Legislature(2001 - 2002)
04/24/2001 01:55 PM Senate L&C
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ALASKA STATE LEGISLATURE
SENATE LABOR & COMMERCE COMMITTEE
April 24, 2001
1:55 p.m.
MEMBERS PRESENT
Senator Randy Phillips, Chair
Senator Alan Austerman
Senator Loren Leman
Senator John Torgerson
Senator Bettye Davis
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
SENATE BILL NO. 168
"An Act relating to loans made by the commercial fishing loan
program."
MOVED CSSB 168 (L&C) OUT OF COMMITTEE
SENATE BILL NO. 176
"An Act relating to distributorships."
MOVED CSSB 176 (L&C) OUT OF COMMITTEE
SENATE BILL NO. 191
"An Act relating to insurance pooling by members of an airline
employers association."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 189
"An Act relating to motor vehicles; and providing for an effective
date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
SB 168 - See Labor and Commerce minutes dated 4/12/01 and 4/19/01.
SB 176 - See Labor and Commerce minutes dated 4/19/01.
SB 191 - See Labor and Commerce minutes dated 4/17/01.
SB 189 - See Labor and Commerce minutes dated 4/19/01.
WITNESS REGISTER
Mr. Greg Winegar, Director
Division of Investments
Department of Commerce and Economic Development
P.O. Box 34159
Juneau AK 99803
POSITION STATEMENT: Opposed SB 168.
Mr. Ed Crane, CEO
Commercial Fishing and Agriculture Bank
2550 Denali St. #1201
Anchorage AK 99503
POSITION STATEMENT: Commented on SB 168.
Mr. John Haxby
Waukeshaw Alaska Corporation
P.O. Box 111098
Anchorage AK 99501
POSITION STATEMENT: Commented on SB 176,
Mr. Ed Sniffen
Department of Law
1031 4th Ave., Ste. 200
Anchorage AK 99501
POSITION STATEMENT: Commented on SB 176 and SB 189.
Ms. Deborah Luper
Eagle River AK
POSITION STATEMENT: Commented on SB 176.
Ms. Mary Marshburn
Division of Motor Vehicles
Department of Public Safety
PO Box 111200
Juneau, AK 99811-1200
POSITION STATEMENT: Commented on SB 189.
Mr. James Kiley
Alliance of Automobile Manufacturers
Washington, D.C.
POSITION STATEMENT: Commented on SB 189.
Mr. Steve Conn
Alaska Public Interest Research Group (AKPIRG)
P.O. Box 101093
Anchorage AK 99510
POSITION STATEMENT: Commented on SB 189.
Mr. Rick Morrison
Owner, Eero Volkswagen
Secretary, National Automobile Dealers Association
Chairman, Anchorage Chamber of Commerce
935 Gambell
Anchorage AK 99501
POSITION STATEMENT: Supported SB 189.
Ms. Catherine Reardon, Director
Division of Occupational Licensing
Department of Community and Economic Development
P.O. Box 110806
Juneau AK 99811
POSITION STATEMENT: Commented on SB 189.
ACTION NARRATIVE
TAPE 01-22, SIDE A
Number 001
SB 168-COMMERCIAL FISHING LOAN PROGRAM
CHAIRMAN RANDY PHILLIPS called the Senate Labor & Commerce
Committee meeting to order at 1:55 pm and announced SB 168 to be up
for consideration.
MR. GREG WINEGAR, Director, Division of Investments, said that Mr.
Crane, CEO of the Commercial Fishing and Agriculture Bank (CFAB),
had raised some issues relating to the Division's policies and the
way they administer the fund. He said:
I think it's important for the committee to know that we
have responded to those issues in writing and through a
series of meetings and also some telephone conversations.
As I testified last week, we did modify one of our
policies relating to quota shares just to be very sure
that we were not in any way overlapping their program.
Also, I want the committee to know that we will continue
to work with CFAB to better coordinate our programs,
because that benefits everyone and both of these programs
are very, very important programs for a very important
industry in this state. We may not agree on everything.
Our programs don't target the same people. They have
different purposes. So, we may not end up agreeing on
every single issue, but I really don't think this is the
form to settle those differences, because this bill
really doesn't speak to those things.
Basically, this bill, I think, is going to affect the
majority of harvesters that utilize this loan fund, most
of which don't qualify for CFAB financing. The concern
that we have, Mr. Chairman, as we have testified to, is
just the extra effort, time and energy that would be
needed to go through that application process twice.
MR. CRANE said he didn't have a response, but would answer
questions.
