description
regarding the practice of acquiring these cars and stated,
"That's simply not what happens." He continued as follows:
These cars are brought into the country by what are
known as "RIs" - registered importers, which have to
meet a certain level of standards and criteria in
order to bring these cars in. And the mileage on
these cars varies from very low to, sometimes,
substantial miles, but needless to say, they are these
Canadian cars that are brought in.
Once they get here, they've got to be certified.
Bonds are posted, [and] the cars can't be sold until
after all the documentation is done and the bond is
released. Then the cars are available for sale in all
50 states. ... So, what this bill really does is it
creates two classes of persons; it says, basically,
that you will not be able to sell these kinds of cars
here in Alaska, unless you're a franchised dealer.
And that doesn't apply to anyone else, and ... -
although we haven't done the legal research ... to the
"Nth" degree - ... it appears to be [in violation] of
the federal law which allows the cars to be imported
and sold in every state in the union. And now we're
going to prohibit a certain class of our business
people here in Alaska from doing that.
MR. COFFEY opined that the proposed legislation is not designed
so much to protect the consumer as it is [to protect] "one
particular aspect of business." He noted that his letter
recommends that if the committee wants to make [HB 272] a
consumer protection bill, it should include the language found
in the previously mentioned Holm Amendment [Amendment 1]. He
said that [similar amendments] have been adopted in many
jurisdictions, including Utah, which mandates disclosure of the
original origin of the vehicle. Then, he said, there would be
no question but that the consumer is informed and can make the
choice if he/she wants to take the alternative warranty, or buy
the car that's used, for example. He emphasized that then it
would be the consumer's choice, not "one that's hoisted on us by
the government."
MR. COFFEY told the committee that Mr. Lyberger and "the other
dealers" would support a consumer protection bill, but not one
they view primarily as anti-competitive in nature.
Number 2831
REPRESENTATIVE LYNN asked Mr. Coffey what steps he would have to
take to become a registered importer.
Number 2846
MR. COFFEY answered that Representative Lynn would have to be
qualified through a federal agency that he said he could not
recall the name of at the moment. He also said Representative
Lynn would have to put up a $20,000 bond per vehicle, and meet
other criteria, as well. He noted that neither Mr. Lyberger nor
any of "these 300-and-some dealers in Alaska are importers";
they buy from a registered importer. In response to a follow-up
question by Representative Lynn, Mr. Coffey said he believes
that the registered importers are just independent business
people and they do not work for the non-franchised dealers.
Number 2922
DONALD WALKER, Salesperson, Lyberger's Car & Truck Sales, LLC,
told the committee that it seems that Section 1 of HB 272 would
not protect the public, but would allow the franchised dealers
to "monopolize on their brand of vehicle," thereby eliminating
competition.
TAPE 03-66, SIDE B
Number 2953
REPRESENTATIVE GRUENBERG asked Mr. Coffey if HB 272, as
currently written, passes, would Mr. Lyberger and "people like
him" be able to continue their current business?
MR. COFFEY answered that they would not be able to sell current-
model-year cars. He stated his understanding that the intent of
the bill is to stop them from doing that. He added, "Absent the
few exceptions."
REPRESENTATIVE GRUENBERG asked if they would have a course of
action and be entitled to just compensation from the state.
MR. COFFEY said he hadn't thought about that [happening as a
result of] "the taking of their business." He said that they
certainly would have a cause of action to have the law declared
illegal, because of the commerce clause, the supremacy clause,
the fact that "selling automobiles is a legal a product," and
because "they're creating two classes of dealers, and they're
saying that one can sell them and another one can't." He
explained that there's no rational basis for the discrimination
between the two classes. He said he thinks there would be a lot
of legal problems associated with it.
Number 2882
REPRESENTATIVE GRUENBERG said this is a serious legal issue that
should be looked into.
Number 2870
CHAIR WEYHRAUCH responded that there is no time to look into
that [issue]. He added that there is a difference between a
court order and advocacy. He remarked, "... We all know that
lawyers are paid to raise issues, too." He said Mr. Coffey is
doing a good job and he appreciates that.
