Legislature(2001 - 2002)

05/05/2001 04:07 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                          May 5, 2001                                                                                           
                           4:07 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Lisa Murkowski, Chair                                                                                            
Representative Andrew Halcro, Vice Chair                                                                                        
Representative Kevin Meyer                                                                                                      
Representative Pete Kott                                                                                                        
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative Joe Hayes                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE CONCURRENT RESOLUTION NO. 9                                                                                               
Encouraging  the Matanuska  Electric Association  to reverse  its                                                               
plan to pursue deregulation.                                                                                                    
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
CS FOR SENATE BILL NO. 176(L&C) am                                                                                              
"An Act  prohibiting certain  coercive activity  by distributors;                                                               
relating to certain required  distributor payments and purchases;                                                               
prohibiting  distributors from  requiring certain  contract terms                                                               
as a  condition for certain  acts related to  distributorship and                                                               
ancillary  agreements; allowing  dealers to  bring certain  court                                                               
actions against  distributors for  certain relief;  and exempting                                                               
from  the  provisions of  the  Act  franchises regulated  by  the                                                               
federal Petroleum  Marketing Practices Act,  situations regulated                                                               
by the Alaska gasoline products  leasing act, and distributorship                                                               
agreements relating  to motor vehicles required  to be registered                                                               
under AS 28.10."                                                                                                                
                                                                                                                                
     - MOVED HCS CSSB 176(L&C) OUT OF COMMITTEE                                                                                 
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HCR 9                                                                                                                   
SHORT TITLE:MATANUSKA ELECTRIC ASSN DEREGULATION                                                                                
SPONSOR(S): REPRESENTATIVE(S)KOTT                                                                                               
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/20/01     0662       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/20/01     0662       (H)        L&C                                                                                          
03/20/01     0662       (H)        REFERRED TO LABOR & COMMERCE                                                                 
05/05/01                (H)        L&C AT 12:00 PM CAPITOL 17                                                                   
                                                                                                                                
BILL: SB 176                                                                                                                  
SHORT TITLE:DISTRIBUTORSHIPS                                                                                                    
SPONSOR(S): LABOR & COMMERCE BY REQUEST                                                                                         
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
04/05/01     0956       (S)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
04/05/01     0957       (S)        L&C, JUD, FIN                                                                                
04/19/01                (S)        L&C AT 1:30 PM BELTZ 211                                                                     
04/19/01                (S)        Heard & Held                                                                                 
                                   MINUTE(L&C)                                                                                  
04/24/01                (S)        L&C AT 1:30 PM BELTZ 211                                                                     
04/24/01                (S)        Moved CSSB 176(L&C) Out of                                                                   
                                   Committee                                                                                    
                                   MINUTE(L&C)                                                                                  
04/25/01     1259       (S)        L&C RPT CS 5DP SAME TITLE                                                                    
04/25/01     1259       (S)        DP: PHILLIPS, DAVIS,                                                                         
                                   AUSTERMAN, LEMAN,                                                                            
04/25/01     1259       (S)        TORGERSON                                                                                    
04/25/01     1259       (S)        FN1: ZERO(CED)                                                                               
04/25/01                (S)        JUD AT 1:30 PM BELTZ 211                                                                     
04/25/01                (S)        Moved CS(L&C) Out of                                                                         
                                   Committee                                                                                    
                                   MINUTE(JUD)                                                                                  
04/26/01     1277       (S)        JUD RPT CS(L&C) 4DP                                                                          
04/26/01     1277       (S)        DP: TAYLOR, THERRIAULT,                                                                      
                                   COWDERY, ELLIS                                                                               
04/26/01     1277       (S)        FN1: ZERO(CED)                                                                               
04/28/01     1338       (S)        FIN REFERRAL WAIVED REFERRED                                                                 
                                   TO RULES                                                                                     
05/01/01     1400       (S)        RULES TO CALENDAR 5/1/01                                                                     
05/01/01     1405       (S)        READ THE SECOND TIME                                                                         
05/01/01     1405       (S)        L&C CS ADOPTED UNAN CONSENT                                                                  
05/01/01     1405       (S)        AM NO 1(TITLE AM) ADOPTED                                                                    
                                   UNAN CONSENT                                                                                 
05/01/01     1406       (S)        ADVANCED TO THIRD READING                                                                    
                                   UNAN CONSENT                                                                                 
05/01/01     1406       (S)        READ THIRD TIME CSSB
                                   176(L&C)(TITLE AM)                                                                           
05/01/01     1407       (S)        PASSED Y19 N1                                                                                
05/01/01     1407       (S)        TAYLOR NOTICE OF                                                                             
                                   RECONSIDERATION                                                                              
05/01/01                (S)        RLS AT 12:15 PM FAHRENKAMP                                                                   
                                   203                                                                                          
05/01/01                (S)        -- Time Change --                                                                            
05/01/01                (S)        MINUTE(RLS)                                                                                  
05/02/01     1447       (S)        RECON TAKEN UP - IN THIRD                                                                    
                                   READING                                                                                      
05/02/01     1447       (S)        RETURN TO SECOND FOR AM 2                                                                    
                                   UNAN CONSENT                                                                                 
05/02/01     1448       (S)        AM NO 2 ADOPTED UNAN CONSENT                                                                 
05/02/01     1448       (S)        AUTOMATICALLY IN THIRD                                                                       
                                   READING                                                                                      
05/02/01     1448       (S)        PASSED ON RECONSIDERATION Y18                                                                
                                   N1 A1                                                                                        
05/02/01     1450       (S)        TRANSMITTED TO (H)                                                                           
05/02/01     1450       (S)        VERSION: CSSB 176(L&C) AM                                                                    
05/03/01     1501       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
05/03/01     1501       (H)        L&C, JUD                                                                                     
05/05/01                (H)        JUD AT 1:00 PM CAPITOL 120                                                                   
05/05/01                (H)        <Bill Postponed>                                                                             
05/05/01                (H)        L&C AT 12:00 PM CAPITOL 17                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
TUCKERMAN BABCOCK, Manager                                                                                                      
Government and Strategic Affairs                                                                                                
Matanuska Electric Association                                                                                                  
163 East Industrial Way                                                                                                         
Palmer, Alaska 99645                                                                                                            
POSITION STATEMENT:  Testified on HCR 9.                                                                                        
                                                                                                                                
JOHN HAXBY, General Manager                                                                                                     
Waukesha Alaska Corporation                                                                                                     
1301 Huffman Road                                                                                                               
Anchorage, Alaska 99515                                                                                                         
POSITION STATEMENT:  Testified and answered question on SB 176.                                                                 
                                                                                                                                
ROGER HAXBY, Founder and President                                                                                              
Waukesha Alaska Corporation                                                                                                     
1301 Huffman Road                                                                                                               
Anchorage, Alaska 99516                                                                                                         
POSITION STATEMENT:  Testified in support of SB 176.                                                                            
                                                                                                                                
CHARLES VAN ORMER                                                                                                               
3801 Barbara Drive                                                                                                              
Anchorage, Alaska 99517                                                                                                         
POSITION STATEMENT:  Testified in support of SB 176.                                                                            
                                                                                                                                
HOWARD YAGER, Sales and Marketing Director                                                                                      
AlasCal, Inc.                                                                                                                   
4706 Harding Drive                                                                                                              
Anchorage, Alaska 99517                                                                                                         
POSITION STATEMENT:  Testified in support of SB 176.                                                                            
                                                                                                                                
JANEECE HIGGINS, General Manager                                                                                                
Alaska Rubber & Supply, Inc.                                                                                                    
5811 Old Seward                                                                                                                 
Anchorage, Alaska 99518                                                                                                         
POSITION STATEMENT:  Testified in support of SB 176.                                                                            
                                                                                                                                
DEBORAH LUPER                                                                                                                   
PO Box 771757                                                                                                                   
Eagle River, Alaska 99577                                                                                                       
POSITION STATEMENT:  Testified in support of SB 176.                                                                            
                                                                                                                                
CLYDE "ED" SNIFFEN, JR., Assistant Attorney General                                                                             
Fair Business Practices Section                                                                                                 
Civil Division (Anchorage)                                                                                                      
Department of Law                                                                                                               
1031 West 4th Avenue                                                                                                            
Anchorage, Alaska 99501                                                                                                         
POSITION STATEMENT:  Testified on SB 176.                                                                                       
                                                                                                                                
GEOFFREY LARSON, Co-Founder                                                                                                     
Alaskan Brewing and Bottling Company                                                                                            
5429 Shaune Drive                                                                                                               
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified on SB 176.                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-71, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIR  LISA  MURKOWSKI  called   the  House  Labor  and  Commerce                                                               
Standing Committee meeting  to order at 4:07 p.m.   Those present                                                               
at the call to order  included Representatives Murkowski, Halcro,                                                               
Meyer, Kott, Rokeberg, Crawford, and Hayes.                                                                                     
                                                                                                                                
HCR 9-MATANUSKA ELECTRIC ASSN DEREGULATION                                                                                    
                                                                                                                                
CHAIR  MURKOWSKI  announced  that the  committee  would  consider                                                               
HOUSE  CONCURRENT RESOLUTION  NO.  9,  Encouraging the  Matanuska                                                               
Electric Association to reverse its plan to pursue deregulation.                                                                
                                                                                                                                
REPRESENTATIVE  PETE  KOTT,  sponsor  of  HCR  9,  presented  the                                                               
resolution.    [Opening statements  were  inaudible  due to  tape                                                               
failure.   However, a written  sponsor statement was  provided in                                                               
committee packets.]                                                                                                             
                                                                                                                                
CHAIR MURKOWSKI asked Representative Kott  if it is his intention                                                               
to enforce  the [Matanuska  Electric Association]  board's intent                                                               
to lay this aside.                                                                                                              
                                                                                                                                
REPRESENTATIVE KOTT  responded that she  was correct.   He stated                                                               
that  he  wants to  reinforce  the  position  that the  board  is                                                               
currently  taking,  and  he  believes  it  should  be  put  aside                                                               
indefinitely.   He added that  this is  not supported by  the RCA                                                               
(Regulatory Commission of Alaska).                                                                                              
                                                                                                                                
Number 0108                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI stated  that in the "resolved" clause  on page 2,                                                               
[the  Alaska State  Legislature]  is  encouraging MEA  (Matanuska                                                               
Electric Association) to reverse its  deregulation plan.  In view                                                               
of the actions of the board,  she asked Representative Kott if he                                                               
feels this language  is still appropriate.  She  remarked that it                                                               
doesn't seem that [MEA] has a deregulation plan at this point.                                                                  
                                                                                                                                
REPRESENTATIVE KOTT  stated that it is  questionable whether that                                                               
plan currently  exists.  He said  he suspects there was  a formal                                                               
plan that [MEA] was working from,  but it has been put [aside] at                                                               
the present time.                                                                                                               
                                                                                                                                
Number 0190                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked   if,  under  the  circumstances,                                                               
Representative Kott  thinks it is  wise to go ahead,  since [MEA]                                                               
has set this issue aside.   He stated that he finds a significant                                                               
amount of  the resolution objectionable  in terms of  its factual                                                               
accuracy, and  thinks it  might "poison the  well" of  any future                                                               
restructuring efforts the state might want to undertake.                                                                        
                                                                                                                                
