Legislature(2015 - 2016)BARNES 124
03/11/2015 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB67 | |
| HB123 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 123 | TELECONFERENCED | |
| *+ | HB 67 | TELECONFERENCED | |
HB 67-PRODUCT WARRANTIES & REQUIRED UPDATES
3:18:29 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 67, "An Act relating to product warranties and
required updates to products; and relating to dealers,
distributors, and manufacturers."
3:18:59 PM
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, speaking
as prime sponsor, stated that HB 67 came about as a result of
concerns expressed by retail construction equipment companies
with respect to the responsibility for performing warranty work.
He offered his belief that financial obligations that should
belong to manufacturers are being pushed down on local vendors.
3:20:49 PM
REPRESENTATIVE HAWKER stated that HB 67 was modeled on the
current statutes regarding boat and recreational vehicle
warranties. The bill would define the relationship and
responsibilities between vendors and manufacturers of equipment,
tools, and off-road vehicles used in construction, resource
extraction, development, snow removal, forestry and similar
functions. Within the bill are carefully crafted delineations,
he said, that will help to ensure that Alaska's dealers are
sufficiently and appropriately reimbursed for work and expenses
incurred on behalf of a manufacturer of certain equipment. He
asked to place very clearly on the record that this bill does
not apply to motor vehicles registered for highway use since
those vehicles fall under a separate class.
3:22:26 PM
REPRESENTATIVE HAWKER stated that HB 67 was limited to warranty
work on defective products and upgrades on those products. The
bill substantively sets a minimum reimbursement rate for parts
and labor, requires the manufacturer to send the necessary parts
that a dealer or distributor does not possess, sets deadlines
for approval and payment of claims, and clearly delineates and
identifies the responsible party - whether it is the
manufacturer or the vendor. He reported that 36 states have
enacted similar laws, which he characterized as commercial
protection laws regarding warranty work performed by dealers and
distributor for manufacturers. In addition, this bill would
extend the state's "lemon law" provisions for boats, ATVs and
new motor vehicles to the products covered in this bill.
However, this bill does not change the law with respect to motor
vehicles, but simply would extend the umbrella of protections
for inherently defective products, he said.
3:23:43 PM
REPRESENTATIVE HAWKER anticipated that the committee will hear
testimony that the major manufacturers object to this
legislation. He stressed that this bill would prevent
manufacturers from dictatorially exercising undue influence and
economic hardship on independent vendors in Alaska. Many
Alaskans depend upon the heavy equipment industry to support the
state's resource base. He characterized this an instance of
evolution and growth of state warranty protection laws, which
expands the laws that have been in effect for motor vehicles to
boats and recreational vehicles. He offered his belief that it
is now time to extend protections to heavy equipment
manufacturers.
3:25:33 PM
REPRESENTATIVE JOSEPHSON understood the focus of the bill was on
industrial equipment. He asked whether these changes could also
apply to stereos.
3:26:07 PM
JULI LUCKY, Staff, Representative Mike Hawker, Alaska State
Legislature, on behalf of the prime sponsor of HB 67,
Representative Mike Hawker, suggested that the committee first
adopt the proposed committee substitute (CS) for HB 67 since one
of the changes in the CS was to narrow the items covered by the
bill.
3:26:30 PM
REPRESENTATIVE HUGHES moved to adopt the proposed committee
substitute (CS) for HB 67, labeled 29-LS0129\E, Bannister,
3/6/15, as the working document [Version E].
CHAIR OLSON objected for the purpose of discussion.
3:27:00 PM
REPRESENTATIVE COLVER referred to a letter of support in
members' packets that points out the manufacturer's flat fee for
dealers to make repairs in the field causes a hardship in
Alaska. He asked to be directed to the language in the bill
that would cure this and allow dealers to charge reasonable fees
to perform the warranty work.
REPRESENTATIVE HAWKER deferred to Ms. Lucky.
MS. LUCKY stated that there is no minimum time or reasonable
time for field repair work; however, the bill would set a
minimum labor rate and clarify that there must be a certain
amount of time allowed for dealers to perform administrative
work. She directed attention to the labor rate in Version E,
beginning on page 2, line 28 to Sec. 45.45.777. She read, " ...
the manufacturer shall pay the dealer or distributor providing
the service at a rate that is not less than the highest of the
following for the labor of the technicians: ...." Thus the
manufacturers must select a rate that was at least as high as
one of the three rates listed in paragraphs 1-3, whichever is
the highest. In addition, the bill would require payment for
cleanup, preparation, diagnosis, disassembly, repair, testing,
and final cleaning as needed to provide a quality result.
