Legislature(2001 - 2002)
01/16/2002 03:15 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
January 16, 2002
3:15 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Harry Crawford
Representative Joe Hayes
- HEARD AND HELD
MEMBERS ABSENT
Representative Norman Rokeberg
COMMITTEE CALENDAR
HOUSE BILL NO. 182
"An Act relating to motor vehicles; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 182
SHORT TITLE: MOTOR VEHICLE SALES AND DEALERS
SPONSOR(S): REPRESENTATIVE(S)MURKOWSKI
Jrn-Date Jrn-Page Action
03/14/01 0586 (H) READ THE FIRST TIME -
REFERRALS
03/14/01 0586 (H) L&C, FIN
03/14/01 0586 (H) REFERRED TO LABOR & COMMERCE
04/11/01 0970 (H) COSPONSOR(S): HALCRO
04/11/01 (H) L&C AT 3:15 PM CAPITOL 17
04/11/01 (H) Heard & Held - Assigned to
Subcommittee
04/11/01 (H) MINUTE(L&C)
11/08/01 (H) L&C AT 1:30 PM Anch LIO Conf
Rm
01/16/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
RICK MORRISON, Owner
Eero Volkswagon; and
Member, Alaska Auto Dealers Association
935 Gambell Street
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 182.
RALPH SEEKINS, President
Seekins-Ford-Lincoln-Mercury, Inc. and
Seekins-Ford-Peninsula; and
President, Alaska Auto Dealers Association
1625 Old Steese Highway
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified on HB 182.
JOHN WHATLEY, Spokesperson
The Alliance of Automobile Manufacturers
1401 H Street, N.W., Suite 900
Washington, D.C. 20005
POSITION STATEMENT: Testified on HB 182.
JIM MOORS, (Legal Counsel)
National Automobile Dealer Association
8400 Westpark Drive
McLeon, Virginia 99518
POSITION STATEMENT: Testified on HB 182.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Fair Business Practices Section Civil Division (Anchorage)
Department of Law
1031 West 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Testified on HB 182.
BOB FAVRETTO, Owner
Kenai Chrysler Center, Inc. and
Capital Chevrolet
P.O. Box 7672
Nikiski, Alaska 99635
POSITION STATEMENT: Testified on HB 182.
STEPHEN CONN, Executive Director
Alaska Public Interest Research Group
P.O. Box 101093
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 182.
DUANE BANNOCK
Kenai Chrysler Center, Inc.
10288 Kenai Spur Highway
Kenai, Alaska 99611
POSITION STATEMENT: Testified on HB 182.
ACTION NARRATIVE
TAPE 02-1, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:15 p.m.
Representatives Murkowski, Halcro, Meyer, Kott, Crawford, and
Hayes were present at the call to order.
HB 182 - MOTOR VEHICLE SALES AND DEALERS
Number 0110
CHAIR MURKOWSKI announced that the committee would hear HOUSE
BILL NO. 182, "An Act relating to motor vehicles; and providing
for an effective date." [Adopted at the 04/11/01 meeting was HB
182, 22-LS0239\F, Bannister, 4/6/01; Version F was then assigned
to a subcommittee.]
Number 0167
REPRESENTATIVE HALCRO, speaking as chair of the subcommittee
assigned to work on HB 182, moved to adopt the proposed
committee substitute (CS) for HB 182, version 22-LS0239\P,
Bannister, 12/28/01, as the working document. There being no
objection, Version P was before the committee.
REPRESENTATIVE HALCRO went on to say that when this was
originally introduced it was a 46-page bill, with a fiscal note
of half a million dollars. Throughout the last eight months the
committee has worked to reduce the bill to 23 pages with 4 pages
of definitions. The fiscal note has been eliminated.
REPRESENTATIVE HALCRO reviewed the brief history of the bill.
The bill contains increased bonding requirements for automotive
dealers and motorcycle [dealers]. The previous bond limits were
not enough to cover the cost of a new vehicle. This was done at
the recommendation of the director of the Division of Motor
Vehicles (DMV).