REPRESENTATIVE KOTT  responded that  he has given  that a  lot of                                                               
thought, and  he does  not think  there is  anything that  is not                                                               
factual.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG   remarked    that   with   issues   of                                                               
deregulation,   it   should   say  "restructuring,"   since   the                                                               
conclusions of the commission are  premature.  He stated that the                                                               
fact that  there was massive  damage to certain economies  due to                                                               
deregulation is arguable.   For example, California's [situation]                                                               
was  not caused  by deregulation;  he believes  it was  caused by                                                               
legislative meddling in the market system.                                                                                      
                                                                                                                                
REPRESENTATIVE  KOTT  responded  that  he  does  not  think  [the                                                               
blackouts  that  occurred in  California]  were  entirely due  to                                                               
meddling by  the California assembly,  but that  deregulation was                                                               
not well thought out.                                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG  stated  that   he  would  suggest  that                                                               
California didn't  have the restructuring or  deregulation in the                                                               
more traditional sense.   It may have been labeled  that way, but                                                               
it  was  with  price  caps,   and  some  very  improper  economic                                                               
assumptions  were  made;  as a  result,  California's  system  of                                                               
alleged  deregulation was  doomed to  failure from  the "get-go."                                                               
He stated that he doesn't think it  is accurate to use that as an                                                               
example, whereas  the cases in Pennsylvania  and the mid-Atlantic                                                               
states have  been quite positive.   He asked  Representative Kott                                                               
what the  form of deregulation  was and if [MEA]  was considering                                                               
some kind of acquisition or merger.                                                                                             
                                                                                                                                
REPRESENTATIVE KOTT  responded that he believes  [MEA] was trying                                                               
to get out from under control of the RCA.                                                                                       
                                                                                                                                
REPRESENTATIVE  ROKEBERG   remarked  that   it  is   a  statutory                                                               
provision that the legislature has provided for.                                                                                
                                                                                                                                
Number 0449                                                                                                                     
                                                                                                                                
TUCKERMAN  BABCOCK, Manager,  Government  and Strategic  Affairs,                                                               
Matanuska  Electric  Association, testified  via  teleconference.                                                               
He stated that it sounds as  if there is some misunderstanding of                                                               
what  MEA  has  offered  to  its membership  as  a  choice.    He                                                               
explained  that it  was already  provided for  in state  statute,                                                               
which  is  a  deregulation  with respect  to  setting  rates  and                                                               
setting service  rules.   He stated that  even if  the membership                                                               
had  voted to  approve  this form  of  deregulation, the  service                                                               
territory  and  the certificate  that  allows  [MEA] to  serve  a                                                               
particular  area  would  still  be  regulated by  the  RCA.    He                                                               
remarked that had [MEA] pursued  it, [MEA] would be doing nothing                                                               
different  from  65 percent  of  all  the electric  utilities  in                                                               
Alaska, which are already deregulated.   These sorts of elections                                                               
have  been  successfully  held by  Copper  Valley,  Cordova,  and                                                               
Kotzebue,  all in  the last  few years.   On  the other  hand, he                                                               
said,  the   MEA  board  of  directors,   particularly  with  the                                                               
confusion  around  the word  "deregulation,"  and  with the  news                                                               
about  California  back  in January,  voted  unanimously  not  to                                                               
initiate  the  deregulation election.    He  stated that  if  the                                                               
legislature  has   considered  the   state  statute   that  gives                                                               
cooperatives this  option and wishes  to recommend to  the co-ops                                                               
not to pursue this option, then  it makes no more sense to direct                                                               
it at  MEA than it would  at Chugach, Golden Valley,  or Homer at                                                               
this point.                                                                                                                     
                                                                                                                                
Number 0637                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI stated  that she had asked the  sponsor about the                                                               
wording in the "resolved" section  encouraging MEA to reverse its                                                               
deregulation  plan, and  asked Mr.  Babcock if,  in his  opinion,                                                               
that has been accomplished by the recent actions.                                                                               
                                                                                                                                
MR.  BABCOCK  responded  that  in   January,  MEA's  board  voted                                                               
unanimously not to  initiate the election.  He  stated that there                                                               
are no plans to pursue this  option or present it to the members.                                                               
Even  if  the  board  wanted  to  pursue  this  limited  kind  of                                                               
deregulation, a  majority of  the members would  have to  vote in                                                               
favor of it before it would be implemented.                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if the  sponsor is going to redraft                                                               
this.                                                                                                                           
                                                                                                                                
REPRESENTATIVE KOTT stated that he would.                                                                                       
                                                                                                                                
[HCR 9 was held over.]                                                                                                          
                                                                                                                                
SB 176-DISTRIBUTORSHIPS                                                                                                       
                                                                                                                                
CHAIR MURKOWSKI  announced that the  committee would  consider CS                                                               
FOR  SENATE BILL  NO. 176(L&C)  am, "An  Act prohibiting  certain                                                               
coercive activity  by distributors; relating to  certain required                                                               
distributor  payments  and  purchases;  prohibiting  distributors                                                               
from requiring certain contract terms  as a condition for certain                                                               
acts  related   to  distributorship  and   ancillary  agreements;                                                               
allowing  dealers   to  bring   certain  court   actions  against                                                               
distributors  for   certain  relief;   and  exempting   from  the                                                               
provisions  of  the  Act  franchises  regulated  by  the  federal                                                               
Petroleum Marketing  Practices Act,  situations regulated  by the                                                               
Alaska  gasoline   products  leasing  act,   and  distributorship                                                               
agreements relating  to motor vehicles required  to be registered                                                               
under AS 28.10."                                                                                                                
                                                                                                                                
Number 0827                                                                                                                     
                                                                                                                                
JOHN HAXBY,  General Manager,  Waukesha Alaska  Corporation, came                                                               
forth and  stated that [Waukesha  Alaska Corporation] will  be 30                                                               
years  old next  year;  it was  started in  1972  by Mr.  Haxby's                                                               
father.  Mr. Haxby said he  has been operating the business since                                                               
approximately  1984.    There  are 13  employees,  and  the  main                                                               
business  involves the  sale and  distribution  of machinery,  as                                                               
well as services throughout Alaska.  He stated:                                                                                 
                                                                                                                                
     Over  the last  30  years we've  been in  relationships                                                                    
     with  many different  manufacturers. ...  Relationships                                                                    
     change  over ...  time, and  there are  occasions where                                                                    
     distributor  agreements  are   "yanked"  or  terminated                                                                    
     without  warning.    In  many  cases,  this  can  cause                                                                    
     irreparable  financial  damage to  Alaskan  businesses,                                                                    
     and the immediate  loss of jobs created by  the lack of                                                                    
     product to sell.  In  our specific case, in addition to                                                                    
     loss  of business  revenues, it  has  also resulted  in                                                                    
     some $300,000  in unusable inventory, which  remains on                                                                    
     our shelf even today.   Senate Bill 176 is good because                                                                    
     it doubles the playing field in Alaska.                                                                                    
                                                                                                                                
     Legal challenges are  extraordinarily expensive, and in                                                                    
     most cases,  the outside manufacturers have  very, very                                                                    
     deep  pockets,  and  have the  ability  to  simply  run                                                                    
     Alaskan businesses out  of money in the  courts.  Cases                                                                    
     like  this   can  easily  run  into   the  hundreds  of                                                                    
     thousands  of dollars.  ...  In  one notable  instance,                                                                    
     from one company, ... legal  bills are in excess of one                                                                    
     million  and  continue  to  climb  with  ongoing  legal                                                                    
     challenges.  This  type of legal expense  is simply not                                                                    
     an  option   for  most  small  businesses   in  Alaska,                                                                    
     certainly not ours.                                                                                                        
                                                                                                                                
     This  bill   also  keeps  manufacturers   from  forcing                                                                    
     unwanted or unordered  inventory on Alaskan businesses.                                                                    
     It is  not uncommon for  manufacturers to make  us part                                                                    
     of  some  imaginary quota  and  just  say that  [we're]                                                                    
     going to take  part in it.  When  there's resistance on                                                                    
     the  part  of  a  local   distributor  to  do  so,  the                                                                    
     manufacturers typically  threaten or say ...  "You need                                                                    
     to do this  because it's part of our  quota, and either                                                                    
     do [it]  or we're going  to have problems."   This bill                                                                    
     also  allows  that  in  the  event  of  a  death  of  a                                                                    
     distributor,  ... an  orderly and  equitable return  of                                                                    
     inventory can be accomplished quickly.                                                                                     
                                                                                                                                
     In  many cases  when business  owners do  die, the  IRS                                                                    
     [Internal Revenue  Service] comes  in and  values [the]                                                                    
     businesses according to past  results and past history.                                                                    
     If  distributor  agreements   are  yanked  because  the                                                                    
     manufacturers believe  that ... the person  [whom] they                                                                    
     originally struck  [the] deal [with] are  not the heirs                                                                    
     of that  person, the  value of the  business can  go to                                                                    
     zero. ... Even though the  IRS would value the business                                                                    
     according to past results and  assets [and] a tax based                                                                    
     on  past [results],  if the  distributorship agreements                                                                    
     were   yanked,  the   value  of   the  business   could                                                                    
     theoretically  go  to  zero  while  the  tax  liability                                                                    
     remains with the estate.                                                                                                   
                                                                                                                                
Number 1038                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER stated  that he had introduced  a House bill                                                               
similar to  this, and when he  first talked about this  [with Mr.                                                               
Haxby], Mr.  Haxby had given  him a few  examples.  He  asked Mr.                                                               
Haxby if  there are other  businesses in which this  has happened                                                               
and has caused some great financial distress.                                                                                   
                                                                                                                                
MR.  HAXBY  responded that  he  could;  however, he  thinks  some                                                               
people will be testifying to that.                                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  Mr. Haxby  if his  business would                                                               
benefit from the enactment of this legislation.                                                                                 
                                                                                                                                
MR.  HAXBY answered  that his  business has  the potential  to be                                                               
treated equitably in the future.                                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG asked  Mr. Haxby if he  is "hustling" the                                                               
legislature because  he sees the  "handwriting on the  wall" from                                                               
his main supply.                                                                                                                
                                                                                                                                
MR. HAXBY responded no.                                                                                                         
                                                                                                                                
REPRESENTATIVE HALCRO  noted that  on page 2,  line 2,  it states                                                               
that  "[a distributor  may not  coerce  or] attempt  to coerce  a                                                               
dealer to perform certain acts  by using duress or by threatening                                                               
to  terminate the  distributorship  agreement".   He stated  that                                                               
some franchise or distributor agreements  call for the franchisee                                                               
to spend money on  marketing or to buy tools.  He  said this is a                                                               
broad  description of  a certain  act.   If part  of a  franchise                                                               
agreement calls for  a [business] to invest  in certain products,                                                               
this theoretically  can be used to  say, "The law says  you can't                                                               
make me  do that."   He asked Mr. Haxby  why that is  written the                                                               
way it is.                                                                                                                      
                                                                                                                                