SENATAOR TORGERSON moved to adopt the L version 4/20/01 of SB 168.
SENATOR AUSTERMAN said he wouldn't object to moving it out of
committee, but he objected to the whole concept of the bill. He
said, "I think the whole issue revolving around this and the
information I've received from Mr. Crane and others that there may
be a problem with the Division of Investments and there may be a
problem within their fisheries loan programs, but I don't think
this is the way to address those issues. I think that if there is a
problem there, we should address the problem rather than creating
what I consider may another problem by tying it to CFAB."
CHAIRMAN PHILLIPS announced that there were no objections and the
committee substitute was adopted.
SENATOR TORGERSON moved to pass CSSB 168 (L&C) out of committee
with individual recommendations. There were no objections and it
was so ordered.
SB 176-DISTRIBUTORSHIPS
CHAIRMAN PHILLIPS announced SB 176 to be up for consideration.
MR. JOHN HAXBY, Waukeshaw Alaska Corporation of Anchorage, said he
would answer questions.
MR. ED SNIFFEN, Department of Law, said they don't have any
concerns with this bill, but he has two recommendations. One deals
with the definition of the required payment by a distributor to a
dealer of merchandise that's held as inventory. On page 2, line 6,
language currently requires the distributor to pay the dealer 100
percent of the net cost of any merchandise that he might have in
his inventory at the time of a termination of a dealership.
Inventory depreciates over time and it may or may not be worth what
the dealer pays, but he suggested changing it to something more
like on page 3, lines 11 and 12, which states that the distributor
is required to pay a commercially reasonable business value for
that inventory.
Also, under the exemption section on page 5, line 5, the
distributorship agreement for the sale, repair or servicing of
motor vehicles that are required to get registered are excluded
from the bill and MR. SNIFFEN said he would add some language to
that definition that would include "franchise agreement" to make it
clear that automobile franchise agreements between manufacturers
and dealers are also excluded.
He said other than those recommendations, Mr. Sniffen said he
supports the bill.
MR. HAXBY responded to the issue of depreciating merchandise, that
in many cases while it may depreciate for tax purposes, many times
the inventory valuation increases as the sectors increase prices.
So, he thought it would be better to leave the language as it is.
MS. DEBORAH LUPER, Eagle River, said she would answer questions.
MR. SNIFFEN clarified that these really aren't technical problems;
they're more suggestions and they don't have strong feelings one
way or another about any of those things.
SENATOR TORGERSON noted page 2, line 6, where it says 100 percent
of net merchandise except for repair parts, and said the first
thing that came to his mind is what happens if you're a
merchandiser of repair parts.
MR. HAXBY said he understood what he was saying and that he was
correct.
SENATOR TORGERSON moved on page 2, line 6, to delete ", except
repair parts,". There were no objections and it was so ordered.
MR. HAXBY concurred with the motion.
SENATOR LEMAN asked if that amendment would affect language on
lines 2 that said: "85 percent of the current net price for repair
parts."
MR. HAXBY answered, "It should not affect it as line 2 is to
include superceded parts."
SENATOR LEMAN moved to pass CSSB 176 (L&C) from committee with the
accompanying fiscal note and individual recommendations. There were
no objections and it was so ordered.
SB 191-JOINT AVIATION INSURANCE ARRANGEMENTS
CHAIRMAN PHILLIPS said that the prime sponsor of SB 191, Senator
Taylor, asked him to hold this bill while he worked on some
amendments.
SB 189-MOTOR VEHICLE SALES AND DEALERS
CHAIRMAN PHILLIPS announced SB 189 to be up for consideration.
MS. MARY MARSHBURN, Division of Motor Vehicles, said that she had
submitted her comments to the committee. She said that the Division
has had a good relationship with its dealers and understands their
concerns. The Division has also experienced problems with "fly-by-
night" operations. She said:
But SB 189 would propose to repeal all of the existing
dealer law and replace it with SB 189 provisions, which
seems to be geared in large measure towards manufacturers
and their franchises, mostly their commercial, their
working and their economic relationships. The dealer
world is larger than manufacturers and franchises and
includes a lot of smaller players. DMV has listed about
four pages of recommendations in the bill.
Very briefly, we question the need for licensing all of
the required parties in SB 189. We do believe there is a
continuing need to license the dealers as they are, short
of individual-to-individual sales, the public's primary
point of contact. We would propose some changes on page 2
of our comments to the dealer license section. Right now,
as it reads, it appears to us that one must sell both new
and used vehicles to be licensed as a dealer. We believe
that there should not be a requirement to sell both kinds
of vehicles, but one or the other, which is the
requirement for our recommendation for inserting "or" in
place of "and". We think, if the committee chooses to
continue with the licensing provisions, they should be on
a multiple year basis and coincide with other licensing
the state does.
