Legislature(2017 - 2018)BARNES 124
04/02/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB155 | |
| SB108 | |
| HB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 108 | TELECONFERENCED | |
| + | SB 155 | TELECONFERENCED | |
| + | HB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 136-MOTOR VEHICLE DEALER FRANCHISES
4:50:01 PM
VICE CHAIR WOOL announced that the final order of business would
be HOUSE BILL NO. 136, "An Act relating to motor vehicle
franchises, motor vehicle transactions, motor vehicle dealers,
motor vehicle manufacturers, and motor vehicle distributors."
4:50:27 PM
REPRESENTATIVE MATT CLAMAN, Alaska State Legislation, presented
HB 136 as prime sponsor. He paraphrased the sponsor statement
to the CS to HB 136, Version R, [included on committee packet}
which reads as follows [original punctuation provided]:
House Bill 136 updates Alaska statutes dealing with
franchise agreements between Alaska's auto-dealers and
the automobile manufacturers and distributors. The
need for a change in franchise agreements became
apparent after the 2008 market crash when General
Motors and Chrysler terminated roughly 2,000
dealerships. As of 2016, Alaska dealerships directly
or indirectly employed 6,876 people. In the same year,
car sales accounted for 14.1% of total retail sales in
Alaska. House Bill 136 recognizes the contributions of
auto-dealers and manufacturers to Alaska's economy and
updates Alaska statute to update protections for both.
The work draft CS HB 136 Version R - is a product of
extensive negotiations between the Alaska Automobile
Dealers Association and the Alliance of Automobile
Manufacturers. Both groups have worked together to
find solutions that protect the consumer, protect the
investments of Alaska's auto-dealers, and maintain the
brands of the manufacturers.
House Bill 136 updates statutes relating to warranty
repair work, requiring a manufacture to pay for
warranty work at a competitive rate that is consistent
with the retail rate for non-warranty work. It also
outlines the requirements for warranty repairs for
consumers who are 100 miles or more away from a
dealership. The bill expands upon dealership
terminations. It sets out good cause for terminations
and sets out the manufacturers and auto-dealers'
financial responsibilities during terminations. The
bill also updates the provisions and terms for
transferring or selling a dealership. Manufactures may
not unreasonably prevent the transfer of a dealership
to someone who meets their standards. Manufacturers
may use the right of first refusal except in
circumstances involving the transfer of a dealership
to family members or managing employees owning more
than 15% of the dealership. Lastly, the bill defines
certain unfair practices.
House Bill 136 brings the auto dealer franchise
agreements in-line with similar laws in other states.
It is the intent that with this legislation, we may
provide support for an industry that services and
employs thousands of Alaskans.
4:52:41 PM
REPRESENTATIVE CLAMAN addressed the sectional analysis, which
reads as follows:
Section 1
Adds legislative intent language to uncodified law:
It is in the public interest to protect have warranty
service for new motor vehicles and maintain fair
competition among auto manufacturers and auto dealers.
Section 2
Amends AS 45.25.010:
Applicability: AS 45.25.020 -045.25.310 apply to
franchise agreements between manufacturers and Alaska
auto dealers.
Section 3
Amends AS 45.25.110(a):
Manufacturers may not terminate an auto dealer unless
they have complied with notice requirements and shown
good cause for termination. Auto dealers have up to
120 days to correct areas out of compliance with the
franchise agreement. The manufacturer may terminate a
franchise if the dealer has systemically engaged in
fraud.
Section 4
Adds new subsection to AS 45.25.110:
Good cause to terminate a franchise does not include
the failure of an auto dealer to meet sales or service
goals due to factors beyond the control of the dealer
including market conditions or insufficient supply of
new motor vehicles.
Section 5
Amends AS 45.25.140(a):
Updates and amends the manufacturers repurchase
requirements upon termination of a franchise
agreement. The manufacturer must repurchase current
year models of new motor vehicles, certain new motor
vehicle models from the prior year, parts, trademark
signs and equipment, special tools, computer,
printers, and electronic hardware.
Section 6
Amends AS 45.25.150(b)
If a franchise termination occurs, auto dealers have
an obligation to mitigate damages under a lease and
mitigate the costs of facility relocations,
alterations or remodels.
Section 7
Adds new subsection to AS 45.25.150:
If a franchise termination occurs, manufacturers must
pay the costs of relocation, alteration or remodeling
of an auto dealers facilities if they were required by
the manufacturer and were completed within three years
of termination.
Section 8
Repeals and reenacts AS 45.25.160:
This section establishes a procedure for the proposed
transfer of a dealership.
• Manufacturers may not prevent the sale of a
franchise to a potential buyer who is capable of
being licensed as an auto dealer and who meets
the manufacturers' standards.
• Upon receipt of the notice to transfer the
franchise, manufacturers have 30 days to request
supplemental information after which the
manufacturer has 75 days to give notice of
rejection of the transfer.