Number 1192                                                                                                                     
                                                                                                                                
MR.  HAXBY  responded that  typically  these  types of  behaviors                                                               
occur after the contract is signed.                                                                                             
                                                                                                                                
REPRESENTATIVE HALCRO  asked Mr.  Haxby, when  he enters  into an                                                               
agreement under which [the  manufacturers] could periodically say                                                               
they are  going to change the  terms and conditions, if  he would                                                               
have to sign it  in order to continue being a  supplier, or if he                                                               
operates off one original document.                                                                                             
                                                                                                                                
MR. HAXBY answered that it is  typical for a manufacturer to come                                                               
back and say,  "Here's the new document; sign it."   And if there                                                               
is any  term that [the  supplier] does  not like and  attempts to                                                               
cross  out, the  [manufacturer] could  say, "Sign  it, or  you're                                                               
terminated."                                                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO  asked if the [manufacturers]  can come [to                                                               
the supplier at  any time], or if  they wait till the  end of the                                                               
contract period.                                                                                                                
                                                                                                                                
MR.  HAXBY responded  that  in  some cases  there  has been  some                                                               
notice,  typically without  the  benefit of  any  input from  the                                                               
[supplier].   There  are  occasions when  there  is literally  no                                                               
notice, and  other occasions when distributorship  agreements are                                                               
yanked with 30 days' notice.                                                                                                    
                                                                                                                                
Number 1320                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO, in  reference  to the  section "Death  of                                                               
distributor" on  page 3, stated  that if the agreement  is signed                                                               
with him, and he  passes away but his wife and  kids want to keep                                                               
the  distributorship,  it  seems  that this  only  addresses  the                                                               
liquidation of  the assets and  that the dealer  would repurchase                                                               
all of  the inventory.   He  stated that if  the family  wants to                                                               
continue on,  it seems to  him that there  ought to be  a section                                                               
that addresses  what the  logical next step  would be  to protect                                                               
both parties.   He asked  if there  has been any  discussion with                                                               
regard to that.                                                                                                                 
                                                                                                                                
MR. HAXBY  replied that the  first sentence of that  section, [AS                                                               
45.45.730,   page    3,   lines   4-5]   states,    "Unless   the                                                               
distributorship   agreement   is   continued  by   the   personal                                                               
[representative]".   He said in  his understanding, in  the event                                                               
that  [the   manufacturers]  say,  they  want   to  continue  the                                                               
agreement, then  they are further bound  by the rest of  the law.                                                               
Therefore, if  the manufacturers wanted to  terminate, they would                                                               
be bound by the other conditions in the bill.                                                                                   
                                                                                                                                
REPRESENTATIVE  HALCRO asked,  "Even though  their agreement  was                                                               
with you and not necessarily the  family member?"  He stated that                                                               
he thinks  there needs to  be some kind of  a process to  come up                                                               
with a new agreement that is going to protect both sides.                                                                       
                                                                                                                                
MR.  HAXBY  remarked  that  he   thinks,  under  this  particular                                                               
section, it would  allow [the supplier] to say, "Yes,  we want to                                                               
continue."   He  added that  there is  another section  that says                                                               
there is  the ability to  go to court.   He stated that  he would                                                               
think that  under subsection  (b)(2), on  page 4,  [the supplier]                                                               
may be able to get an injunction.                                                                                               
                                                                                                                                
REPRESENTATIVE  HALCRO,  in   reference  to  "Required  purchase,                                                               
reimbursement, and  supplies", on page  3, asked Mr. Haxby  if he                                                               
could  explain when  a distributor  terminates a  distributorship                                                               
agreement   or  changes   the   competitive   situation  of   the                                                               
distributors dealer  with regard  to distribution.   For example,                                                               
if  someone  has  a  signed   contract  representing  a  specific                                                               
toolmaker and [a representative] asks  [someone else] to sell the                                                               
same  tools, that  would affect  the competitive  balance in  the                                                               
workplace.                                                                                                                      
                                                                                                                                
MR.  HAXBY responded  that  that  may be  one  case,  but a  more                                                               
suitable case  would be when  there are certain discounts  from a                                                               
list-price  that   are  afforded   and  all   of  a   sudden  the                                                               
manufacturer changes the discount.                                                                                              
                                                                                                                                
Number 1564                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI stated that she  has some concern with this area.                                                               
She stated  that "changes  the competitive  situation" is  a very                                                               
broad terminology.   It does  not include making a  price change;                                                               
however,  the  distributor  could  make  an  agreement  with  one                                                               
company to  sell the exact  same product regarding  which another                                                               
company has an agreement.                                                                                                       
                                                                                                                                
MR. HAXBY  stated that  typically in the  businesses he  has been                                                               
involved  in,  when these  agreements  are  signed, many  of  the                                                               
manufacturers do not  have markets in Alaska.   However, he said,                                                               
he supposes Chair Murkowski is right.                                                                                           
                                                                                                                                
REPRESENTATIVE  HALCRO stated  that  the  broadness concerns  him                                                               
because certainly the  agreement would vary.   For instance, some                                                               
dealer-distributorships have specific  [geographic] areas, but if                                                               
there  is an  agreement  that  does not  have  a geographic  area                                                               
defined,  this leaves  the  door  open to  someone  to say,  "The                                                               
competitive situation's  changed; I'd  like to take  advantage of                                                               
some  of the  provisions  that  are outlined  here  and make  the                                                               
dealer buy back my inventory."   He stated that he thinks that is                                                               
one area that needs to be "tightened down."                                                                                     
                                                                                                                                
Number 1737                                                                                                                     
                                                                                                                                
ROGER HAXBY, Founder and  President, Waukesha Alaska Corporation,                                                               
testified via teleconference.  He stated:                                                                                       
                                                                                                                                
     Until  the mid  1980s,  our business  and  that of  our                                                                    
     competitors [were]  relatively stable.   However, since                                                                    
     that  time, we  and our  employees have  suffered extra                                                                    
     costs  and  losses  due  to   the  specious  nature  of                                                                    
     manufacturers  from  Outside,   who  typically  do  the                                                                    
     following:    They'll come  to  Alaska  looking for  an                                                                    
     introduction  to their  product;  ... join  us for  the                                                                    
     first early  years; ... demand training  of our service                                                                    
     personnel as well as customer  personnel; insist on the                                                                    
     substantial  inventory   of  parts  and   machines;  do                                                                    
     warranty work  immediately, and then decide  whether or                                                                    
     not  to  reimburse  us;  and  continue  to  expand  and                                                                    
     provide modern  facilities for  appearances as  well as                                                                    
     the ability to do additional business.                                                                                     
                                                                                                                                
     Then, when  the machine  volume and  population reaches                                                                    
     the  threshold,  it  is  not   [atypical]  to  use  the                                                                    
     distributor  agreement as  a  threat or  as  a pawn  in                                                                    
     negotiating with  outside companies  who wish  to enter                                                                    
     the Alaska arena.   It's happened more  than once where                                                                    
     an Outside  company is enticed to  handle their product                                                                    
     on  the basis  that they  get the  contract for  Alaska                                                                    
     also.                                                                                                                      
                                                                                                                                
     When  cancellation   for  a  simple  nonrenewal   of  a                                                                    
     distributor or  contract occurs, we get  stuck with the                                                                    
     inventory  of  parts,  machines, (indisc.)  units,  and                                                                    
     trained servicemen. ... One of  the worst [parts] about                                                                    
     being  in business  is ...  [laying] off  employees who                                                                    
     have lost  their use.   The cost runs into  hundreds of                                                                    
     thousands,  if not  millions of  dollars.   The serious                                                                    
     problem  with this  is that  our local  industries will                                                                    
     never grow to the size  of their potential, because the                                                                    
     conditions   simply  do   not   match  with   long-term                                                                    
     amortization   cost   for  facilities   and   personnel                                                                    
     training.                                                                                                                  
                                                                                                                                
Number 1897                                                                                                                     
                                                                                                                                
CHARLES VAN ORMER testified via teleconference.  He stated:                                                                     
                                                                                                                                
     At this time,  I would like to request  your support on                                                                    
     this bill.   As an employee and a manager  with quite a                                                                    
     few companies  here in Alaska  in the last 27  years, I                                                                    
     have  been  forced through  the  change  of the  lines,                                                                    
     handled by distributorships that  I have worked for, to                                                                    
     have  to  devalue.    And [I]  have  seen  the  owner's                                                                    
     company I work for pay  taxes based on inventory tax of                                                                    
     dead  stock  before  it  to   be  totally  devalued  as                                                                    
     distributorships  have  changed.   And  [I  have]  also                                                                    
     watched  good  employees  get  laid  off,  ...  had  to                                                                    
     terminate the  people because we didn't  have the work,                                                                    
     and see these people leave Alaska with their families.                                                                     
                                                                                                                                
     The  question that  came  up earlier  as  to change  in                                                                    
     market are -- one of  things that's happening in Alaska                                                                    
     is we're  seeing a large  influx of  large corporations                                                                    
     from outside  the state of Alaska  bringing products to                                                                    
     Alaska.  While most  (indisc.), the corporations coming                                                                    
     into town  now bring  in the lower  end -  the consumer                                                                    
     end.   These products  are able  to buy  and sell  at a                                                                    
     price  sometimes lower  than Alaska  distributors would                                                                    
     buy at.                                                                                                                    
                                                                                                                                
     ... I worked last year for  a company; we were asked by                                                                    
     one of  our major  suppliers to handle  a product.   By                                                                    
     the time I cost it out  with freight to Alaska, I could                                                                    
     go to Costco and buy it  for $7 cheaper than my landing                                                                    
     cost  in Seattle,  not including  the Seattle-to-Alaska                                                                    
     Freight.  Costco had it  there ready to sell.  Costco's                                                                    
     price  was driven  by their  national buying  price and                                                                    
     also reduced  shipping rates. ...  They're a  very good                                                                    
     company, don't  get me wrong, but  Alaskan distributors                                                                    
     have been  forced to either  jettison a line,  cancel a                                                                    
     line, or readjust their  marketing because of wholesale                                                                    
     marketing.                                                                                                                 
                                                                                                                                
     I personally, last year due  to reduced sales caused by                                                                    
     this, laid  off a young  man whose father had  opened a                                                                    
     business  in Alaska  that was  driven  out because  the                                                                    
     major qualities  from lines he  handled were  now being                                                                    
     held by  a major wholesaler  in town on the  lower end.                                                                    
     They had to buy him; he could not compete.                                                                                 
                                                                                                                                
Number 2009                                                                                                                     
                                                                                                                                
MR. VAN OMER continued, stating:                                                                                                
                                                                                                                                
     [There's]  another  major  issue ...  I  think  affects                                                                    
     Alaskan businesses  - Mr. Haxby's  alluded [to]  this -                                                                    
     as the Alaskan distributor  would be appointed, develop                                                                    
     a market  area, and then  in which a  corporation would                                                                    
     set up another distributor  [and] bring someone to town                                                                    
     or come to  town themselves.  This  happened during the                                                                    
     trans-Alaska   oil   pipeline  construction   -   major                                                                    
     corporations  who've had  national agreements  with the                                                                    
     pipeline  men.    [The] pipeline  proceeded  to  bypass                                                                    
     local Alaskan  distributorships, [and] bring  their own                                                                    
     company's store to  town.  The people  were not Alaskan                                                                    
     residents; they worked up here  in and out of the state                                                                    
     at the time after the  pipeline, then they closed their                                                                    
     company store and left town.                                                                                               
                                                                                                                                