Although it doesn't necessarily specific a minimum amount of
time, it does require that the time must be adequate to perform
all of these services, she said. In addition, she referred to
subsection (d), on page 3, lines 13-15, which requires
manufacturers to pay a dealer or distributor an hour for
administrative services.
3:29:47 PM
REPRESENTATIVE LEDOUX understood the sponsor's intent, but asked
for the rationale used to interfere with contractual rights.
It's easy to say, "This is the little guy and there's this big
bad corporation out there that's going to do really mean awful
things to the little guy so like let's change the law." She
said she once lived on an island and prices were higher but
government didn't set rate or price controls because people
trusted the free market system. She asked why the free market
system wasn't working.
3:31:02 PM
REPRESENTATIVE HAWKER suggested Representative LeDoux was likely
aware of the five legal elements of a valid contract, with one
being the absence of any form of duress on one of the
contracting parties. In fact, duress was a broad subject that
has been examined extensively in the legal system. He noted
there are certainly levels of what might be constituted as
duress in relation to a contracting entity, such as when one
party was in such a position that the other party is unable to
fairly negotiate the terms of an agreement. In those types of
circumstances one party can dictate the terms of the agreement.
Essentially this is what has been occurring with the vendor
relationships when one mega company is the manufacturer of a
product. He asked to refrain from using a specific
manufacturer, however, it could apply to any one of major
national or international manufacturers who dictate the terms of
their franchise agreements in the state. These franchisees
really don't have any choice except to say yes since these
contracts are not negotiable items due to the weight and
influence of one party to the contract. Thus these contracts
are not contracts negotiated at an "arms-length" among parties
of equal standing. He offered that HB 67 would provide
guidelines for the contracts that can keep them within sidebars.
This bill was crafted to provide guidelines and a reasonable
basis for the relationships between manufacturers and venders
without getting overly prescriptive, and without trying to
dictate a fixed rate or other terms; instead, to provide a
framework and a rubric of guidelines to create a fair economic
relationship between the manufacturers and vendors.
3:33:50 PM
REPRESENTATIVE LEDOUX asked how she obtains equal standing with
a bank [under contracts], since the bank is a corporation and
she is an individual. She pointed out that government doesn't
tell the banks what to charge consumers.
REPRESENTATIVE HAWKER replied that the banking industry, in
particular, the commercial loan industry, the residential loan
industry, or the consumer loan industry represent some of the
most heavily regulated industries in terms of tax codes, usury
statutes, and non-discrimination statutes under FIRREA, [the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989]. Under FIRREA any holder of property always has recourse
against the previous property holder for environmental damage,
he said. He respectfully requested that the financial
institutions between small individuals and the mega-banks is
exactly the kind of relationship being discussed here and
exactly why so many financial protection laws are in place at
the state and federal level.
3:35:37 PM
REPRESENTATIVE JOSEPHSON asked how disagreements are ultimately
resolved between the manufacturer and the ultimate purchaser.
MS. LUCKY replied that Ed Sniffen with the Department of Law
could more fully answer that question; however, the language in
this bill was based on current laws regarding ATVs,
snowmachines, and boats.
3:36:24 PM
REPRESENTATIVE JOSEPHSON asked about the issue of electronic
notice to the manufacturer from the vendor when there was a
defect or need for repair. He asked whether that was something
that could reasonably be added.
MS. LUCKY offered her belief that Representative Josephson was
referring to the certified mail requirement for the lemon law
provisions. She explained that the certified mail requirement
exists in all lemon law provisions in current statute and it
provides a proof of mailing and proof of receipt. However,
there currently isn't any standard for a proof of mailing for e-
mail and proof of receipt. For example, the aggrieved party in
this case could send an e-mail that shows the date stamp, but
the manufacturer could say it never received the e-mail.
Therefore, there currently is not any real standard of proof
except for certified mail, she said.
3:38:49 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), introduced himself said his
responsibilities included enforcement of consumer protection
laws, including ATV and motor vehicle lemon law statutes. He
said he has been doing consumer protection for about 15 years
and has encountered some situations that might address some
questions previously asked.
3:39:22 PM
REPRESENTATIVE LEDOUX acknowledged that what Representative
Hawker was addressing were instances when significant disparity
exists, which she referred to as an adhesion contract.