SB 189 would repeal the bonding requirement for dealers.
Currently, that's $10,000 and it's $3,000 for a
motorcycle dealer. We think the dealers are in agreement,
as is the Department of Law, that this is an important
provision. Ten thousand dollars is insufficient if
someone does wish to seek redress. We recommend a minimum
floor of $50,000. I believe that the Department of Law
and perhaps the Dealers Association are looking at
$100,000. We've included some suggested language in our
amendments.
SB 189 speaks to the sale of three or more vehicles as
part of the qualification for a dealer. Current dealer
law does not list any number of sales for a dealer and
that's presented problems to the Division when trying to
work with people who purport not to be dealers, but in
fact, all of their business conduct seems to point to the
fact that they are dealers. We support putting a limit or
putting a floor, if you will, on the number of sales for
someone qualifying as a dealer. We think that three is
too few and would suggest five. The state national
averages for dealers ranges from three to 12. We believe
that five or six is a reasonable number. This would not
restrict an individual who is selling on behalf of a
family member or selling for personal use.
We do not support the need for issuing a state I.D. card
to every dealer and sales person. We believe that the
employee conduct is the responsibility of the dealer. We
believe that some businesses do require their employees
to have I.D. cards, like maybe oil companies, but these
can be obtained privately rather than through DMV and
that, in turn, will help with the fiscal note.
We raise the issue of the appropriate role of the state
in the relationship between the manufacturer and the
franchisee. Obviously, we do not make any recommendations
on that issue as we do with the Motor Vehicle Advisory
Boards and its constitution.
We do make recommendations. The commissioner is given
quite a bit of responsibility and authority. There is a
recommendation that he can assess penalties. If there are
multiple penalties within a 30-day period, one of the
sections in the bill recommends that these be treated as
a single violation. We recommend that consideration be
given to treating these as separate violations. Right
now, under current law, the dealer definition includes
businesses that sell trailers. This is on the third page
of our note to the committee. These are units without
power. I'm talking camping trailers, snow machines and
utility trailers. It is questionable in this Senate bill
whether they would be included in the bill and have to be
licensed or not. We really don't see any need for
businesses that sell only non-self-propelled equipment to
be licensed to dealers. So, we have recommended a change
in that. It also conflicts with motor vehicle law in
Title 28.
We raise the issue of one of the prohibitions on page 38,
prohibiting consignment lot sellers. The committee may
want to consider whether they wish to do this.
Consignment lot sellers can be problematic for the
consumer, for the Division. By the same token, there is
merit to having consignment lot sales in that the
availability of that avenue for advertising a vehicle
will allow an individual to place their vehicle in
usually a more visible location and give a little bit
more exposure.
Last, but not least, on page 41 of the bill, the
requirement to be licensed as a dealer includes having a
principle place of business. This is defined as a
permanent structure with a certain minimum of square
footage. Again, we understand where the dealers are going
with this and the effort to clean up this issue is
commendable, but this would prohibit not only businesses
that have tents or no structure, simply an open car lot.
As we read it, a permanent structure would not include a
prefab unit or a mobile home. We think this section
deserves some consideration and some flexibility in
construction to allow a more temporary kind of structure,
such as a mobile home. It is true that the large
dealerships, the General Motors, the Ford dealerships,
and the dealerships in town have significant investments
in the community. There are other smaller businesses that
do have an investment in the community, as well. It may
not be as large. They may not be able to necessarily
afford a structure as is described here. We do think
there is merit in trying to assure that individuals going
into business for the purpose of selling cars to the
public are responsible and can back up that product.
Obviously, there is a fine line between that and
excluding a sizeable chunk of the population from being
able to go into business.
Those are briefly the substance of our comments. I'll be
happy to answer questions...
MR. JAMES KILEY, Alliance of Automobile Manufacturers, said they
had submitted their suggestions and would answer questions.
MR. STEVE CONN, Alaska Public Interest Research Group (AKPIRG),
said he had the statutory sites where he suggested changes. He said
they are focused on the consumer perspective and that they should
have multiple options. They did not want anything in the bill that
would discourage opening of other dealerships. His focus has been
on the immediate needs of consumers who engage automobile dealers
and sales people.
The sales person license provision we would add to Mr.