     I see,  potentially, the same thing  happening with the                                                                    
     opening  of  ANWR  [Arctic National  Wildlife  Refuge],                                                                    
     hopefully,  and the  gas line.  ... Major  corporations                                                                    
     will say,  "We're coming  to town,  we'll open  our own                                                                    
     store to  support the pipeline,  support ANWR,  the gas                                                                    
     line,"  and the  local  distributors will  be left  out                                                                    
     again.   This type of  thing does happen;  we're seeing                                                                    
     it  in  the equipment  business,  which  I  am in.    A                                                                    
     company  came  to  town  last  year;  this  forced  the                                                                    
     cancellation  of three  lines  of  equipment they  have                                                                    
     because  of  national  agreements, because  a  national                                                                    
     firm [was]  handled by  other Alaskan  small businesses                                                                    
     that now  have dropped.   Either due to lack  of market                                                                    
     or  cancellation, [they]  have  dropped  that line  and                                                                    
     have  [been]  forced to  find  something  to fill  that                                                                    
     market hole.                                                                                                               
                                                                                                                                
Number 2114                                                                                                                     
                                                                                                                                
HOWARD  YAGER,  Sales  and  Marketing  Director,  AlasCal,  Inc.,                                                               
testified via teleconference.  He  stated that [AlasCal, Inc.] is                                                               
a  petrology   laboratory  that  deals  with   low-cost  to  very                                                               
expensive  instruments  used  to calibrate  the  measurements  of                                                               
things  that  deal  mainly  with   the  pipeline,  aviation,  and                                                               
military.  He stated:                                                                                                           
                                                                                                                                
     Our range  of equipment is  from a few  hundred dollars                                                                    
     to many  thousands [of]  dollars.   Should we  lose our                                                                    
     distributorship  from our  manufacturers,  we could  be                                                                    
     left with  some very  "high-tech" inventory  that would                                                                    
     be like  computers:  every  year it sits on  the shelf,                                                                    
     it becomes less  and less valuable and would  be out of                                                                    
     date.    The  inventory dollars  would  dissipate  very                                                                    
     quickly  on that.    We  would urge  [that  SB 176]  be                                                                    
     passed to protect  us from this.   When we're appointed                                                                    
     by  our manufacturers,  we assume  that we're  going to                                                                    
     sell everything that they suggest  we carry, and should                                                                    
     that not  happen, that's going  to stick us with  a lot                                                                    
     of inventory  that would be worthless  and depreciating                                                                    
     very quickly.                                                                                                              
                                                                                                                                
CHAIR  MURKOWSKI  asked Mr.  Yager,  if  he  had a  product  that                                                               
essentially  becomes technologically  obsolete  under how  things                                                               
operate currently,  whether the distributor would  buy back those                                                               
products.                                                                                                                       
                                                                                                                                
MR.  YAGER responded  no, that  he would  be stuck  with them  in                                                               
inventory.                                                                                                                      
                                                                                                                                
Number 2268                                                                                                                     
                                                                                                                                
JANEECE HIGGINS,  General Manager, Alaska Rubber  & Supply, Inc.,                                                               
testified via teleconference.  She stated:                                                                                      
                                                                                                                                
     In  1995   one  of   our  manufacturers   terminated  a                                                                    
     distributor  agreement  that we  had.    We decided  to                                                                    
     fight the  case.  They  went after our  customers, told                                                                    
     them   we  were   no   longer  the   factory-authorized                                                                    
     distributor,  and we  were not  allowed  to return  any                                                                    
     inventory.   We  had close  to a  million [dollars]  in                                                                    
     inventory at that point.   We could then no longer sell                                                                    
     it to  our main  customers, because  they were  told by                                                                    
     the  manufacturer  that  we would  not  give  them  the                                                                    
     technical  support that  [was]  needed.   We have  gone                                                                    
     through  litigations. ...  We have  prevailed in  every                                                                    
     court case.   They have appealed it all the  way to the                                                                    
     Ninth  Circuit, and  they have  still appealed;  we are                                                                    
     still  in the  appeals process.   Our  legal fees  have                                                                    
     reached over $1.2 million and we're not done yet.                                                                          
                                                                                                                                
     We  have moved  some  of the  inventory.  ... We  still                                                                    
     [have]  close to  $100,000 worth  of inventory  that is                                                                    
     very  specific  to  a  customer   who  no  longer  will                                                                    
     purchase  it from  us.   At $20  a foot,  not too  many                                                                    
     people  want to  water  their gardens  with hoses  that                                                                    
     cost that kind of money.   Had something like this been                                                                    
     in effect ... we might  have been able to withstand ...                                                                    
     [it with]  much fewer losses.   We could  have possibly                                                                    
     returned  the  inventory,  worked   out  some  sort  of                                                                    
     agreement, and come out a  much better deal.  Hindsight                                                                    
     tells us we  probably  shouldn't have fought, we should                                                                    
     have tried  to work something  out, but the loss  to us                                                                    
     was very significant.  One  customer that we lost was a                                                                    
     $600,000-per-year customer.                                                                                                
                                                                                                                                
     ...  I would  really urge  you to  pass this  into law.                                                                    
     Most small  companies could  not withstand  the expense                                                                    
     that we  have. ... When they  terminated the agreement,                                                                    
     [the owner] decided that he  was going to stick with it                                                                    
     and fight it out, that  he had done nothing wrong, that                                                                    
     we had  been a good distributor;  we had been a  top 12                                                                    
     distributor  in the  nation for  over 15  years.   [The                                                                    
     manufacturers]  were  promised  oil  slope  revenue  by                                                                    
     another company,  and that was  one of the  reasons the                                                                    
     distributorship was terminated.   In one of the counter                                                                    
     suits they have now, [they]  even implicated that it is                                                                    
     our fault  that they terminated  us and had to  go with                                                                    
     an  inferior distributor,  because  the  sales did  not                                                                    
     materialize. ... There needs  to be some protection for                                                                    
     the small businesses.                                                                                                      
                                                                                                                                
Number 2389                                                                                                                     
                                                                                                                                
DEBORAH  LUPER testified  via teleconference.    She stated  that                                                               
essentially  the   bill  prevents   coercion  of   small  Alaskan                                                               
businesses -  Alaskan dealers  who are  providing the  market for                                                               
the "big guys" Back East.  She said  she knows that in one case a                                                               
tire  manufacturer   required  the   dealers  to   purchase  tire                                                               
inventory that they  did not want and had not  ordered.  That was                                                               
something  that eventually  forced that  dealers to  seek another                                                               
line.  She said this would  require the big businesses Outside to                                                               
buy back inventory, should they try  to make the agreement.  This                                                               
also [addresses] a  dealer who is deceased, and  whose heirs have                                                               
inherited the business.  In  cases where the dealership is yanked                                                               
because the dealer  has died and the  [manufacturer] doesn't want                                                               
to deal with the heirs, the inventory will be purchased back.                                                                   
                                                                                                                                
TAPE 01-71, SIDE B                                                                                                              
                                                                                                                                
MS.  LUPER continued,  stating that  typically  these "big  guys"                                                               
come in and  want [the dealer] to develop the  market.  They sign                                                               
a distributorship agreement that is  fair to both parties, but as                                                               
the  years  go   on,  these  agreements  become   more  and  more                                                               
restrictive.   Eventually, [the dealer]  becomes so  dependent on                                                               
one  particularly   line  that  if   they  decide  to   yank  the                                                               
distributorship agreement,  [that dealer] has an  entire business                                                               
that  could go  under.   She pointed  out that  this bill  is not                                                               
retroactive; it  does not take into  account previous activities.                                                               
However, from  the day  it is  signed, it  would go  into effect.                                                               
She added  that most businesses  cannot afford the  legal hassles                                                               
and   the  legal   expenses  that   are  associated   with  these                                                               
situations.   Small businesses in Alaska  have "shallow" pockets,                                                               
whereas the manufacturers in the Lower 48 have "deep" pockets.                                                                  
                                                                                                                                
Number 2372                                                                                                                     
                                                                                                                                
CLYDE  "ED"  SNIFFEN,  JR.,   Assistant  Attorney  General,  Fair                                                               
Business   Practices   Section,   Civil   Division   (Anchorage),                                                               
Department of Law, testified via  teleconference.  He stated that                                                               
the  Department  of  Law  generally supports  the  bill  and  has                                                               
proposed a  couple of  minor amendments.   One [later  adopted as                                                               
Amendment 1] involves  the amount of money that would  have to be                                                               
paid  to the  distributor  in the  event  that a  distributorship                                                               
agreement was  canceled.   In the original  version of  the bill,                                                               
that amount  was 100 percent of  the net value of  the inventory;                                                               
this amendment would  change that amount to a  fair market value.                                                               
He explained that  the reason for this is  that requiring payment                                                               
of  100 percent  of  the amount  paid for  the  inventory was  an                                                               
inventory guarantee  that perhaps  wasn't a  sharing of  the risk                                                               
that was contemplated  under the agreement.   The other suggested                                                               
change  [later adopted  as Amendment  2] is  to include  the word                                                               
"franchise" in the language that exempts motor vehicle dealers.                                                                 
                                                                                                                                
CHAIR  MURKOWSKI stated  that a  question was  raised earlier  by                                                               
Representative  Halcro   concerning  the  section   on  "Required                                                               
purchase,  reimbursement, and  supplies"  on page  3.   She  said                                                               
there is  language on line  16 that allows for  the reimbursement                                                               
or the purchase  if there's a termination  of the distributorship                                                               
or  changes to  the  competitive situation  of the  distributor's                                                               
dealer.   She  remarked that  her concern  is, for  example, when                                                               
someone  has been  selling tires  in  Anchorage for  a period  of                                                               
years and  has a  nonexclusive agreement,  but the  community has                                                               
grown  and there  is a  need to  expand.   If somebody  else then                                                               
comes in and  starts selling the same product, that  is clearly a                                                               
change  in the  competitive  situation.   She  asked whether  the                                                               
distributor   is  then   required  to   repurchase  all   of  the                                                               
[inventory], including the good will and assets of the company.                                                                 
                                                                                                                                
MR.  SNIFFEN stated  that that  is  an interesting  question.   A                                                               
couple of issues  arise.  One might be  an antitrust implication.                                                               
If the competitive relationship has  changed because of the entry                                                               
of a new competitor into  the market, those things are encouraged                                                               
in  order to  lower  prices and  provide  benefits to  consumers.                                                               
Under a situation  like that, the way the bill  is written now, a                                                               
repurchase of inventory might be  required; however, he said that                                                               
might be a factual question for  the court to consider.  He noted                                                               
that under  the proposed amendment,  if inventory  is repurchased                                                               
at  fair market  value,  the distributors  are protected  because                                                               
they can resell the merchandise  to someone else, and the dealers                                                               
are  protected  because  they are  receiving  something  for  the                                                               
inventory and not left high and dry.                                                                                            
                                                                                                                                