REPRESENTATIVE GRUENBERG said that the question is whether the
issue is a valid issue and one that has not been raised yet. He
asked Mr. Coffey, "If Mr. Lyberger did have a cause of action
against the state for taking this ... portion of his business,
do you have any idea what his damages in this one company alone
would be?"
MR. COFFEY said no, but he added that he thinks they would be
fairly substantial.
Number 2803
REPRESENTATIVE CRAWFORD asked Mr. Coffey if he was aware that if
the legislature doesn't "pass some law here, that all these
folks would be breaking the law, under the current law."
MR. COFFEY said that he disagrees with that inaccurate
statement.
REPRESENTATIVE CRAWFORD offered his belief that current-model-
year vehicles, under the law, have been illegal since 1993, but
the law has just not been enforced.
MR. COFFEY said he has had discussions with Mr. Sniffen of the
AG's office, and the problem that existed in the past, as it was
presented to him, was one of advertising the vehicles as "new"
or "like-new." He explained as follows:
A vehicle is used, by state law definition, when
there's no longer a certificate of origin, when that
vehicle's been titled. They don't go by the number of
miles; they go by the status of the vehicle relative
to its condition of title.
So, if you say you cannot ... advertise for sale or
sell as current-model-year, in a way that's saying you
can't sell a blue car. I mean, it either is a
current-model-year or it isn't. And it's either new
or it's used - one or the other. So, under current
law, you can't sell as new a car that's ... used -
that ... has been titled ....
So, that's what we've got here is -- and certainly
they're ... low mileage - there's no question of that.
But what you'd need to do if you wanted to do that is
you'd need to change the definition of new and used,
because these are clearly used vehicles.
Number 2721
REPRESENTATIVE LYNN mentioned sovereign immunity and asked Mr.
Coffey if he was saying that the state could be sued.
MR. COFFEY said that sovereign immunity applies, but it also has
to "fall to the idea of a man's property." He explained that if
the government takes a man's property, it has to compensate him
for it. He surmised that Representative Gruenberg's theory is
that preventing this kind of business for Mr. Lyberger is
tantamount to taking away a business right. He said he doesn't
know if that's a valid legal theory or not, because he has not
looked at that idea. Regarding sovereign immunity [as it may
relate to Mr. Lyberger's business], he added, "Now whether or
not it's property, I don't know."
Number 2650
REPRESENTATIVE CRAWFORD referred to [AS] 08.66.015, which read
as follows:
Sec. 08.66.015. Sale of motor vehicle.
(a) A person who does business as a dealer in the
state may not offer to sell or sell a motor vehicle as
a new or current model motor vehicle unless the motor
vehicle retains the manufacturer's certificate of
origin.
(b) A person who does business as a dealer in the
state may not offer to sell or sell a motor vehicle as
a new or current model motor vehicle having a
manufacturer's warranty unless
(1) the dealer has a current sales and service
agreement with the manufacturer and the agreement
requires the dealer, upon demand of the motor vehicle
buyer, to perform or arrange for, within a reasonable
distance of the dealer's place of business in the
state, the repair and replacement work required of the
manufacturer under the warranty; or
(2) the dealer offers to give the buyer a rebate
to cover the repair and replacement work that the
dealer cannot perform or arrange for within a
reasonable distance of the dealer's place of business.
REPRESENTATIVE CRAWFORD turned to a sentence in the fiscal note
analysis for [CSHB 272(L&C)], which read: "Currently, the law
prohibits the sale of any current-model-used vehicles." He said
he doesn't know how to make it plainer that unless the present
law is changed, then "all these folks are breaking the law."
MR. COFFEY offered his understanding that "they meet the
qualification relative to the current-model year with the
warranty programs that are available." He stated his
understanding that the proposed legislation would absolutely
prohibit that, "unless you're a franchised dealer," which he
said is a substantial change.
REPRESENTATIVE CRAWFORD responded that that's not exactly how
it's been explained to him. He noted that the reason the
committee brought the bill back after moving it out of committee
is that "we're all doing our best to try to understand this."