Sniffen's suggestion of a course of study in consumer
law, that there be a background check for crimes of moral
turpitude. On the issue of the principle place of
business, which is AS 45.25.750, our main concern is not
the physical plant, but rather that books, records, and
files pertaining to automobile transactions be at a place
ready and available for individuals who might want to
discover matters to bring a private action under the
private attorney general provisions of the consumer
protection law or for the Department of Law or other
individuals.
We're concerned under AS 45.25.730 that the Motor Dealers
Advisory Board have audits by a member of the consumer
organization, because our concern has to do with
activities that might ultimately be for a good reason,
but inadvertently serve to limit competition. We think
that subsection (g) should be eliminated entirely since
no private entity or quasi private entity should be a
screen for decisions made by the attorney general
pertaining to the statutory provisions.
Under AS 45.25.410, we are mostly concerned that that's a
very elaborate recitation of ways that the dealer and
manufacturer might engage each other on matters of their
own understandings, but we want none of that process to
delay repair and compensation due and owing. The consumer
who ultimately pays and is responsible is a secondary
matter from the consumer's perspective who cannot afford
to have his or her vehicle without repair.
Subsections (r) and (s) in that same provision (AS
45.25.410), in the matter of exposure to hazardous
materials and substances, most assuredly, if such
information is available, it should be shared with the
purchaser of the vehicle, as well as, present and former
employees of the dealer who may have been exposed along
the way. We happen to agree with the Department of Law
that there are federal laws here that do apply regarding
notice. But our mantra from the consumer's perspective is
whichever law is more protective of consumer rights, new
state law or the federal, that should be applicable in
our state.
Number 1700
Under AS 45.25.420, on matters of damage resulting from
transportation, which of course, is a truly Alaskan
issue, we have not yet set a dollar amount, but we
definitely believe that any damage that would cause a
reasonable purchaser to reconsider his or her purchase,
should be shared. So, we err on the side of sharing
information, even if a repair has been made at whatever
level resulting from transportation.
On installment sales in the service contracts, there
again, there is state law on the subject and we hope that
the most protective would prevail. We very much like AS
45.25.520 that deals with deceptive practices that the
dealers have brought to the legislature. It's very nice
work on their part, but we would like to add to (b)(2)
some specification on service contracts whether
manufacturers or dealers by name or both are obligated to
honor the service contract. In other words, can a
purchaser take that contract and have it honored if they
move from Alaska to Florida, etc.?
We also very much like section AS 45.25.610, but we would
add to line 30, subsection 15, an addition - vehicles
declared wrecked, junked or totaled by insurers or other
state authorities." That is a strong matter of
disclosure, which is common in other states. On Section
610, we would add 25 and this would be essentially an
extension of the cooling off period from extant state law
to the subject of automobile sales and not merely new
automobiles, but other automobiles. We would suggest as a
preliminary matter, a five business day or five hundred
mile cooling off period, with provision for the dealer,
of course, to receive compensation should the vehicle be
returned aligned to normal rental or mileage fees for
days or miles which the dealer was held by the buyer
prior to the notice of rescission and redelivery of the
vehicle.
And then finally, on the statutory language pertaining to
warranties, we as the Attorney General's Office, note
that there are federal laws pertaining to these subjects
as well as notice. There again, our mantra is the issue
is that the strongest law should prevail, but overall we
have left aside many of the things that are of interest
to other people regarding the core relationship between
franchisers and franchisees and focus on this piece of
legislation as it pertains to the consumer, because
obviously the consumer is there at the table. We very
much appreciate the opportunity to weigh in in some
detail and share this information, not only with you, the
lawmakers, but also with Rick Morrison and the dealers.
MR. RICK MORRISON, owner of Anchorage Eero Volkswagen, Chairman of
the Chamber of Commerce, and Secretary of the National Auto Dealers
Association, added that they have had meetings with Assistant
Attorney General Ed Sniffen and Mary Marshburn, DMV, and they came
up with some amendments that could eliminate a lot of their
concerns. He said:
When we talk about consumer issues, one of the things
that hasn't been looked at - the things that we are
looking at for warranty coverage from manufacturers and
for protection to keep that dealer's contract alive as a
franchise agreement is also a consumer protection issue,
if you've got a business that is taking care of the
customers. Just since our last conversation on Thursday,
I had a conversation with our Porsche division yesterday.