Number 2199                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  asked whether it  would help if  [it read]                                                               
"substantial changes" [in  the competitive relationship], thereby                                                               
creating a higher threshold.                                                                                                    
                                                                                                                                
MR. SNIFFEN  responded that he  thinks it  would.  He  added that                                                               
one  thing  that might  help  would  be  if the  distributor  was                                                               
responsible for creating other competition.                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  suggested   that  inserting  the  words                                                               
"makes substantial" after  "or" on page 3, line  16, implies that                                                               
it is the distributor making the substantial change.                                                                            
                                                                                                                                
CHAIR MURKOWSKI stated that the  Alaska Gasoline Products Leasing                                                               
Act  addresses  what  happens  on   a  termination  and  required                                                               
purchase   or   reimbursement,   but   good   will   under   that                                                               
consideration  is only  allowed if  it's the  dealer who  doesn't                                                               
renew because he or she can't agree  to other terms.  She said if                                                               
there  appear  to be  situations  in  which  good will  would  be                                                               
allowed,  but  it  is  an  act of  the  dealer  that  causes  the                                                               
termination, then good will should not  be allowed as part of the                                                               
compensation package.   He asked Mr. Sniffen if  he would comment                                                               
on that.                                                                                                                        
                                                                                                                                
MR. SNIFFEN responded  that he would agree  with that completely.                                                               
He stated that good will is  another one of those nebulous things                                                               
that is difficult to put a value on.                                                                                            
                                                                                                                                
Number 2033                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO added  that he thinks the use  of assets is                                                               
equally as  broad.  He said  assets could be a  revenue stream or                                                               
loss in the customer's account.                                                                                                 
                                                                                                                                
REPRESENTATIVE  ROKEBERG suggested  using a  different word  than                                                               
"covered" on  page 3, line 19.   He asked Chair  Murkowski if she                                                               
was suggesting deleting "good will".                                                                                            
                                                                                                                                
CHAIR  MURKOWSKI answered  no,  that in  looking  at how  similar                                                               
statutes  have addressed  it, it  seems to  make sense  to mirror                                                               
that.    She  stated  that  in certain  instances  in  which  the                                                               
termination has  not been through  the fault of the  dealer, good                                                               
cause  should  be allowed.    However,  she  said, there  may  be                                                               
instances  in  which  good  will shouldn't  be  allowed  for  the                                                               
compensation  package, if  the dealer  had somehow  acted against                                                               
the agreement or there had been some bad faith.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG remarked  the she would have  to be clear                                                               
on that,  because basically there would  have to be some  type of                                                               
appraisal or evaluation made.                                                                                                   
                                                                                                                                
CHAIR MURKOWSKI added that anytime  there is evaluation of goods,                                                               
the courts are involved.                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that that should be avoided.                                                                     
                                                                                                                                
Number 1938                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI remarked,  in  reference to  page 3,  subsection                                                               
(a)(2),  that  if  the  dealer   has  substantially  changed  the                                                               
competitive situation,  the distributorship should  reimburse the                                                               
dealer for the  expenses that were incurred by  the dealer during                                                               
the 18  months before the termination  or the change.   She asked                                                               
Mr. Sniffen  if "expenses" means  that the distributor  will have                                                               
to reimburse the  dealer for rent, overhead,  and everything that                                                               
is associated with the operation of the business.                                                                               
                                                                                                                                
MR.  SNIFFEN responded  that he  didn't see  that "expenses"  was                                                               
defined  in the  bill in  any specific  way.   He stated  that he                                                               
thinks that could be a possibility.                                                                                             
                                                                                                                                
CHAIR  MURKOWSKI remarked  that  "expenses" needs  to be  defined                                                               
more clearly.   She asked if this draft [of  the bill] is seeking                                                               
to reimburse the  dealer for those things that the  dealer had to                                                               
buy from  the distributor 18  months prior to the  termination or                                                               
the change.                                                                                                                     
                                                                                                                                
MR. SNIFFEN  answered that he thinks  that is correct.   He added                                                               
that he would  think the main items that a  dealer would have are                                                               
inventory,  equipment, and  supplies, as  well as  transportation                                                               
expenses  associated  with  getting  those  things  back  to  the                                                               
distributor.                                                                                                                    
                                                                                                                                
CHAIR MURKOWSKI  stated that in  looking at the petroleum  Act in                                                               
state statutes,  it doesn't define  "expenses" but it does  put a                                                               
limitation  that  the distributor  should  not  have to  pay  for                                                               
personalized materials that don't have  a value to the refiner or                                                               
distributor.                                                                                                                    
                                                                                                                                
MR. SNIFFEN commented that he thinks that is a good approach.                                                                   
                                                                                                                                
Number 1806                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG directed  Mr. Sniffen to page  6, lines 2                                                               
and  3,   which  read,  "'distributorship  agreement'   means  an                                                               
agreement, whether express, implied, oral,  or written".  He said                                                               
he is concerned  about having an implied or  oral contract raised                                                               
to the level of statutory protection.                                                                                           
                                                                                                                                
MR. SNIFFEN responded that he thinks  that is a good concern.  If                                                               
a distributor denied that there  was such a relationship and then                                                               
refused to comply with the statute,  it would be up to the dealer                                                               
to  prove that  there was  a relationship.   He  added that  that                                                               
would be a question for the courts.                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Sniffen if he  thinks leaving                                                               
"implied" and "oral" would be OK under those circumstances.                                                                     
                                                                                                                                
MR. SNIFFEN stated that it is  going to raise some questions down                                                               
the road,  and he  doesn't know if  there is an  easy way  to get                                                               
around  that.   He  added  that he  does  think those  situations                                                               
exist, and this would provide some protection.                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG remarked  that those  are his  concerns.                                                               
If [the  bill] were to  stipulate only a written  agreement, then                                                               
most  of these  arrangements  would be  made more  or  less as  a                                                               
handshake deal in order to avoid the enforcement of the statute.                                                                
                                                                                                                                
MR. SNIFFEN said that is a good point.                                                                                          
                                                                                                                                
Number 1704                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO  stated  that  in  the  inverse  of  that,                                                               
handshake  deals might  become a  norm in  order for  somebody to                                                               
take  advantage of  the  statute.   He stated  that  part of  his                                                               
concern is with subparagraph (2)(B)  on page 3, which reads, "(2)                                                               
reimburse the dealer  for the expenses that were  incurred by the                                                               
dealer  (B)  during  the  18 months  before  the  termination  or                                                               
change"; it is so broad, it  gets way beyond "stationery and pens                                                               
and pencils."  He remarked that  if he built a showroom 12 months                                                               
earlier to  highlight the product  line, and he lost  the product                                                               
line, it might  be argued that the distributorship  would have to                                                               
pay for the showroom.                                                                                                           
                                                                                                                                
MR. SNIFFEN  responded that that is  a good point.   He suggested                                                               
that  one way  to  limit  that is  to  include  language such  as                                                               
"expenses necessarily incurred to sell  the product" or to tie it                                                               
to  only those  expenses that  the distributor  requires for  the                                                               
sale of the  product, and not expenses the dealer  might incur on                                                               
his or her own.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  HALCRO suggested  tightening the  language so  it                                                               
only relates to inventory or related expenses.                                                                                  
                                                                                                                                
MR. SNIFFEN stated that he thinks that's a good idea.                                                                           
                                                                                                                                
Number 1602                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI,  in   reference  to  the  section   on  page  2                                                               
concerning   disposition  of   merchandise  remaining   upon  the                                                               
contract termination,  stated that she understands,  the way this                                                               
is drafted now, that this  applies regardless of whether there is                                                               
cause for  termination.   She asked  Mr. Sniffen  if that  is his                                                               
understanding.                                                                                                                  
                                                                                                                                
MR. SNIFFEN answered yes.                                                                                                       
                                                                                                                                
CHAIR MURKOWSKI stated that she  understands the language on page                                                               
2, subsection (c),  as relating only to repair parts.   She asked                                                               
how obsolete  technology would be  dealt with.  For  example, she                                                               
asked if she  were an Apple computer dealer and  had repair parts                                                               
in  her  inventory  for  several years  that  are  now  obsolete,                                                               
whether she  could receive the  original purchase  price, because                                                               
that  would  be the  highest  price.    She  stated that  she  is                                                               
concerned with  technological obsolescence  and the fact  that in                                                               
this day  and age things  change literally overnight.   She asked                                                               
Mr. Sniffen if she is too concerned about this.                                                                                 
                                                                                                                                
MR.  SNIFFEN  responded  that  he  does not  think  she  is  [too                                                               
concerned].   He stated that he  does not understand a  whole lot                                                               
about dealer-distributor relationships, but  assumes that in some                                                               
situations  there   is  a  requirement   that  repair   parts  be                                                               
available.  Therefore,  dealers might be more reluctant  to buy a                                                               
computer  than repair  parts, because  they may  not realize  the                                                               
value from  the repair-part  inventory that  they would  from the                                                               
computer itself.  He  said there has to be a  sharing of the risk                                                               
here; the  dealers are making  profits selling these things.   On                                                               
the  repair-part issue  alone, he  said  it would  seem that  the                                                               
distributor is requiring the dealer  to carry that inventory at a                                                               
certain level,  and [the  distributor] should  bear more  of that                                                               
risk than the dealer.                                                                                                           
                                                                                                                                
Number 1359                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  remarked that  Mr. Sniffen  hit on  a good                                                               
possible solution of tying in  the repurchase of the repair parts                                                               
to fair market value.                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he is concerned  about that because                                                               
if [the committee] adopts the  fair market value suggestion, that                                                               
won't necessarily  include repair  parts.  He  stated that  he is                                                               
less concerned about this [than  the other members] because there                                                               
is going to be a net price list.                                                                                                
                                                                                                                                
CHAIR  MURKOWSKI remarked  that  it  will be  the  higher of  the                                                               
original purchase price or the latest price published.                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  responded that  it is still  a wholesale                                                               
price,  rather than  a  fair market  value price  if  there is  a                                                               
listing.  He  suggested that it be the higher  of the fair market                                                               
value or the latest price published.                                                                                            
                                                                                                                                
CHAIR MURKOWSKI remarked that that would take care of it.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Sniffen if  he has  looked at                                                               
any other states or what has been done elsewhere.                                                                               
                                                                                                                                
MR.   SNIFFEN  responded   that  he   hasn't  specifically   with                                                               
distributor bills like this one.   He said he has looked at other                                                               
states when it comes to automobile franchise relationships.                                                                     
                                                                                                                                
Number 1184                                                                                                                     
                                                                                                                                
MS. LUPER  stated that in  regard to  page 2, subsection  (c), in                                                               
cases where  the parts  are small  and there is  a risk  of their                                                               
going obsolete, the trend seems to  be that [a single] request is                                                               
faxed  in so  the  dealer is  not  left with  a  lot of  obsolete                                                               
products.   In cases where  the parts are  very heavy and  cost a                                                               
lot in  freight, those tend  to be the  sort of repair  parts for                                                               
Caterpillar tractors,  for example, and don't  become obsolete as                                                               
a general  rule.  She stated  that the concern is  valid, but she                                                               
thinks  that  in  the  long  term  it  probably  will  not  be  a                                                               
formidable situation.                                                                                                           
                                                                                                                                