MR. COFFEY stated his belief that there are very strong consumer
protection concerns associated with this [issue]. He continued
as follows:
And I think that if that's ... our focus ..., and we
put a bill out that makes sure there's disclosure, and
if you're going to sell these things there's a certain
type of vehicle - like a current-model year - and make
them sound like they're ... something different than
just a used car, then you've probably got to provide
these warranties and these other things that are in
the current law. And ... we don't have any problem
with that.
It's the question of whether or not a person is ...
going to be precluded in any circumstances, no matter
what they do, from being able to sell these cars that
come in from Canada, which is really what the source
of the automobile is. And I think the problem I have
with it is: when you're on the consumer protection
side, with disclosures and required warranties, and
all that, then you're on the ... appropriate side;
when you're on the anti-competitive side that says,
"Wait a minute, this class of 320-some dealers, you
can't sell these things at all, period, no matter what
you do" - ... I think that's the thing that runs afoul
of NAFTA.
Because we clearly allow these things to be imported
into the country. That means somebody's going to have
to sell them. And every state does allow them to be
sold. As far as we can find, only Alaska's
considering prohibiting them. So, I think that's
going to cause some problems with the federal law. I
think you've got the commerce clause and the supremacy
clause, and all that stuff. And so I think that's a
legal problem. And then ... just the basic anti-
competitive nature is problematic to me.
So I think we ought to say, "Look, disclose that it's
a Canadian vehicle ...." And then, if you're going to
sell it in the way you're going to sell it - ... as a
current-model year - you've got to offer this warranty
that's in existing law. And then you've accomplished
your purpose, I think.
Number 2489
REPRESENTATIVE LYNN stated his understanding that it is not a
warranty, but a service contract.
MR. COFFEY said he thinks that's semantics more than anything
else, although he added that he doesn't know the particulars of
each warranty. In response to a follow-up question by
Representative Lynn, he said, "If it breaks and somebody else
fixes it for you, I don't care whether you call it a service
contract or a warranty. If you don't have to pay for the
repairs, then ... I think that's probably okay."
Number 2390
REPRESENTATIVE SEATON referred to the two kinds of warranties:
a manufacturer's warranty and [a service contract such as] the
Heritage warranty. He noted that they are both covered under
current law; however, the second kind of warranty would be
eliminated by the language on page 2, beginning line 3 of the
proposed committee substitute (CS) for HB 272, Version 23-
LS0975\H, Bannister, 5/14/03, which read as follows:
[DEALER OFFERS TO GIVE THE BUYER A REBATE TO COVER THE REPAIR
AND REPLACEMENT WORK THAT THE DEALER CANNOT PERFORM OR ARRANGE
FOR WITHIN A REASONABLE DISTANCE OF THE DEALER'S PLACE]
MR. COFFEY responded that that's also his understanding.
Number 2310
CHRIS HESTER, Lyberger's Car & Truck Sales, LLC, testified that
last year alone Lyberger's averaged 1,800 vehicles [sold]. He
said that it surprises him that the issue of odometer rollbacks
keeps being brought up, and that [people say] that consumers
will be hurt by these Canadian vehicles because there are no
warranties. Out of those 1,800-plus vehicles sold last year, he
noted, the AG only received one complaint.
MR. HESTER turned to the subject of price difference. He
explained that the reason there is such a price difference on
Lyberger's vehicles is because they are used cars. He stated
that a person pays less for a used car. He said that franchised
dealers have made Alaskans pay marked-up prices for the last 20
years and people are sick of paying those higher prices. He
posited that if consumers wanted to pay those prices they would,
but instead "they come and purchase used vehicles from our lot."
Mr. Hester added that if there was such a problem with these
Canadian vehicles he thinks the AG would be getting more than
one complaint out of all the cars Lyberger's sold last year. He
stated that HB 272 is a simple interest bill that is "for the
franchised dealer" and does not help the consumer.
Number 2217
CAROL LYBERGER, testifying on behalf of Lyberger's Car & Truck
Sales, LLC, stated that there is a difference between new and
used [vehicles]. She surmised that Lori Urban has been waiting
to testify and probably wishes to talk about "something that we
here in Alaska know nothing about," which is importing vehicles.
Without further ado, she deferred to Ms. Urban.