They informed me that even though I've got a higher than
average market penetration, even though my customer
relations and customer satisfaction index rates at 98 -
100 percent continuously and has done so for the last
several years, and even though we're 100 percent trained
with our employees and even though we have a tool and
part requirement by our dealer agreement, they inform me
that now the new thing is if I don't build a 1,500 square
foot show room separate from the others that they will
not renew my dealer franchise license. This is the kind
of heavy-handed action that we have from the
manufacturers. When I discussed this with Ed Sniffen
earlier today, he said there is a federal law that will
allow me to go back and fight that and, in fact, there
is. The problem is that I don't have the resources, nor
the money, nor the legal staff to go back to do that.
That is exactly why these bills have been passed in 49
other states of the U.S.
MR. MORRISON said he has a manual for all the associated laws
throughout the United States and that he would share it and
work at resolving the issues with the different parties, but
he reminded them that it took placing a bill in Juneau to get
the manufacturers to even sit down and start talking to him.
The gentleman from Chrysler said Thursday that the whole thing
could be thrown out after he agreed to work with Mr. Morrison
on the issues.
MR. MORRISON said this is a good bill and he is still willing to
work on the issues with everyone.
Number 2000
MR. SNIFFEN commented that there is a remedy under federal law Mr.
Morrison mentioned that requires manufacturers to act in good faith
towards dealers. It can be expensive to litigate those issues,
because the act requires a person to file a court action in federal
or state court. This bill shifts the cost of that to the State of
Alaska. He didn't know if this bill really added any more
protection than the Automobile dealers already have, but it
requires the state to absorb the cost instead of the private
litigants.
MR. SNIFFEN also didn't think a bill like this could be applied
retroactively to affect existing franchise relationships. He had
seen it done in a couple of states, but only where a proposed law
doesn't significantly impair the obligations that already exist
under the current franchise relationships. He thought that SB 189
does impair or significantly change those obligations. He,
therefore, didn't see how they could apply those obligations
retroactively. He noted that he had met with Mr. Morrison and he
would like to work with him.
MS.CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community and Economic Development, suggested a
technical change on page 46, line 14 where her department's name
was used instead of the Department of Administration. She said that
the bill references the Administrative Procedures Act and it is set
up so that all of the duties are performed by the Department of
Administration.
SENATOR AUSTERMAN said that the Automobile Dealers Association say
that the licensing should be done through her office. He asked if
she had a position statement on that.
MS. REARDON said she didn't have a position yet, but had a
conversation with the Director of DMV three hours ago on that
subject, but her department had not had time to prepare a formal
position.
CHAIRMAN PHILLIPS asked her to prepare her recommendation in a
letter and bring it to the committee along with Senator Austerman's
position so that all the positions could be in one place. He said
they had a lot of work ahead of them on this issue.
He asked regarding Mr. Conn's recommendations on page 2, if damaged
vehicles by natural causes, such as a flood, could be added to
section (15), line 30, or was it included in the wording already.
MR. CONN responded that normally those types of situations would be
included in the wording.
MR. MORRISON said that one of Mr. Sniffen's concerns was cost to
the state on litigation and the National Organization pointed out
that when state laws are in place, the manufacturers have a
tendency to back off unless they have a true solid issue.
TAPE 20, SIDE B
CHAIRMAN PHILLIPS asked Mr. Morrison and Mr. Sniffen to come up
with another draft that everyone could look at. Mr. Morrison and
Mr. Sniffen agreed with that.
SENATOR LEMAN commented that the Alliance of Automobile
Manufacturers and others had come forward with some very
substantial comments and he thought that there should be a reason
given for accepting the suggestions or why they are rejected or
that the Chairman should appoint a subcommittee to grind through
it.
CHAIRMAN PHILLIPS said he would give copies of all the concerns to
Mr. Morrison and Mr. Sniffen to work through in preparing a bill
and then he would consider a subcommittee.
SENATOR AUSTERMAN commented that going through the comments from
the Alliance of Automobile Manufacturers, he saw that sometimes
they were talking about apples and oranges and that 30 days is not
long enough. He thought it was very important on the occupational
licensing aspects of this that they don't create new bureaucracies
to take care of this issue when there are already bureaucracies in
existence that can handle it. He also has a hard time with AS
45.25.170, sales person licensing, and whether that should be
required.
SENATOR TORGERSON said if they pick a bigger bond that $50,000, he
wanted the committee to consider a sliding scale for a small dealer
who doesn't sell more than eight or 10 cars.
SENATOR AUSTERMAN agreed.
SENATOR LEMAN agreed, also.
CHAIRMAN PHILLIPS said he appreciated everyone's patience with this
bill and adjourned the meeting at 2:53 p.m.
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