MS. LUPER stated  that she believes page 3,  paragraph (2) refers                                                               
to  the  special  training and  infrastructure  specific  to  the                                                               
product.   For example, Roger  Haxby related to her  earlier that                                                               
to  sell   a  specific  product,   his  company  worked   out  an                                                               
arrangement  whereby  many  of  Alaskan  Natives  living  in  the                                                               
villages were  brought into town,  trained, and sent back  to the                                                               
villages to  earn a living.   When that dealership  agreement was                                                               
gone, not only did all those  people lose their jobs, but all the                                                               
training,  travel,  and  everything  that  was  specific  to  the                                                               
product was gone as well.                                                                                                       
                                                                                                                                
Number 1040                                                                                                                     
                                                                                                                                
GEOFFREY  LARSON,   Co-Founder,  Alaskan  Brewing   and  Bottling                                                               
Company, testified via teleconference.   He stated that he thinks                                                               
SB  176  is good  for  protecting  small, in-state  dealers  from                                                               
larger, more  powerful outside  entities.   He remarked  that the                                                               
definition  "distributor" also  includes  manufacturers, and  his                                                               
company is  a manufacturer.   He stated  that in  this particular                                                               
interpretation of  SB 176,  it would  not be  very good  for [the                                                               
Alaskan Brewing  and Bottling  Company].   He explained  that his                                                               
company  sells its  beer through  a wholesaler  that is  a fairly                                                               
large  entity.    In  this instance,  [the  Alaskan  Brewing  and                                                               
Bottling  company] is  the small  entity,  being a  manufacturer,                                                               
which creates a paradox.                                                                                                        
                                                                                                                                
MR. LARSON stated that he thinks  this is good for the protection                                                               
of people  who build  a brand  in an  environment where  they are                                                               
smaller   by    definition,   because   generally    the   larger                                                               
manufacturers have much  of the control over  what merchandise is                                                               
being sent to the "light."   In his case, the rolls are reversed.                                                               
[The  Alaskan Brewing  and Bottling  Company] actually  gives its                                                               
wholesaler  exclusive  rights  for   distribution,  but  in  that                                                               
instance  the company  ends up  relinquishing  a lot  of its  own                                                               
ability  to help  guide and  prosper  in that  relationship.   He                                                               
added   that   the  awkward   thing   for   his  company,   being                                                               
manufacturers  in Alaska,  is  that  if they  had  to go  through                                                               
another market to  get their product to market,  they would first                                                               
have to succeed in [Alaska's] market.                                                                                           
                                                                                                                                
MR.  LARSON  stated  that  in the  proposed  amendment  there  is                                                               
reference to wholesalers  under Title 4, which he  does not think                                                               
would be as appropriate.  He  stated that even his wholesaler has                                                               
larger suppliers from out-of-state.                                                                                             
                                                                                                                                
Number 0827                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  stated  that  [the committee]  had  received  a                                                               
proposed  amendment  from  Senator   Leman's  office  that  would                                                               
specifically   exempt   breweries,    brewpubs,   wineries,   and                                                               
wholesalers  under Title  4.   She asked  if it  is Mr.  Larson's                                                               
recommendation to expand it to  those that are manufacturers in a                                                               
more general sense.                                                                                                             
                                                                                                                                
MR. LARSON responded that the  awkwardness is that he understands                                                               
his  business and  the channels  of trade  for breweries,  and is                                                               
provincially unaware of what would  be a good generalization.  He                                                               
stated that  from his perspective,  that amendment  would protect                                                               
the breweries.   He remarked that in his case,  his company needs                                                               
to wholesale  through other entities.   In doing that,  they will                                                               
form  a relationship  and sign  distribution rights  whereby they                                                               
give their wholesaler total rights  to their product; however, in                                                               
that exclusivity a lot of power is  lost.  He added that he would                                                               
tend  to say  that  with the  amendment as  it  is proposed,  the                                                               
manufacturers and the wholesaler should probably be left out.                                                                   
                                                                                                                                
REPRESENTATIVE HALCRO asked  Mr. Larson if he  had addressed this                                                               
in Senate Labor and Commerce Standing Committee.                                                                                
                                                                                                                                
MR. LARSON responded  that he just became aware of  the bill.  He                                                               
added that  the intent of the  law in other states  is to protect                                                               
the in-state distributor  from larger outside interests.   In the                                                               
last 15 years,  for his industry, these laws  sometimes have been                                                               
problematic for the tiny entities.                                                                                              
                                                                                                                                
Number 0470                                                                                                                     
                                                                                                                                
MR.  VAN ORMER  stated that  as a  manufacturer and/or  dealer in                                                               
Alaska,  he handles  products that  are subdistributed  to people                                                               
throughout the  state.   He said  he would  see [his  company] as                                                               
being subject  to the manufacturer-dealer  side of this law.   He                                                               
added that  the importance of  keeping the oral  agreements piece                                                               
in  this law  is  that they  become a  part  of the  distributor-                                                               
dealership agreement.                                                                                                           
                                                                                                                                
CHAIR MURKOWSKI called  for an at-ease at 5:40 p.m.   The meeting                                                               
was called back to order 5:44 p.m.                                                                                              
                                                                                                                                
TAPE 01-72, SIDE A                                                                                                              
                                                                                                                                
REPRESENTATIVE  HALCRO  made  a   motion  to  adopt  Amendment  1                                                               
[language  provided  by  Mr.  Sniffen],  which  would  change  AS                                                               
45.45.710(a)(1),  page  2, lines  16  to  22, to  read  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
          (1) the fair market value for merchandise that is                                                                     
     unused  and  for  which  the   retailer  has  paid  the                                                                    
     distributor,  plus 100  percent  of the  transportation                                                                    
     charges paid  by the dealer  to return  the merchandise                                                                    
     to  the  distributor.   "Fair  market  value"  as  used                                                                    
     herein means  the amount the distributor  would realize                                                                    
     from the  sale of  the merchandise to  another retailer                                                                    
     using reasonable  good faith  efforts.   "Unused" means                                                                    
     unopened  merchandise  still  in the  original  factory                                                                    
     packaging or container; ....                                                                                               
                                                                                                                                
     This   will   protect    distributors   from   becoming                                                                    
     "insurers"  of old  inventory, and  from having  to pay                                                                    
     for merchandise that cannot be resold.                                                                                     
                                                                                                                                
There being no objection, Amendment 1 was adopted.                                                                              
                                                                                                                                
Number 0054                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO  made  a   motion  to  adopt  Amendment  2                                                               
[language  provided   by  Mr.   Sniffen],  which   would  replace                                                               
paragraph (3) on  page 5, line 17, to  read [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
          (3) a distributorship or franchise agreement for                                                                      
     the sale,  repair, or servicing of  motor vehicles that                                                                    
     are  required   to  be   registered  under   AS  28.10,                                                                    
     including any  person required to be  licensed under AS                                                                    
     45.45.200.                                                                                                                 
                                                                                                                                
There being no objection, Amendment 2 was adopted.                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment 3,  on page  2, lines  27 and  28, to  delete "original                                                               
purchase  price" and  add "fair  market value".   There  being no                                                               
objection, conceptual Amendment 3 was adopted.                                                                                  
                                                                                                                                
Number 0164                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment  4, on  page  2, line  8, to  add  "not contracted  for                                                               
expenditure for money" after "the".                                                                                             
                                                                                                                                
CHAIR MURKOWSKI objected for purposes of discussion.                                                                            
                                                                                                                                
REPRESENTATIVE  HALCRO explained  that  this is  in reference  to                                                               
when something  is called for  in a franchise agreement,  such as                                                               
tools or training.                                                                                                              
                                                                                                                                
CHAIR   MURKOWSKI  suggested   changing  the   wording  to   "the                                                               
expenditure of money not contracted for".                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG agreed with Chair Murkowski.                                                                            
                                                                                                                                
CHAIR MURKOWSKI announced that there  being no further objection,                                                               
conceptual Amendment 4 was adopted.                                                                                             
                                                                                                                                
Number 0269                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment  5, on  page 3,  line 16,  to insert  the words  "makes                                                               
substantial" after the word "or".                                                                                               
                                                                                                                                
CHAIR  MURKOWSKI asked  if the  distributor would  be making  the                                                               
substantial changes.                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that she was correct.                                                                            
                                                                                                                                
REPRESENTATIVE  HALCRO  suggested  that  the  wording  should  be                                                               
"makes substantial changes in the competitive situation".                                                                       
                                                                                                                                
CHAIR  MURKOWSKI   announced  that  there  being   no  objection,                                                               
conceptual Amendment  5 [as worded by  Representative Halcro] was                                                               
adopted.                                                                                                                        
                                                                                                                                
Number 0336                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if [the  committee] has  to adopt                                                               
the termination for cause.                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI responded  that Mr. Sniffen didn't  seem to think                                                               
that  the  termination  for cause  issue  was  significant  until                                                               
talking about good will.                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG stated  that he  doesn't think  a person                                                               
should buy back the business he or she terminates for cause.                                                                    
                                                                                                                                
CHAIR MURKOWSKI responded that that was what she was saying.                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG remarked  that  [the  bill] doesn't  say                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR  MURKOWSKI  stated  that [the  committee]  can  incorporate                                                               
language  similar   to  what  is  contained   in  the  [Petroleum                                                               
Marketing Practices Act].  She  stated that if the termination is                                                               
without  cause,  then   good  will  could  be   worked  into  the                                                               
evaluation   of  the   assets.     She  said   she  agrees   with                                                               
Representative Rokeberg in not wanting to eliminate good will.                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that he  doesn't mind making it as                                                               
tough as possible if the  whole idea of "purchasing the business"                                                               
is if there is any cause.                                                                                                       
                                                                                                                                
CHAIR MURKOWSKI  stated that nowhere in  [the Petroleum Marketing                                                               
Practices Act] does the termination have to be for cause.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG asked what would  happen if the person is                                                               
a bad operator.                                                                                                                 
                                                                                                                                
Number 0584                                                                                                                     
                                                                                                                                
MR. HAXBY responded  that if the person is a  bad operator, good-                                                               
will  assets   of  his   or  her   business  would   go  downhill                                                               
dramatically.    He  added, in  reference  to  Chair  Murkowski's                                                               
comment on  termination for cause or  if there is no  good cause,                                                               
that after  discussing this with  Legislative Legal  and Research                                                               
Services there  was a question as  to how to define  "cause."  He                                                               
said it  ended up that  there were so many  terms that had  to be                                                               
defined;  therefore,  Legislative  Legal  and  Research  Services                                                               
suggested leaving it the way it is.                                                                                             
                                                                                                                                
CHAIR  MURKOWSKI  stated  that   the  good-will  aspect  is  this                                                               
intangible  concept,  and  if  there   has  been  good  cause  to                                                               
terminate a contract,  she said she questions whether  or not the                                                               
individual should be entitled to any good will.                                                                                 
                                                                                                                                