LORRI URBAN, Manager, Member Services, North American Automobile
Trade Association (NAATA), told the committee that NAATA
[serves] independent importers and exporters of motor vehicles.
Furthermore, she noted that 75 percent of its membership is
comprised of registered importers who import Canadian vehicles
into the United States.
MS. URBAN said she would address what she called the "myths" and
"half-truths" that the committee has been hearing. First, she
recalled that Mr. Aline previously testified that within his
franchised dealer agreement there is a clause that indicates
that he is prohibited from selling Canadian motor vehicles. She
remarked that she wonders if the committee has [seen] a copy of
that [agreement]. The very nature of that restriction, she
noted, would be contrary to federal trade laws.
MS. URBAN turned to the next myth regarding "the procurement of
Canadian motor vehicles from Canada into the United States by
college students." She noted that 210,000 Canadian vehicles
were legally imported into the United States last year through
the Registered Importer program, which is regulated by the
National Highway Traffic Safety Administration (NHTSA), [within]
the [U.S.] Department of Transportation. The federal laws and
regulations are in place for consumer protection. A registered
importer is licensed by that department, she said, and no person
may import a motor vehicle into the U.S. for the purpose of
sale, unless he/she is contracted with a registered importer.
She said, "210,000 motor vehicles is a lot of cars; to have
individuals going to dealerships [to] purchase this [many
vehicles] is neither practical [nor] economical."
MS. URBAN noted that for many years, automobile manufacturers
have used certain sales and marketing practices, both in the
U.S. and Canada, which are designed to stimulate car sales. She
said two of those practices are the use of fleet subsidies and
consumer rebates. Ms. Urban explained that fleet subsidies are
subsidies offered to purchasers of large quantities of cars,
such as rental car companies and large corporations. She said
these discounts can be larger than the discounts offered to the
franchised dealer, and for many years the franchised dealers
have been totally against this. She said that fleet purchasers
often resell fleet vehicles directly to the public or to non-
franchised dealers who in turn sell them to the public.
MS. URBAN referred the committee to United States v. National
Automobile Dealers Association for that information. She said
the [U.S.] Department of Justice found that the agreement by a
trade association or its members not to do business with other
competitors or customers for the purpose of (indisc.) is
(indisc.) violation of the Sherman Act.
Number 1945
MS. URBAN turned to the issue of odometer fraud. She stated
that it's not unique to Canadian cars, but is a North American
problem that "we're all concerned with." However, she offered
her understanding that "there is an amendment on the table that
would allow daily rental companies to sell vehicles after six
months, including Canadian vehicles." She added, "I'm not
seeing the relevance of the age difference in the motor vehicle.
I assume that at one time that vehicle was a nearly-new Canadian
vehicle, so I'm not understanding the difference of six months
for nearly-new for odometer fraud situations, which addresses
the public concern."
MS. URBAN reiterated that the federal laws regulate a registered
importer. She said, "They take on all the liability and the
responsibility of a manufacturer, once that motor vehicle is
imported into the United States." She noted that the registered
importer "has certain duties that he has to apply to." Ms.
Urban said that this is in regard to safety recall, and she
continued as follows:
For the next ten years that that motor vehicle is in
the United States, the registered importer is
responsible for notifying the titled owner of that
vehicle. There is a $20,000 bond on that vehicle, and
it will remain on there for the next 10 years.
... Also, it should be ... noted that even though
manufacturers are currently denying warranty on
Canadian motor vehicles, they cannot refuse safety
recall work on the same vehicle.
MS. URBAN indicated that, regarding noncompliance and safety -
related defects, there is a safety net of a quarterly report.
She also mentioned a duty to provide and retain copies of
odometer disclosure. When a registered importer imports a motor
vehicle into the U.S., she said, he/she must first obtain a
service record from a Canadian franchised dealer that indicates
that Canadian motor vehicle does not have a Canadian recall on
it. The reason for this, she explained, is that some of the
data bases from the manufacturer do not correspond from Canada
to the U.S.; therefore, in order to ensure that there is no
safety recall solely in Canada, that registered importer must
submit a document and printout to [NHTSA] with a compliance
package to ensure that either there has been no recall, or that
the work has already been done. She added, "With that work
order, you would find that the dealership would indicate the
miles and kilometers at that particular instance."