REPRESENTATIVE HALCRO explained that the [subcommittee] had
addressed the subject of termination. They addressed issues
such as the point at which the automotive manufacturer can
terminate a local automotive dealership, the requirements for
this process, and what criteria have to be in place. The
[subcommittee] feels that it has defined these issues clearly;
included now are an appeals process and an arbitration process
that the automotive dealership can go through if there is any
disagreement.
Number 0312
REPRESENTATIVE HALCRO spoke about the issue of succession. For
example, if the owner of an automotive dealership were to die,
the bill addresses the [franchise-holder's rights], such as
having the business go to a relative or to a manager. This bill
includes criteria that address this scenario.
Number 0348
REPRESENTATIVE HALCRO also addressed the subject of new
dealerships and market entry. This deals with protection for
franchise holders. For instance, if General Motors (GM) wanted
to come in and put in a dealership and there was already an
existing (GM) dealership, [it outlines] what would have to take
place to allow that to happen.
Number 0382
REPRESENTATIVE HALCRO discussed a key issue regarding new
dealership and market entry, known as "relevant market area",
which is the dealer's existing market. He indicated the
Connecticut version was used as a model. It says "that the
manufacturer will honor the franchise agreement"; a local car
dealer would [have a franchise agreement] with its local
community and would have the right to sell a product in a given
area. That is often defined in the franchise agreement. What
Version P covers is that the dealership will not only honor what
is in the manufacturer's franchise, but will also extend a 14-
mile buffer. It gives the dealer, if there is no geographic
protection, 14-miles of protection.
REPRESENTATIVE HALCRO continued to say that [the subcommittee]
had to be careful with [the franchise agreement] because there
is a very strong argument that limiting or putting conditions
upon the manufacturer's right to expand its operations might
"bump up" against federal anti-trust laws; it would put up
barriers that tell somebody that he or she cannot compete. The
[subcommittee] was very careful about [this subject] and spent a
lot of time [working] with Terry Bannister, Attorney,
Legislative Legal and Research Services, [reviewing the content
of HB 182] to make sure that it is okay.
Number 0482
REPRESENTATIVE HALCRO also addressed some smaller sections of
the bill that deal with some repurchase obligations from the
manufacturer. When [a manufacturer] terminates a dealership, it
specifies what [the manufacturer] has to do to compensate [the
dealership] for equipment that has been purchased within the
last three to five years. It also covers [the dealership's] new
inventory and what [the manufacturer] has to pay [the
dealership] for compensation. In addition to this, it addresses
how soon [the manufacturer] has to compensate [the dealership].
The committee has set forth those requirements.
Number 0512
REPRESENTATIVE HALCRO addressed one of the most important parts
of the bill, consumer protection. He said the subcommittee has
spent a good deal of time with Clyde (Ed) Sniffen, Jr.,
Assistant Attorney General, Fair Business Practices Section,
Civil Division (Anchorage), Department of Law. He had asked
[Mr. Sniffen] about the type of issues that consumers complain
about. Although a great number of issues arise, there is
nothing in [Alaska] state law that protects consumers in certain
situations. He asked [Mr. Sniffen] to come up with some
language with regard to consumer rights. Representative Halcro
also requested that [Mr. Sniffen] review [existing laws] as well
as what was already covered under federal laws, because there
are existing federal "lemon laws" in place.
Number 0575
REPRESENTATIVE HALCRO explained that if a dealership advertises
a vehicle for a specific sales price, then the dealership should
have more than one vehicle available. If it only has one
vehicle available, it would be required to disclose it to the
public. He said there is concern that the dealerships are
advertising vehicles to attract consumers to the dealership.
Once the consumer is at the dealership, the dealer discloses
that it only had one of the vehicle advertised, which the dealer
since sold. As a result, the dealership might try to "move" the
consumer into a different vehicle. The subcommittee is
concerned about [dealerships] misrepresenting the product and
the [number of vehicles] available to the consumer.
