Legislature(2017 - 2018)BUTROVICH 205
04/13/2018 03:30 PM Senate STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB136 | |
| SJR9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 136 | TELECONFERENCED | |
| *+ | SJR 9 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 136-MOTOR VEHICLE DEALER FRANCHISES
4:22:24 PM
CHAIR MEYER announced the consideration of House Bill 136 (HB
136).
4:22:53 PM
SARA PERMAN, Staff, Representative Claman, Alaska State
Legislature, Juneau, Alaska, noted that Chair Meyer is the
sponsor of the Senate's companion bill, Senate Bill 47 (SB 47).
She provided an overview of HB 136 as follows:
The driving forces behind HB 136 were the repeated
conversations about the need to statutorily update
franchise agreements between auto dealers and auto
manufacturers; much of this discussion was driven by
issues with warranty practices and franchise
termination.
When we first introduced this bill last year, it
looked very different; however, we had trouble getting
it out of "first gear" when we hit a "speed bump" with
the auto manufacturers. With their concerns in mind we
decided to "throw the bill in reverse" and work to
find a compromise between all parties. While the bill
"idled" in the House Transportation Committee,
Representative Claman and Senator Meyer brought both
manufacturers and auto dealers to the table and we've
worked out a revision that is now acceptable to both
auto dealers and manufactures; this is the version in
front of you today.
The CS of House Bill 136 updates warranty policy to be
more consumer friendly, it provides customers who live
in remote locations either off-the-road system or more
than 100 miles from a dealer with a reasonable option
for warranty repair coverage. As it stands, customers
currently need to pay to get their vehicle to and from
an authorized dealer for warranty repairs. With House
Bill 136, the manufacturer will be responsible for
warranty repairs in the remote location or shipping
the vehicle to and from an authorized location at no
cost to the consumer.
House Bill 136 also updates the rates that
manufacturers may pay auto dealers for warranty work.
The updated rates may not be less than the rates that
the auto dealer charges customers for similar non-
warranty-retail work; this equalizes the rate for
repair work across the board.
"Shifting gears," House Bill 136 amends statutes
concerning terminations and succession of franchises.
Manufactures must have good cause for terminating the
franchise and must provide dealers with notice and
allow dealers to attempt to fix areas out of
compliance with franchise agreements before
terminating the dealer. During the sale of a
franchise, a manufacturer must also take into
consideration whether the potential buyer is an
immediate family member, partial owner, or meets the
standard requirements when approving the sale.
4:22:59 PM
SENATOR EGAN joined the committee meeting.
4:25:33 PM
MS. PERMAN referenced the sectional analysis HB 136 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 percent 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.
MS. PERMAN reviewed the "substantial parts" of HB 136 as
follows:
Section 3
Is about dealership terminations. Manufactures may not
terminate dealers without good cause and meeting the
proper notice requirements.
Section 4
Expands upon that good cause, if a dealer cannot meet
sales goals due to factors out of the dealer's
control, such as lack of inventory or delayed
shipments, it does not amount to good cause for
termination.
Section 5
When terminating dealerships, the manufacturer must
repurchase all current year models, certain new motor
vehicles from the previous year, trademark signs,
parts, tools, computers and equipment.
Section 8
Is about the transfer of dealerships. Manufactures are
given the right of first refusal for transfers;
however, they may not prevent the transfer of a
dealership if the potential buyer is capable of being
licensed as an auto dealer and meets the manufacturers
standards. Manufacturers also may not reject the
transfer of a dealership to an immediate family member
of the current owner or a managerial employee who owns
15 percent or more of a dealership.
Section 12
Covers warranties, manufactures have the burden of
repairing warranty vehicles for consumers that live in
remote, off-road locations or more than 100 miles from
a dealership; this is places like Kodiak or Nome where
someone may have a brand-new Mercedes but there isn't
a Mercedes dealer in town, they have the burden of
repairing it either in the location or paying for it
to be transfer to an authorized shop and then paying
of it to come back at no cost to the consumer. This
section also changes the rates dealers are paid for
warranty work to match the amount they are paid for
non-warranty retail work.
Section 13
Lists unfair practices and among these manufactures
may not require unreasonable advertising displays or
require dealers to join advertising associations.
4:27:39 PM
SENATOR WILSON asked what the shipping costs are to ship a
vehicle to off-road locations.
MS. PERMAN answered that there were concerns about the use of a
third party to do warranty work with the manufacturer unable to
guarantee the work that the manufactures preferred to take on
the burden of doing the maintenance themselves to maintain their
reputation and brand.
SENATOR WILSON asked who sets vehicle transportation in motion.
MS. PERMAN replied that she was not sure but noted that the
burden falls on the manufacturer.
SENATOR COGHILL asked how the new law will affect existing
franchises. He inquired if the legislation requires immediate
conformity.