MR. SNIFFEN agreed.
REPRESENTATIVE LEDOUX asked whether the courts or the state
normally substitute their own provisions or if the courts simply
declare that the contract is null and void, which would be a
method of getting out of the contract.
3:40:23 PM
MR. SNIFFEN answered that it can be a little tricky. He
explained that the courts look to the intent of the parties when
they decide what a contract should look like if a contract of
adhesion issue arises. He said the Alaska Supreme Court has
handled contracts in different ways. If the consumer couldn't
reasonably understand the contract and there was not any
"meeting of the minds," contracts could sometimes be voided, he
said.
3:41:11 PM
REPRESENTATIVE LEDOUX asked what would happen if the consumer
understands the process, but doesn't have any other alternative.
MR. SNIFFEN answered that she just identified the reason for
lawyers, but in the event a factual or legal dispute arises and
it is a legitimate dispute, a jury or judge will ultimately
decide.
3:41:45 PM
REPRESENTATIVE LEDOUX related a scenario in which a small
community with one grocery store charges really high prices.
She asked whether the state or the court would intervene on
behalf of the customers.
MR. SNIFFEN answered that he also enforces anti-trust statutes.
He stated that with the recent closure of one grocery store in
Bethel there will only be one store left, which creates a
natural monopoly. He suggested that the state doesn't rate
pricing on products for a monopoly so the store will likely
charge whatever rates it feels the customers will bear; however,
the state would only get involved if predatory pricing contract
exists. For example, if the store was engaging in some type of
unilateral conduct to force out another competitor, or if the
price was set through some collusion to artificially raise
prices without the benefit of true market competition, the state
would intervene. In terms of an equipment supplier entering
into a warranty contract with a retailer, he suggested that what
the bill attempts to do is similar to laws pertaining to ATV or
auto manufacturers, who have so much power that they can
essentially dictate terms of the contracts. This bill would
provide some mechanism for vendors to be paid fairly, which of
course, are all policy decisions. The Department of Law has
reviewed HB 67 and believes it would provide good consumer
protection and did not find anything inconsistent with this bill
that isn't already done with other manufacturers.
3:44:48 PM
REPRESENTATIVE LEDOUX asked whether HB 67 would be
philosophically inconsistent, assuming there weren't any
predatory practices occurring, pointing to the earlier scenario
in which one store in one community can charge what it wanted to
charge.
MR. SNIFFEN understood the concern, but answered that it would
be a policy decision whether to regulate pricing in those types
of situations.
3:45:28 PM
REPRESENTATIVE HAWKER commended Mr. Sniffen for his accurate
portrayal of the bill. He clarified that this bill was not
about regulating pricing or transactions that relates to bulk
commodities, but it specifically relates to the relationship
between manufacturers and sellers that involve products with a
product warranty from the manufacturer. For example, Quaker
Oats doesn't put a warranty on oatmeal, he said. This bill does
not regulate any industry, pricing, or specific terms between
the manufacturers and vendors; however, the bill does put on
some sidebars to provide reasonable protections for vendors in
instances in which a dictatorial opportunity for the
manufacturer exists. Again, it would only apply to product
warranty issues and is limited to warranty issues, he said.
3:47:21 PM
MS. LUCKY said the bill would cover warranty work and required
updates in instances when the manufacturer wants something done
and the dealer provides that work on behalf of the manufacturer,
such as a product defect fixed, a safety modification, or
necessary improvement must be done. The first half of HB 67
covers this work, she said, and the second half of the bill
would address lemon law provisions, she said.
3:48:11 PM
MS. LUCKY referred to Version E and stated that the bill will
require the manufacturer to provide warranty to the dealer and
the dealer to provide the warranty and necessary manuals to the
ultimate purchaser of the item, with the dealer or distributor
to subsequently provide warranty service on behalf of the
manufacturer.
3:48:40 PM
MS. LUCKY described the "meat of the bill" as the provisions
related to minimum payments. She said the manufacturer would
not be allowed to restrict the parts, the number or type of
parts necessary to perform this work. The payment for required
services must meet a minimum payment in terms of labor rates and
time. For example, the bill would provide a minimum of one hour
for administration of the claim, plus reimbursement for
transportation and lodging costs when providing this service in
the field. In instances in which a product cannot be shipped
back to the dealer or distributor for warranty work, the vendor
has currently been bearing the cost of sending a technician to
the field, often via a flight to a remote site. The dealer
loses the employee's work for the day plus has not been
reimbursed adequately for any travel and lodging costs incurred.