• The manufacturer has the right of first refusal
to a transfer with limitations. The manufacturer
has the same notice requirements for the right of
first refusal as they have for rejecting the
transfer outright. A manufacturer may not
exercise the right of first refusal if the
transfer of the franchise is to a family member
or a managerial employee owning 15% or more of
the dealership. If a manufacturer exercises the
right of first refusal, then the manufacturer
must provide the auto dealer with the same
compensation as offered by the proposed buyer.
The manufacturers must also pay the legal fees
incurred for the preparation of the void transfer
agreement.
Section 9
Amends AS 45.25.180(d)
Expands the factors that the superior court must
consider in a lawsuit addressing whether good cause
exists to establish or relocate a dealership.
Section 10
Adds new subsection to AS 45.25.180
Establishes the burden of proof in a franchise
lawsuit. A manufacturer has the burden of proof to
establish good cause for establishing or relocating a
dealership that the manufacturer has proposed. An auto
dealer must establish good cause for any establishment
or relocation that the auto dealer proposes.
Section 11
Amends AS 45.25.190
This section updates the statutory references in the
arbitration section.
Section 12
Adds new sections to article 2 of AS 45.25
This section addresses warranty work and pay rates for
warranty work:
Sec 45.25.200: A manufacturer must pay an auto
dealer for all warranty work if the auto dealer
provides documentation of the need for the
repairs. The auto dealer must submit the claim
within 90 days of the completed warranty work,
and a manufacturer must approve the claim within
30 days of receipt. If the manufacturer rejects
the claim they must provide notice of their
reasons to the auto dealers, who may correct the
issues within 30 days of receipt of the
rejection. A manufacturer may conduct an audit of
warranty repairs performed, which must be done
within a year of the claim. Only one audit can be
performed per year.
Sec 45.25.210: A manufacturer must provide auto
dealers with a schedule of compensation for
warranty work. The rates may not be less than the
rates that the auto dealer charges customers for
similar retail work. To establish this warranty
rate, auto dealers shall submit 100 sequentially
ordered claims. Rates for special events and
manufacturer specials are not considered in this
calculation.
Sec 45.25.220: If a vehicle needs warranty
repairs and is located in a remote location, the
manufacturer shall make reasonable efforts to
repair the vehicle in the remote location. If the
repairs cannot be made on site, the manufacturer
may arrange, at no cost to the owner, to ship the
vehicle to a location where repairs can be
completed. The manufacturer is responsible for
returning the repaired vehicle to the remote
location. The manufacturer may direct auto
dealers to refer customers in remote locations to
the manufacturer. Auto dealers may subcontract
warranty work in a remote location. 'Remote
location' refers to a location that is not
accessible by road or is 100 road miles or more
from an auto dealer.
Sec 45.25.230: Manufacturers shall provide auto
dealers with specific instructions for the
preparation of new vehicles before delivery to
buyers, compensation for the preparation, and the
amount of time allowed for preparation.
Section 13
Repeals and reenacts AS 45.25.300
Regarding unfair practices, manufacturers may not:
• Require or coerce auto dealers to relocate or
remodel their facilities if the changes are
unreasonable.
• Require auto dealers to purchase a set number of
certified pre-owned vehicles or lease return
vehicles
• Refuse to deliver for sale a line or make of
vehicles that manufacturer makes.
• Require auto dealers to purchase unreasonable
advertising displays or an unreasonable number of
signs.
• Require auto dealers to accept vehicles, parts,
accessories or equipment they did not voluntarily
order.
• Increase the price of a vehicle ordered by the
auto dealer between the time of order and the
time of payment.
• Require or coerce auto dealers to join an
advertising association or contribute to an
advertising campaign.
Section 14
Repeals and reenacts AS 45.25.990(19)
Defines "terminate" for this chapter.
Section 15
Adds new paragraph to AS 45.25.990
Defines 'schedule of compensation" and "warranty work"
for this chapter.
Section 16
Repeals AS 45.25.320
4:58:33 PM
REPRESENTATIVE JOSEPHSON asked whether the bill represents an
agreement between the two sides.
REPRESENTATIVE CLAMAN said the dealers would present what they
like about the proposed bill and the manufacturers would do the
same.
4:59:46 PM
GARY SLEEPER, Attorney, testified in support of HB 136. He said
the automobile manufacturers present franchise agreements on a
"take it or leave it" basis. He mentioned requirements for
remodeling dealership premises, payment for warranty repairs on
manufacturing defects at 70 percent or less, or termination due
to a failure to meet sales goals. He explained that in Alaska,
the law governing automobile franchises was adopted in 2002 and
has not been updated. He highlighted Section 12 of the proposed
bill, which provides for manufactures to pay for warranty
repairs at the same rate as paid by consumers for similar non-
warranty work.
5:07:51 PM
MR. SLEEPER shared his appreciation for Representative Claman's
work on the proposed bill.
5:09:08 PM
VICE CHAIR WOOL opened public testimony on HB 136.
VICE CHAIR WOOL held over HB 136.