MS. PERMAN replied that she would defer to the lawyer for the
Alaska Auto Dealers Association, Gary Sleeper.
4:31:18 PM
GARY SLEEPER, Attorney, Alaska Automobile Dealers Association,
Anchorage, Alaska, explained that the bill was drafted to be
remedial and apply to existing franchise agreements but only to
the extent permitted by the Alaska Constitution and the United
States Constitution. He noted that the provision was approved by
the manufactures and detailed that it may or may not be applied
retroactively depending on the particular provision at stake and
decided on a case-by-case basis.
4:33:00 PM
SENATOR COGHILL remarked that many manufactures can come down
with requirements and asserted that the provision provides a
backdrop for some protection. He noted that franchises have
requirements for advertising, quality and volume. He asked if
the bill provides enough "Alaska unique protection."
MR. SLEEPER answered yes. He explained that section 13
identifies a couple of unfair practices. He noted that a new
section was added to say that the manufactures cannot require a
new auto dealer to purchase unreasonable advertising. He
detailed that the intent was to give the Alaska dealers the
right to pushback a little bit when manufactures try to require
participation in expensive advertising campaigns, especially
when designed for a national audience rather than an Alaska
audience.
SENATOR COGHILL asked if the arbitration addressed in the bill
is a new technique.
MR. SLEEPER answered that the amendment was technical and
conforming to correctly cite the statute. He added that there
was no change from the existing law.
CHAIR MEYER thanked Ms. Perman for providing partial credit for
the legislation but asserted that all the credit goes to her and
Representative Claman. He conceded that he did not think it was
possible to get both groups in agreement but somehow "A rabbit
was pulled out of a hat." He noted that Senator Coghill has
tried to get similar legislation passed for many years as well.
He continued as follows:
This "vehicle" has been "going many miles" and I want
to thank you for not "wrecking this vehicle" and
"keeping it on the road."
4:36:39 PM
CHAIR MEYER opened public testimony.
4:36:47 PM
MARTEN MARTENSEN, Owner, Continental Auto Group, Anchorage,
Alaska, testified in support of HB 136. He disclosed that work
began on the legislation four years ago. He detailed that the
bill was over 30 pages long but Representative Claman
recommended the bill be pared down. He revealed that
Representative Claman mediated between the Alaska Auto Dealers
Association and the manufactures. He asserted that the
legislation protects dealers and its customers.
CHAIR MEYER emphasized that the bill is neither for the auto
dealers or the manufactures, but for consumers.
4:39:00 PM
LESTER NICHOLS, Owner, Fairbanks Nissan, Fairbanks, Alaska,
testified in support of HB 136. He opined that a good deal is
only good if it was good for everybody and asserted that HB 136
"fits that criteria." He said the bill is good for Alaska
consumers, dealers and manufactures. He emphasized that the bill
helps Alaskans protect the work that he and other auto dealers
have put in to create a legacy. He said having the ability to
hand his dealership on to his children is important to him. He
added that there are a lot of Alaskan consumers living in
outlying areas that need assistance in warranty issues.
4:42:59 PM
STEVE ALLWINE, President, Mendenhall Auto Center, Juneau,
Alaska, testified in support of HB 136. He noted that he is also
a member of the Alaska Auto Dealers Association board of
directors as well as the state director for the National
Automobile Dealers Association. He asserted that HB 136 serves
to update state franchise law that has not been updated since
originally written in 2002. He said HB 136 will serve dealers,
employees and consumers throughout the state, especially those
in remote areas. He added that HB 136 addresses dealer
succession by clarifying the ability for qualified people within
an organization to own the dealership without a manufacturer
jumping in with a right of first refusal. He emphasized that the
bill provides that a dealer will be compensated for warranty
issues and recalls at the same retail level that's charged to a
consumer that walks into a dealership for repairs. He added that
the bill allows dealerships the ability to fix a warranty issue
that is discovered while fixing an initial warranty issue,
something that currently is not allowed. He summarized that the
bill addresses consumers in outlying areas by providing the
option to either find someone locally that is qualified for
warranty repairs or to have the automobile sent back to the
dealer.
SENATOR COGHILL said he supported the bill.
4:48:50 PM
CHAIR MEYER closed public testimony.
4:49:35 PM
SENATOR GIESSEL noted that she has a bill that addresses a
similar situation for heavy commercial equipment franchisers and
she will be using HB 136 as a model.
She moved to report CSHB 136(TRA), 30-LS0561\N from committee
with individual recommendations and attached zero fiscal note.
4:50:14 PM
CHAIR MEYER announced without objection the motion carried.
4:50:24 PM
At ease.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SJR 9 Sponsor Power Point Presentation.pdf |
SSTA 4/13/2018 3:30:00 PM |
SJR 9 |