MS. LUCKY related that the bill would establish a timeline for
the payment of claims, specifically the manufacturer will have
30 days to approve or deny the claim, and if not denied within
30 days would be deemed approved, with an additional 30 days to
remit payment.
3:50:05 PM
MS. LUCKY referred to page 4, line 15, which addresses the lemon
law provisions. She commented that the lemon law provisions are
similar to ones for other items, such as boats, ATVs,
snowmachines, and motor vehicles. She explained that the
purchaser can send a letter to the manufacturer that states that
despite a reasonable number of attempts the product still is not
functional. The manufacturer shall either provide the new
product or reimburse the purchase price minus an amount for the
use of the product.
3:51:02 PM
MS. LUCKY directed attention to page 6, lines 9-19, of Version
E, which outlines the exemptions and establishes a rebuttable
presumption for "reasonable number of attempts" to remedy a
defect in order to claim a replacement or refund.
3:51:21 PM
MS. LUCKY directed attention to page 7, lines 2-19, to proposed
Sec. 45.45.787, that defines what products are covered by this
legislation, which read, "(1) equipment, tools, or motor
vehicles if the equipment, tools, or motor vehicles are designed
to be used primarily for construction, road building, snow
removal, mining, oil projects, gas projects, forestry, resource
development, or a similar type of project. in this paragraph,
"motor vehicle" means a motor vehicle that is not 8 subject to
registration under AS 28.10.011; or".
3:52:06 PM
REPRESENTATIVE LEDOUX asked whether motor vehicles are covered
under a similar act.
MS. LUCKY answered yes; she was unsure how similar the law
covering the auto industry was; however, she related her
understanding that the auto industry has been working on details
of their warranty provisions under AS 45.45.
3:52:45 PM
REPRESENTATIVE LEDOUX asked whether the dealers are working with
the manufacturers.
MS. LUCKY answered that she was not privy to any specifics
between the auto dealer franchises and their manufacturers,
since the auto dealers are clearly exempted from this bill.
However, she related her understanding that the auto industry,
wanted an exemption from this bill since the industry has a
separate provision in statute.
3:53:41 PM
REPRESENTATIVE HAWKER reiterated that he was not aware of any
work being addressed related to automotive warranties. This
bill was developed specifically to exempt automobile warranties,
and HB 67 relates to qualified equipment under AS 45.45.787 as
previously discussed, he said.
3:54:36 PM
REPRESENTATIVE HUGHES referred to page 7 of Version E, and said
she noticed that construction and road building was covered, but
she did not notice road maintenance; however, she did notice
language "or a similar type of project." She asked whether the
sponsor was confident that will cover projects such as equipment
that places gravel on roads as well as other big equipment used
in road maintenance.
REPRESENTATIVE HAWKER answered that was absolutely the intent.
The bill doesn't delineate specific tools, but mentions
equipment, tools or motor vehicles designed for construction,
road building, snow removal, or similar type of project, which
would imply other work. He offered his belief that this
language would very definitely include it, with the exception of
any equipment subject to title and registration for on-road use.
3:56:07 PM
REPRESENTATIVE JOSEPHSON assumed that the period of warranty
service are typically mention, and not any surcharges being
foisted on vendors.
REPRESENTATIVE HAWKER said that was a reasonable
characterization; however, he suggested that the manufacturers
or vendors could better answer the specifics.
REPRESENTATIVE JOSEPHSON asked what would stop Kubota [Tractor
Corporation] from tacking on a surcharge for backhoe uses.
3:57:33 PM
REPRESENTATIVE HAWKER answered that was where competition in the
marketplace takes places, for example, if Kubota raises the
price of its skid loader by 15 percent, but John Deere [Products
and Services] or other manufacturer do not, market forces come
into play.
3:58:19 PM
REPRESENTATIVE LEDOUX asked why motor vehicles should not be
covered by the bill since all of the same problems will be
applicable.
MS. LUCKY answered that this bill was crafted not to include
auto dealers because it was not a problem constituents
requested. She requested that legislators often bring up bills
at the request of constituents. The auto dealers did not raise
issues in terms of reimbursement on warranty work. She related
her understanding that similar efforts occurred in 2009 with
boats, ATVs, and snowmachines. Since the auto dealers have
statutes that address their products, this bill will be limited
to off road motor vehicles. Further, it would be a policy call
for the legislature and the committee to discuss, but from the
sponsor's perspective, HB 67 was limited to address the specific
problem raised. Finally, the auto dealers indicated their
preference to address their products separately.