MR. HAXBY  responded that when giving  evaluations of businesses,                                                               
if there  is a growth curve  that is negative, the  value of that                                                               
business  is going  to  be modest  compared to  the  growth of  a                                                               
company that may have a  highly positive, year-after-year growth.                                                               
Good will would be taken into  account at that time by a business                                                               
analyst or an  evaluation expert who says the  company is growing                                                               
at 25  percent year-over-year,  and therefore  will give  them an                                                               
"X"-times-earnings multiplier, which includes good will.                                                                        
                                                                                                                                
Number 0740                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   stated  that   unless  there   is  the                                                               
discretion of  causation and contract obligation,  he thinks that                                                               
should be inserted into this clause.                                                                                            
                                                                                                                                
REPRESENTATIVE HALCRO  stated that  good will  to him  reads like                                                               
"blue sky."  He suggested taking out "good will."                                                                               
                                                                                                                                
REPRESENTATIVE  HALCRO   made  a   motion  to   adopt  conceptual                                                               
Amendment  6, on  page  3,  line 19,  to  replace "covered"  with                                                               
"directly  affected".    There  being  no  objection,  conceptual                                                               
Amendment 6 was adopted.                                                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO   made  a   motion  to   adopt  conceptual                                                               
Amendment 7, on page 3, line 20, to delete "good will".                                                                         
                                                                                                                                
CHAIR  MURKOWSKI objected  for the  purpose of  discussion.   She                                                               
stated  that  she  knows  deleting "good  will"  makes  the  bill                                                               
cleaner,  but  she said  she  supposes  there  is some  merit  to                                                               
keeping it.   She  stated that she  does not like  that it  is as                                                               
broad as it is.                                                                                                                 
                                                                                                                                
REPRESENTATIVE HALCRO stated that "assets"  is a very broad term,                                                               
but there are some sideboards  that imply commercially reasonable                                                               
business  evaluations.   He added  that assets  could potentially                                                               
cover good will.                                                                                                                
                                                                                                                                
CHAIR MURKOWSKI removed her objection.   She announced that there                                                               
being no further objection, conceptual Amendment 7 was adopted.                                                                 
                                                                                                                                
Number 0986                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO   made  a   motion  to   adopt  conceptual                                                               
Amendment 8, on page 3, line  26, to insert "those costs directly                                                               
related to inventory" after (B).                                                                                                
                                                                                                                                
CHAIR MURKOWSKI  asked Representative  Halcro if he  is referring                                                               
to the expenses.                                                                                                                
                                                                                                                                
REPRESENTATIVE HALCRO answered yes.                                                                                             
                                                                                                                                
CHAIR  MURKOWSKI suggested  putting a  definition of  expenses in                                                               
(B).                                                                                                                            
                                                                                                                                
REPRESENTATIVE HALCRO withdrew his conceptual Amendment 8.                                                                      
                                                                                                                                
Number 1057                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  suggested  the wording,  "necessarily  incurred                                                               
with the sale of the inventory".                                                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG suggested  "the  records  incurred as  a                                                               
result of the agreement".                                                                                                       
                                                                                                                                
CHAIR MURKOWSKI remarked that that is good.                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO stated that as  (B) defines it, not only is                                                               
a  dealer's business  covered by  the distributor  agreement, but                                                               
it's 18 months prior to the termination or change.                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that he thinks that is too long.                                                                 
                                                                                                                                
Number 1188                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  made a motion  to adopt conceptual  Amendment 8,                                                               
on  page 3,  line 22,  to insert  "reimburse the  dealer for  the                                                               
expenses that  were necessarily incurred  by the dealer  for that                                                               
portion of the business covered by distributorship agreement".                                                                  
                                                                                                                                
REPRESENTATIVE  HALCRO restated  that  18 months  seems a  little                                                               
long.                                                                                                                           
                                                                                                                                
CHAIR MURKOWSKI  asked Mr. Haxby  what the reasoning was  for the                                                               
18 months.                                                                                                                      
                                                                                                                                
MR. HAXBY responded that typically  it has to do with advertising                                                               
contracted for six months prior  to its publication in the Yellow                                                               
Pages.    Therefore, the  company  would  incur the  expense  six                                                               
months after it's contracted for.                                                                                               
                                                                                                                                
REPRESENTATIVE  HALCRO  remarked  that   that  would  already  be                                                               
covered  regardless  of  the timeframe,  because  that  would  be                                                               
necessarily incurred.                                                                                                           
                                                                                                                                
Number 1270                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI asked if subparagraph (B) is even necessary.                                                                    
                                                                                                                                
REPRESENTATIVE  HALCRO  responded  that he  doesn't  believe  so,                                                               
unless  there's  some compelling  reason  other  than the  Yellow                                                               
Pages.                                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG stated  that there needs to  be a defined                                                               
time period where there will be expenses.                                                                                       
                                                                                                                                
REPRESENTATIVE HALCRO stated that he  agrees.  He suggested [that                                                               
the time period be] 12 months.                                                                                                  
                                                                                                                                
CHAIR  MURKOWSKI   announced  that  there  being   no  objection,                                                               
conceptual Amendment 8 was adopted.                                                                                             
                                                                                                                                
Number 1351                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  made a motion  to adopt conceptual  Amendment 9,                                                               
on page 3, line 26, to delete "18" and insert "12".                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  stated that  he is not  comfortable with                                                               
that.  He said he is not going to reward a bad businessperson.                                                                  
                                                                                                                                
REPRESENTATIVE HALCRO stated  that he still has  some concerns on                                                               
page 6 with  "implied, or oral".   He said he thinks  if there is                                                               
going to be  a distributorship agreement, it  certainly should be                                                               
in  writing;  if  [the  committee] is  putting  these  terms  and                                                               
conditions  in statute,  he thinks  [the  committee] should  make                                                               
this apply  to a  written document because  otherwise it  will be                                                               
impossible for the court to enforce and decipher.                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG stated that it happens all the time.                                                                    
                                                                                                                                
Number 1477                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER asked Mr. Haxby  what he thinks about taking                                                               
out "oral" and "implied".                                                                                                       
                                                                                                                                
MR. HAXBY stated that he has  seen many instances in which people                                                               
do not have  the money to get an agreement;  many times there are                                                               
handshake deals that  will take place over many years.    He said                                                               
"oral" does  allow some method to  review a contract that  is not                                                               
in writing.                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER remarked  that he does not know  how an oral                                                               
agreement could be proven.                                                                                                      
                                                                                                                                
REPRESENTATIVE HALCRO  stated that it seems  to him if he  were a                                                               
small distributorship  and couldn't  afford a  lawyer to  craft a                                                               
distributorship agreement, he would be "looking for trouble."                                                                   
                                                                                                                                
MR.  HAXBY  stated  that he  understands  Representative  Halcro;                                                               
however,  this  does  in fact  occur.    If  all  of a  sudden  a                                                               
distributor says,  "I want a  written contract now," and  the guy                                                               
says, "I'm  sorry, have a nice  day," then the business  is gone.                                                               
If it is taken out, there is no way to have some type of review.                                                                
                                                                                                                                
Number 1591                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI stated  that recognizing  that distributors  now                                                               
will  have a  distributor protection  Act in  Alaska, she  thinks                                                               
with that  protection comes an  obligation for the  businesses to                                                               
protect themselves.   She  remarked that  she recognizes  that in                                                               
the past people  have operated in a trusting  "hand shake world";                                                               
however, [times]  are changing and  people are suing at  the drop                                                               
of a hat.  Therefore,  for [the businesses'] protection, she said                                                               
she thinks it ought to be in writing.                                                                                           
                                                                                                                                
MR.  HAXBY  stated  that  he would  agree  with  Chair  Murkowski                                                               
wholeheartedly.    However,  as  the business  market  in  Alaska                                                               
matures,  there are  still people  who  will be  covered by  oral                                                               
agreements.                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI stated  that this  applies to  a distributorship                                                               
agreement that is entered into on  or after the effective date of                                                               
this  Act.   She  said if  she  has an  oral  agreement that  she                                                               
entered into last  year and she wants it covered  under this, she                                                               
could allege that she entered  into this oral agreement after the                                                               
effective date in order to get  the coverage.  She added that she                                                               
thinks a written agreement gives [businesses] protection.                                                                       
                                                                                                                                
MR. HAXBY  stated that he  agrees with Chair Murkowski,  and that                                                               
most smart businesspeople  who have the time and the  money to do                                                               
that  will do  so.   Everybody  who typically  is distributing  a                                                               
product wants  some type of  a formal written agreement  in order                                                               
to go  to the  banks to  borrow money; however,  that is  not the                                                               
case all the time.  He remarked  that he thinks there needs to be                                                               
some  method  to  review  the  contract, which  may  be  an  oral                                                               
contract.                                                                                                                       
                                                                                                                                
Number 1728                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO stated that  maybe a businessperson has had                                                               
an oral agreement with a  particular supplier for years, and once                                                               
this bill passes, he or she  calls the supplier and [confirms the                                                               
agreements],  then   if  anything  happens  different   from  the                                                               
original oral agreement,  he or she could  legitimately forward a                                                               
claim saying  he or she  has reinforced  the oral agreement.   He                                                               
remarked that it  gets into a "he said she  said," and he doesn't                                                               
see how anybody comes out ahead with that.                                                                                      
                                                                                                                                
REPRESENTATIVE   CRAWFORD  suggested   adding  "verifiable   oral                                                               
agreement".                                                                                                                     
                                                                                                                                
MR. HAXBY  remarked that  that's typically  the way  these things                                                               
happen; there is usually a history that has gone on.                                                                            
                                                                                                                                
CHAIR  MURKOWSKI  stated  that  [the committee]  is  now  talking                                                               
prospectively;  if  someone wants  to  come  under the  franchise                                                               
protection Act, he or she needs a written agreement.                                                                            
                                                                                                                                
REPRESENTATIVE CRAWFORD stated that he  knows there needs to be a                                                               
written contract;  however, in the  business that he is  in, more                                                               
often than not, things are done "on the handshake."                                                                             
                                                                                                                                
Number 1049                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO restated Chair  Murkowski's motion to adopt                                                               
conceptual Amendment  9, on page 3,  line 26, to delete  "18" and                                                               
insert "12".   There being  no objection, conceptual  Amendment 9                                                               
was adopted.                                                                                                                    
                                                                                                                                
CHAIR MURKOWSKI made  a motion to adopt  conceptual Amendment 10,                                                               
on page 6, line 3, to delete "implied" and "oral".                                                                              
                                                                                                                                
REPRESENTATIVE  HALCRO  suggested deleting  on  page  6, line  2,                                                               
"whether express" as well.                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI clarified that conceptual  Amendment 10 would be,                                                               
"means a written agreement between two or more persons".                                                                        
                                                                                                                                
Number 1901                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES  objected.    He stated  that  he  believes                                                               
implied  and  oral  contracts  are  done all  the  time  and  are                                                               
adjudicated in the courts.  Taking  that out would hinder some of                                                               
the flexibility that some businesses have.                                                                                      
                                                                                                                                
REPRESENTATIVE MEYER  indicated he thinks  it is a  good business                                                               
practice,  regardless of  the size  of  the business  to have  it                                                               
written, to protect both sides.                                                                                                 
                                                                                                                                