Number 1741
MS. URBAN noted that when the vehicle is moved into the U.S. and
the odometer is changed by the registered importer, that
importer must take a photograph of that odometer "in miles,"
submit an odometer statement, and certify that the odometer "is
true."
MS. URBAN revealed that registered importers face imprisonment
for up to 20 years if they're found guilty of noncompliance of
any of these regulations. She indicated that there are many
other safety nets. She said, "It's pretty much covered by
federal law that would ensure that the consumer is protected as
the motor vehicle is moving into the United States; ...
therefore, the Alaska law is not necessary." She noted some
additional requirements, including that a vehicle must be
brought into compliance within 120 days, otherwise it must be
exported back out of the U.S.
Number 1662
CHAIR WEYHRAUCH asked Ms. Urban to clarify how broad her
statement was meant to be regarding Alaska law not being
necessary.
MS. URBAN stated her understanding that the ultimate concern is
for the consumer, regarding odometer fraud, for example. Full
disclosure laws, she said, are currently in place. Other
states, she noted, have other laws in place to keep other
foreign vehicles out that don't meet the U.S. safety and
emissions standards. However, she pointed out that Canadian
vehicles are almost identical to U.S. versions, "save for the
odometer," and those particular vehicles are allowed into the
state. She concluded, "State laws are changing to ensure that
... full disclosure on Canadian motor vehicles is one of the
laws."
Number 1582
REPRESENTATIVE GRUENBERG asked Ms. Urban to confirm that the
odometer law is the result of the [Magnuson-Moss Warranty -
Federal Trade Commission Improvement Act].
MS. URBAN said yes.
REPRESENTATIVE GRUENBERG noted that that has been law since
approximately 1972.
Number 1566
GEORGE CLARK, Salesperson, Lyberger's Car & Truck Sales, LLC,
told the committee that the primary effect Section 1 of HB 272
will have is to hurt customers who would like to buy "late-
model-year" cars. He said he thinks that it's important to have
competition and HB 272 doesn't support that.
Number 1500
DARRELL FRIESS, testifying on behalf of Budget Car & Truck Sales
and Budget Rental Car of Alaska, told the committee that he is
concerned about Section 1. He offered his interpretation that
the effect of the bill would be to only allow someone with a
manufacturer's okay or a new-car dealership to sell a current-
model vehicle.
MR. FRIESS turned to the issue of Canadian vehicles. He noted
that Budget purchases vehicles for its car and truck division
through local auctions, as well as auctions in Oregon and
Washington states. One of the vehicles that may be available at
the auctions are current-model-year U.S. vehicles with anywhere
between 100 to 39,000 miles and higher. Mr. Friess admitted
that he does not specialize in buying those vehicles; however,
he currently has three 2003 Chevrolets on his lot with mileages
on each ranging from 6,000 to approximately 20,000. He said,
"So, the current law - the way it's in place right now - would
eliminate me from selling those vehicles, but it wouldn't
eliminate the other 49 states that are able to do that."
MR. FRIESS said that the distinguishing factor is in regard to
"new" and "used," which he acknowledged has been previously
discussed. He related that when he worked in the car business
in California back in 1990, he learned in training that if he
took a demonstration ride in a vehicle and did not have the
dealer plate in the window and he was subsequently pulled over
and cited for not having that current dealer plate, then that
dealership could not sell that vehicle as a new car, but had to
sell it as a used vehicle. What that meant, he explained, is
that that dealership actually had to register the vehicle and
sell it as used. He said he believes that law is still in
effect in California.
MR. FRIESS, in response to a request by the chair to conclude
his testimony, remarked that he has had a short time to converse
with [those involved with this legislation] and he invited the
legislators to call him for more details. He added that he
agrees with "everybody else [who] called in tonight."