Number 0652
REPRESENTATIVE HALCRO mentioned that there is some support for a
two- or three-day "cooling off" period. He said that it is
unworkable for a car dealer to have a two- or three-day "cooling
off" period for a new car. When a new car is purchased and the
paperwork is completed, it starts a process that informs DMV
that [the person] owns the car. This makes the car used, and it
cannot be sold again as a new car. He stated concern over this
issue and suggested that another state's process be reviewed.
Regarding "balance," he said that the consumer needs to have
some protections, but the consumer also needs to be responsible,
and the responsibility should be shared.
REPRESENTATIVE HALCRO mentioned that the subcommittee had
removed the DMV oversight. He said that the original bill had
plans that would have caused additional work for DMV, which the
director of DMV feels the division cannot presently handle. He
also said that DMV should not be responsible for the
[oversight]. He added that it is questionable as to whether or
not it should be in legislation.
Number 0821
REPRESENTATIVE HALCRO said the subcommittee had eliminated all
of the issues regarding warranty work and the issues relating to
manufacturer's subsidiaries. He said that these are the two
issues that the dealers and manufacturers could not "get
together" on. He indicated that the subcommittee reviewed the
[process] of what other states had done previously, and the
"trend" of similar legislation. The subcommittee found that it
would not be realistic for these problems to be solved in
legislation. He said that the State of Alaska should not be
[regulating] items such as rental vehicle [compensation],
warranty work [obligations], and coverage. These are items that
are left to a franchise agreements; if all of these items were
covered in state law, then there would be no need for a
franchise agreement.
REPRESENTATIVE HALCRO suggested that there should be some
protection for Alaskan businesses that have made substantial
investments in their dealerships and their communities. If
there were any termination, succession, or new market entry,
there should be a groundwork in [place].
Number 0874
REPRESENTATIVE HALCRO indicated that Version P is less involved
than the original version. He said this was based on previous
conversations regarding [Version F], held with opposing sides
regarding the bill; he felt that neither side was happy [because
both sides must compromise.
REPRESENTATIVE HALCRO addressed concerns that this bill was not
the right "vehicle" for consumer protection. He disagreed,
citing that if the bill [outlines] the responsibilities of the
dealers and manufacturers, the bill should also address consumer
[protection].
Number 0949
REPRESENTATIVE HALCRO explained that he had studied other states
and their laws relating to auto dealers. During his research he
discovered that dealers tend to be local and to have a better
connection with their state legislators, which is the reason
that these [issues] have gained so much ground in states. He
found that it had become a trend to put these protections in
place. He said that he has a problem with it; there is a strong
argument that this "bumps" up against anti-choice and anti-
consumer issues. The [legislation] is limiting competition and
the options available to consumers. The argument is that
[legislation] needs to be careful with "what they put forward";
it limits the consumer in the choices they have when it comes to
buying an auto or where they get it serviced.
REPRESENTATIVE HALCRO added that he feels this is a good bill
and a "balanced" bill. He thinks if both sides do not like the
bill, then the subcommittee has done its job.
Number 1006
CHAIR MURKOWSKI publicly thanked Representative Halcro for all
of his work on this bill. She mentioned the amount of research
that he has conducted involving individual states' agreements
and how they have treated [similar issues] in the various
jurisdictions. She said that the drafts have not been concise.
She also said that she appreciates the time that he has spent
with both sides in an effort to fairly treat both sides, as well
as giving consumers the opportunity to weigh in on the issue.
Number 1158
RICK MORRISON, Owner, Eero Volkswagon; and Member, Alaska Auto
Dealers Association (AADA), testified via teleconference from
Anchorage. He informed the committee that he had several
concerns regarding the bill. One of his concerns was the
difference between [Version P] and the original bill. He said
the original bill addressed dealer franchise protection. He
went on to say that because of some needs of some very large
business corporations with "a whole battery" of lawyers.