REPRESENTATIVE   HALCRO  stated   that  he   would  concur   with                                                               
Representative Meyer.                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG stated  that he is going  to vote against                                                               
the amendment  because he believes  that customary  practice does                                                               
take place.                                                                                                                     
                                                                                                                                
Number 1995                                                                                                                     
                                                                                                                                
A  roll  call  vote  was taken.    Representatives  Meyer,  Kott,                                                               
Halcro,  and   Murkowski  voted  for  conceptual   Amendment  10.                                                               
Representatives Hayes,  Rokeberg, and Crawford voted  against it.                                                               
Therefore, conceptual Amendment 10 was adopted by a vote of 4-3.                                                                
                                                                                                                                
CHAIR  MURKOWSKI referred  to page  4, line  2, which  states, "a                                                               
requirement that  the distributor  waive a trial  by jury".   She                                                               
asked whether it should say "dealer" instead of "distributor".                                                                  
                                                                                                                                
MR. HAXBY replied yes.                                                                                                          
                                                                                                                                
Number 2050                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI made  a motion to adopt  conceptual Amendment 11,                                                               
on page  4, line 2, to  change "distributor" to "dealer".   There                                                               
being no objection, conceptual Amendment 11 was adopted.                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO   made  a   motion  to   adopt  conceptual                                                               
Amendment    12,   which    read   [original    punctuation   and                                                               
capitalization included]:                                                                                                       
                                                                                                                                
         TITLE WILL HAVE TO BE AMENDED TO INCLUDE THESE                                                                       
     EXCEPTIONS.                                                                                                                
                                                                                                                                
     Page 5, line [19]:                                                                                                         
          Following "to be registered under AS 28.10"                                                                           
                                                                                                                                
          Insert                                                                                                                
                                                                                                                                
               "(4) a person licensed as a                                                                                    
                    (A) brewer under AS 04.11.130;                                                                            
                    (B) brewpub under AS 04.11.135;                                                                           
                    (C) winery under AS 04.11.140; or                                                                         
                    (D) wholesaler under AS 04.11.160                                                                         
                                                                                                                                
CHAIR  MURKOWSKI objected  for the  purpose of  discussion.   She                                                               
stated that  Mr. Larson thought  that this should not  be limited                                                               
to brewers, but should also deal with manufacturers.                                                                            
                                                                                                                                
REPRESENTATIVE  ROKEBERG  stated  that  he  was  going  to  offer                                                               
another amendment whereby small  manufactures of 100 employees or                                                               
less would  be exempt.   He  remarked that  he thinks  that would                                                               
address  Mr.  Larson's  concern.    He made  a  motion  to  amend                                                               
conceptual Amendment 12 by deleting subparagraph (D).                                                                           
                                                                                                                                
CHAIR  MURKOWSKI announced  that there  was no  objection to  the                                                               
amendment  to  conceptual  Amendment  12;  therefore,  conceptual                                                               
Amendment  12,  as amended,  would  provide  an exemption  for  a                                                               
brewery, brewpub, and a winery.                                                                                                 
                                                                                                                                
Number 2187                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO  remarked to  Mr. Haxby that  the wholesale                                                               
[aspect], under  Title 4  only deals with  those involved  in the                                                               
liquor industry.                                                                                                                
                                                                                                                                
MR. HAXBY  responded that  he was only  concerned if  it excluded                                                               
one  area  such  as  an   Alaskan  [company]  versus  an  Outside                                                               
[company].                                                                                                                      
                                                                                                                                
REPRESENTATIVE  ROKEBERG  stated  that  these  would  be  Alaskan                                                               
breweries.                                                                                                                      
                                                                                                                                
MR. HAXBY  stated that he  doesn't think so,  that Representative                                                               
Halcro suggested it was excluding all.                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  replied that  he has  another amendment;                                                               
therefore, Mr. Haxby shouldn't worry about it.                                                                                  
                                                                                                                                
CHAIR MURKOWSKI stated that breweries  and brewpubs under Title 4                                                               
are Alaskan  by definition.   She announced  that there  being no                                                               
objection, conceptual Amendment 12, as amended, was adopted.                                                                    
                                                                                                                                
Number 2228                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  made  a   motion  to  adopt  conceptual                                                               
Amendment 13, on  page 5, which would be paragraph  (5) after the                                                               
previously adopted  amendment, to  exempt small  manufacturers of                                                               
100 employees or  less.  He added that it  could be in-state, but                                                               
there would probably be equal-protection problems.                                                                              
                                                                                                                                
CHAIR MURKOWSKI objected  for discussion purposes.   She asked if                                                               
this  would  put [the  bill]  in  conflict  with the  meaning  of                                                               
"distributor," which includes a manufacturer with no definition.                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG  responded that  that  is  why it  is  a                                                               
conceptual amendment.   He said this would exempt  only the small                                                               
manufacturers.   At 100  employees, it would  almost be  a "micro                                                               
manufacturer."                                                                                                                  
                                                                                                                                
MR.  HAXBY pointed  out one  of the  issues that  may arise:   if                                                               
there is  subdistribution of  five or ten  sales agents  from the                                                               
major manufacturer, this would exclude them.                                                                                    
                                                                                                                                
Number 2296                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI asked how "manufacturer" is defined.                                                                            
                                                                                                                                
REPRESENTATIVE  MEYER  asked  if  an   oil  company  would  be  a                                                               
manufacturer.                                                                                                                   
                                                                                                                                
MR. HAXBY  stated that  he is  at a total  loss and  is concerned                                                               
about that question.                                                                                                            
                                                                                                                                
REPRESENTATIVE HALCRO suggested that  [the committee] wait to see                                                               
a draft.                                                                                                                        
                                                                                                                                
CHAIR  MURKOWSKI asked  Representative Rokeberg  if he  wanted to                                                               
withdraw conceptual Amendment 13.                                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG answered, no.                                                                                           
                                                                                                                                
REPRESENTATIVE HALCRO  objected to  the amendment because  he did                                                               
not know how it would impact the bill.                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  stated that  all it  would do  is exempt                                                               
small businesses.                                                                                                               
                                                                                                                                
TAPE 01-72, SIDE B                                                                                                              
Number 2334                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAYES  stated that  he opposes the  amendment, and                                                               
thinks this  would be a  great amendment  to debate in  the House                                                               
Judiciary Standing  Committee, with  an opinion  from Legislative                                                               
Legal and Research Services.                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG remarked that  it is a business decision,                                                               
not a legal decision.                                                                                                           
                                                                                                                                
REPRESENTATIVE HALCRO  commented that he is  concerned that there                                                               
may  be a  small  manufacturer  in the  states  with  100 or  few                                                               
employees  that produces  a tremendous  product that  might be  a                                                               
distributor's more profitable line, and  it might be the cause of                                                               
some "heartburn."                                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  Mr.  Haxby if  he represents  any                                                               
manufacturers that have less than 100 employees.                                                                                
                                                                                                                                
MR. HAXBY replied that he couldn't think of any.                                                                                
                                                                                                                                
REPRESENTATIVE HALCRO  stated that Mr. Haxby  also testified that                                                               
this bill was not designed to help his company.                                                                                 
                                                                                                                                
MR.  HAXBY added  that  in the  past he  has  done business  with                                                               
manufacturers that have less than  100 employees, but not at this                                                               
moment.                                                                                                                         
                                                                                                                                
Number 2275                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  stated  that  she  has a  friend  who  owns  an                                                               
Alaskan-known pipe-manufacturing company that is  a "mom and pop"                                                               
business.  She said she  wondered what the ramifications would be                                                               
for a company like that.                                                                                                        
                                                                                                                                
CHAIR MURKOWSKI  made a motion  to amend conceptual  Amendment 13                                                               
from  100 to  50  [employees].   There  being  no objection,  the                                                               
amendment to conceptual Amendment 13  was adopted.  She announced                                                               
that there  being no further objection,  conceptual Amendment 13,                                                               
as amended, was adopted.                                                                                                        
                                                                                                                                
REPRESENTATIVE CRAWFORD  asked if,  on page 3,  line 4,  where it                                                               
states "Death  of the  distributor", it should  be "Death  of the                                                               
dealer".                                                                                                                        
                                                                                                                                
CHAIR  MURKOWSKI  responded  that  it should  be  "Death  of  the                                                               
dealer".                                                                                                                        
                                                                                                                                
Number 2160                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD  made  a   motion  to  adopt  conceptual                                                               
Amendment  14, on  page 3,  line 4,  to delete  "distributor" and                                                               
insert "dealer".  There being  no objection, conceptual Amendment                                                               
14 was adopted.                                                                                                                 
                                                                                                                                
REPRESENTATIVE HAYES made a motion  to adopt conceptual Amendment                                                               
15, on page 5, line 8, to delete "merchandise".                                                                                 
                                                                                                                                
CHAIR MURKOWSKI objected for discussion purposes.                                                                               
                                                                                                                                
REPRESENTATIVE  HAYES explained  that AS  45.45.740(a)(1) is  not                                                               
for merchandise, it is only for business value.                                                                                 
                                                                                                                                
CHAIR MURKOWSKI  stated that  she would  agree that  it shouldn't                                                               
read  "repurchase",  because  the  distributor  is  purchasing  a                                                               
portion of the business that  the dealer has never purchased from                                                               
the  distributor;  therefore,  it  is   just  a  purchase.    She                                                               
clarified that conceptual Amendment  15 would state, "(6) failing                                                               
to purchase as required by  AS 45.45.740(a)(1);".  There being no                                                               
objection, conceptual Amendment 15 was adopted.                                                                                 
                                                                                                                                
Number 2013                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI stated  that Representative  Halcro  had made  a                                                               
point under  the "Death of  dealer" section  that it is  not just                                                               
the  purchase of  the  inventory,  but that  there  should be  an                                                               
opportunity  to  continue  the distributorship  agreement.    She                                                               
asked if that was addressed.                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  stated  that unless  the  agreement  is                                                               
continued, that would occur.                                                                                                    
                                                                                                                                
CHAIR  MURKOWSKI responded  that he  was correct,  but oftentimes                                                               
there will be a right of first refusal to the spouse.                                                                           
                                                                                                                                
REPRESENTATIVE HALCRO remarked that Mr.  Haxby had brought up the                                                               
concern that if  the primary person passes away,  the business is                                                               
valued  and the  distributor says,  "We're going  to cancel  your                                                               
agreement"; then [the dealer] is left with a huge tax bill.                                                                     
                                                                                                                                
MR. HAXBY commented  that he thinks that since it  states in this                                                               
particular  section,  "Unless  the distributorship  agreement  is                                                               
continued by the personal representative,  heirs, [or devisees of                                                               
the individual]",  there would be  the ability for  the [dealers]                                                               
to say they are going to continue on.                                                                                           
                                                                                                                                
Number 1895                                                                                                                     
                                                                                                                                
REPRESENTATIVE HALCRO made a motion  to move CSSB 176(L&C) am, as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
the attached  zero fiscal  note.  There  being no  objection, HCS                                                               
CSSB 127(L&C) moved from the House Labor and Commerce Standing                                                                  
Committee.                                                                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
6:45 p.m.                                                                                                                       
                                                                                                                                

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