Number 1212
RICK MORRISON, Owner, Morrison Auto Group, told the committee
that he is a new-car dealer, and he listed his credits as
follows: board of directors for the Alaska Automobile Dealers
Association; and member of the board of directors for the
National Automobile Dealers Association, serving as secretary
and head of government affairs, and nominee for the national
chair's position. Mr. Morrison said he has been in the car
business for about 30 years and has been a car dealer since
1985. He stated that he knows many of the previous testifiers
personally. Mr. Morrison stated that the important key to
remember is that nobody is "pointing fingers at these people,
trying to say that these people are a problem."
MR. MORRISON turned to the issue of Canadian vehicles, which he
said is a complex, controversial issue getting national
attention. He stated his belief that the State of Alaska is
probably not going to be the one that comes up with the answer;
therefore, he opined, trying to correct the importation
questions within the Alaska State Legislature is "going the
wrong direction." He stated that the basis of this legislation
is about brokering a "like-new" car.
MR. MORRISON said that this legislation is about clarifying a
law that is currently on the books. The "second part" of the
bill is an attempt to clean up the language from previously
passed legislation, in order to clarify consumer protection
issues regarding advertising, for example.
MR. MORRISON turned to Section 1. He said the issue of people
being allowed to sell a "like-new" car was already handled by
the state in a law made in 1993. He stated that there is a
substantial difference in selling a new car today, and a
customer's expectations of what comes with a new car is really
what the issue is about. He added that he believes that's why
the original bill was passed 10 years ago.
MR. MORRISON noted that this year alone, he will be spending
close to $100,000 between his two stores, solely for training.
He offered an example of one vehicle that will require $70,000
to set up the "warrants process" and training. He told the
committee that the salespeople cannot even sell the vehicle
unless they are certified by the manufacturer to do so. A
customer who buys a car with 10 miles on it, for example, is not
getting that trained personnel "to take care of it," he said.
He explained that nobody will have taken the time to lay out the
differences between a Heritage warranty and the manufacturer's
warranty, which he expressed are substantially different.
MR. MORRISON said, "I can't tell you how many customers I have
had call me with other brand names of cars - other than my brand
names - saying, 'What can I do about this situation, and how can
I deal with this?' And they have no leg to stand on." He
explained that they can't go back on lemon laws, nor can they
[follow] the normal processes [a person would follow regarding
a] new car.
Number 0860
MR. MORRISON said that he has invested "several hundreds of
thousands of dollars" to protect the customer and to provide
"the top level of service to meet the expectations that are
being put forward." He opined that a used-car [dealer] selling
a current-model car is trying to become a new-car dealer,
without the commitment and investment that a new-car franchised
dealer has. That's the reason the law was changed [in 1993].
He said he thinks it's important to keep in mind that [HB 272]
is not about regulating Canadian cars. He added that he doesn't
think "we" can do that. Rather, it's about clarifying an
existing law to make it more understandable. He said he thinks
the fact that "a lot of these lots have been tolerated and
allowed to sell these cars, doesn't mean that it's been right;
because they have been violating the law ... up through this
time, doesn't mean that they're justified in doing so."
MR. MORRISON said that [the impetus for HB 272] began with
discussion between the attorney general's office and the Alaska
Auto Dealers Association regarding issues and difficulties that
the AG's office was having because of consumer complaints. He
noted that customers were also complaining to service managers
of new-car dealerships. He said he would be thrilled to have
employees as dedicated as those who have previously testified
[on behalf of the used-car dealers], and he noted that the
committee has heard a lot of testimony from people who work for
the used-car facilities. He said, "That doesn't mean that the
law that was passed 10 years ago was a bad law. If there's
something that needs to be addressed on that, then I think
that's a separate issue."
Number 0722
MR. MORRISON noted that there are numerous states that have laws
that prohibit the sale of a current-model car. He named the
State of Washington as one. In conclusion, he reiterated that
this issue is a national one, and that the Canadian car issue is
not one that will be solved in the Alaska State Legislature.
Number 0640
MIKE McCABE, Fleet Manager, Kodiak Auto Auction in Anchorage,
told the committee that his company sells exclusively to motor
vehicle dealers licensed in the state of Alaska. He noted that
the House Labor and Commerce Standing Committee, while hearing
HB 272, imposed a six-month [minimum] time limit on rental
vehicles being in a bona fide rental fleet. He said that his
company deals with a lot of corporate and fleet accounts that
lease vehicles to rental car companies on terms shorter than six
months. He said he might see three- and four-month vehicles
come out of the rental car fleet and be brought to the auction
to be liquidated. He added that that is something that the
committee might want to consider.