4:00:31 PM
REPRESENTATIVE HAWKER emphasized that HB 67 addresses a
different and unique market segment, rather than the highway
motor vehicle industry that already has a functioning set of
statutes. Further, HB 67 was limited to a gap in the statutory
protections for the commercial community.
4:00:58 PM
CHAIR OLSON suggested that the 2009 bill set up a firewall
between the auto industry and the off road vehicles, equipment,
and boats. He surmised one reason that the auto industry has
not testified since industry issues have been addressed.
4:01:24 PM
MS. LUCKY pointed out there was a zero fiscal note.
CHAIR OLSON removed his objection to adopting Version E. There
being no further objection, Version E was before the committee.
4:01:56 PM
CHAIR OLSON opened public testimony on HB 67.
4:02:14 PM
CHAD GERONADALE, Construction Machinery Industrial (CMI), stated
he works for CMI, and has worked in the construction equipment
industry for 28 years, including as a dealer as well as for the
manufacturers. He offered to provide some examples that can
help identify some of the situations equipment dealers face.
There are times in which the equipment industry has had to
comply with emission regulations that required making changes
with engines. In addition, the Tier IV upgrades; The Tier 4
standards provide manufacturers with a flexibility provision and
include an interim step - Tier 4-I [interim] upgrades. He
related that a manufacturer might have a piece of equipment in
Barrow experiencing problems with its emission control system.
The dealer would provide a synopsis of the symptoms of the
problem, and in turn, the manufacturer would respond with ideas
and which parts to replace or sometimes the dealer would not
hear back, but would send the dispatcher/technician. Upon
arrival, the technician may discover a certain component that
was not functioning, and if possible would change it, if not,
would bring the part to the branch, and once the replacement
part was available, would fly back to Barrow with the part, and
replace it. However, the manufacturer might only offer three
hours to replace the part, but would not pay travel time. This
could mean the equipment dealer or the customer must pay for
both flights to Barrow, plus and room and board, if necessary,
since the mechanic may not be able to accomplish the work and
take a return flight. In addition, a repair that might take
three hours in California, could take six hours in the 20 below
zero weather conditions in Barrow without a shop. He emphasized
that the additional labor hours are not reimbursed, and the
dealers seek relief.
4:06:16 PM
MR. GERONADALE said that typically the manufacturer warranties
take a "cookie cutter" approach, which may include four hours of
labor, and no reimbursement or limited reimbursement of an hour
for travel time. These programs may work in many other states,
but in Alaska due to the remoteness and geographical nature of
the state, don't work well. In addition, the change from the
emissions control issues, the engines are now controlled
electronically, which may require software updates, which again
means flying or driving to the machines and performing the
upgrades. When the machines lie off the road system or a
lengthy drive, for example, at Coldfoot, means a four-hour drive
to perform an upgrade that might take 20-30 minutes; however,
the mechanic would be gone for the whole day, yet the
manufacturer may only allow reimbursement of one-half hour to
one hour.
4:08:46 PM
CHAIR OLSON, after first determining no one further wished to
testify, closed public testimony on HB 67.
4:09:13 PM
REPRESENTATIVE HUGHES moved to report the proposed committee
substitute for HB 67, Version E, out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, the CSHB 67(L&C) was reported from the
House Labor and Commerce Standing Committee.
4:10:06 PM
The committee took an at-ease from 4:10 p.m. to 4:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB67 ver W.PDF |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Sponsor Statement.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Fiscal Note-LAW-CIV-03-06-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Supporting Documents-Letter CMI Construction.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Opposing Documents-Email John Deere 2-16-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Opposing Documents-Letter CNH Industrial 2-25-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Opposing Documents-Letter AEM 3-05-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Draft Proposed Blank CS ver E.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB67 Sectional Analysis for Draft Proposed Blank CS ver E.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |
| HB123 Letter from DOA-OAH regarding fiscal note revision.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 123 |
| HB123 Fiscal Note-DCCED-ABC-03-09-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 123 |
| HB67 Opposing Documents-Email CNH Industrial with Letter 3-10-15.pdf |
HL&C 3/11/2015 3:15:00 PM |
HB 67 |