Legislature(2001 - 2002)

04/24/2001 01:55 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
              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                                                                 
     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                                                                 
     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                                                                 
     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                                                            
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                                                            
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                                                            
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                                                            
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                                                            
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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