MR. McCABE continued as follows:
A new-car dealer can take in a current-model-year
vehicle in on trade. Say, for example, a 2003
Chevrolet Tahoe gets traded in at a Ford store that is
selling 2003 Ford Expeditions. Sometimes that new-car
dealer would elect to take that vehicle to auction and
liquidate it; it doesn't want to sell a competitive-
make vehicle next to its Ford Expeditions. Under the
current statute, the buyers at the auction cannot
resell the unit, and knowing that the buyers at the
auction cannot buy that 2003 Tahoe, the dealer that's
taking that Tahoe in on trade will not give that
customer a fair deal. It creates a place where the
consumer would lose, and that would impact the car
business in general.
MR. McCABE referred to testimony he believed was offered by Mr.
Alexander yesterday regarding current-model-year bank
repossessions that have been sold at auction. He noted that
currently there's no language that will allow used-car dealers
to buy and then resell a current-model-year vehicle that is
repossessed by a lending institution and liquidated at auction.
He remarked that that's something that should be added to this
bill before it is passed.
Number 0401
MR. McCABE pointed out that his business services both used-car
and new-car dealers alike, who buy large volumes of cars at
auction to maintain a large and diverse inventory, and in its
current form, [HB 272] will severely affect the way these
dealers do business "with consideration to the auctions." In
the end, he concluded, that will effect the livelihood of "our
small businesses in Alaska" and the consumer.
Number 0369
MR. McCABE, in response to a question by Representative
Crawford, said that he has only seen Version D, and has not seen
a copy of Version H for HB 272.
REPRESENTATIVE CRAWFORD read Sections (4) through (6) of Version
H for Mr. McCabe [text provided previously]. He stated that
[the drafters of Version H] were trying to address Mr. McCabe's
concerns, and he asked him if they were successful in doing so.
MR. McCABE responded that from what he just heard Representative
Crawford read, it sounds as though a good job has been done to
meet his concerns. Notwithstanding that, he said that he thinks
that [Section (4)] should be changed to allow for the four-month
program that is seen from [Diamler] Chrysler, for example.
Number 0066
MR. ALWINE summarized that the existing law precludes both new-
and used-car dealers from selling a current-model used vehicle.
TAPE 03-67, SIDE A
Number 0001
MR. ALWINE reviewed the changes that would be effected by
Section (1) in Version H, and reiterated that it would allow all
dealers a level playing field. He noted that it would not
support "the brokering of new cars in the form of a low-mileage
used car."
MR. ALWINE stated for the record that he is not paid by the
Alaska Auto Dealers Association. On behalf of all the members
of the association, he reminded the committee that new-car
dealers are required to have the tools, training, and
facilities, and must meet very specific requirements and
restrictions in order to sell a new car. A used-car dealer who
is selling a "brokered" new car that he/she has obtained outside
of the system has none of the obligations or responsibilities
[as does the new-car dealer]. Ultimately, if there is a problem
with a current-model vehicle [sold by that used-car dealer],
"they will come back to ... all the new-car dealers." He
commented that the AG may or may not have received a lot of
complaints, because the new-car dealers "go out and try and make
it right for the consumer, so that it doesn't reach that level."
Number 0219
REPRESENTATIVE CRAWFORD asked if leased vehicles are included
anywhere in the proposed legislation.
MR. ALWINE answered yes. He explained that a leased vehicle is
a vehicle that's on a term, much like a rental. He added, "And,
frankly, that would be a used vehicle, and it could be disposed
of through the auctions."
REPRESENTATIVE CRAWFORD asked, "That's under the 'normal course
of business'?"
MR. ALWINE answered yes.
[The objection to Version H was left pending. HB 272 was held
over.]
ADJOURNMENT
The House State Affairs Standing Committee meeting was recessed
at 11:27 p.m., to be continued at 8:00 a.m. on May 16, 2003.
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