Working against smaller-business people in the local community,
some abuses have happened in the past THAT have hardened local
business people. Mr. Morrison maintained that Version P has
turned into a consumer protection bill; he does not agree or
disagree on all the issues addressing consumer protection. He
said he thinks there need to be more studies in that area. He
also indicated that the bill is "weighted" much more toward
consumer protection than toward being a franchise bill.
MR. MORRISON addressed the comment made by Representative Halcro
about the local dealers' knowing their legislators. He pointed
out that this is the situation because the [dealers] are active
in their communities; they have invested a lot of money in their
facilities, franchises, and employees, in order to provide the
best service to their customers. He said the [dealers] are a
group of people who have put in a tremendous amount of time,
energy, and expense into the local community and into developing
the local community.
Number 1370
MR. MORRISON said that he is uncomfortable when a legislator
says, "Wait a minute: we don't want to listen to these people
and work with these people, because it limits consumers." He
said that it does not limit consumers; the [automotive] industry
is probably the most scrutinized industry in the nation right
now in the way they do their self-evaluations. He said the
[dealership] would rather be taking care of customers than not
taking care of customers. He said that he doesn't mean that
there aren't things that happen. He indicated that
[dealerships] would be interested in seeing that certain
protections are put out for consumers.
Number 1398
MR. MORRISON expressed concerns about issues in the bill that he
feels need more attention. He commented on the warranty issue
and the way it was written to be a contractual agreement on a
franchise agreement. He indicated that the warranty protection
directly affects the consumer: the dealership is not protected
in warranty coverage, and the vehicles are not protected in
certain [aspects] that are being promised to consumers. He said
that consumers will ultimately lose in the process.
MR. MORRISON went on to address termination issues and the
changes that had been made regarding those issues. He indicated
that the [dealers'] request for a 24-month period had been
reduced to 12 months, without negotiations.
MR. MORRISON mentioned that he was concerned about some of the
advertising aspects. He also expressed concern regarding some
of the issues surrounding inspections of vehicles. He said that
there are some tough [requirements] in the bill that are not
being done in other states. He indicated that more review was
needed in regard to these issues.
MR. MORRISON expressed concern about the differences between
Version P and the previous versions. He said that this
[version] is considerably different from the suggestions that
have been made at three different "suggestive rewrites." He
said he feels that the [dealerships'] "voice isn't being heard."
Number 1489
REPRESENTATIVE HALCRO clarified what he said regarding dealer
protection laws. He said that the dealer protection laws have
become popular in the various states because of the
relationships [between local dealers and their legislators]. He
suggested that there is nothing wrong with those types of
relationships, but those need to be considered when "balancing"
this bill. He reflected on the hearing held on November 8,
2001, in which he commented on the content of the bill. He'd
indicated at that hearing that there was content in the bill
that he was going to rewrite, he said since he didn't think that
some of the [issues] needed to be included in the legislation.
Number 1556
REPRESENTATIVE HALCRO apologized for the timeline of the bill.
He indicated that he had not had much time to review Version P,
which was published on December 28, 2001.
REPRESENTATIVE HALCRO reflected on Mr. Morrison's testimony
regarding termination. He indicated that the concerns that Mr.
Morrison expressed over the requested termination period are
issues that can be addressed.
REPRESENTATIVE HALCRO explained that after each of the previous
hearings on the bill he would receive a revised version from the
dealers. He indicated that he would receive a revised 43-page
version from the dealers, and a revised version from the
manufacturers, not the suggestions he had asked for. He noted
that this made it difficult to move forward.
Number 1605
RALPH SEEKINS, President, Seekins-Ford-Lincoln-Mercury, Inc. and
Seekins-Ford-Peninsula; and President, Alaska Auto Dealers
Association (AADA), testified via teleconference from Fairbanks.
He informed the committee that he disagreed regarding some of
the issues that Representative Halcro discussed. He
acknowledged there were areas of the bill that manufacturers and
dealers could not agree on. He noted that a great deal of time
had been spent on reviewing the content of the bill. Mr.
Seekins disagreed with Representative Halcro's comment about
returning a 43-page revised bill, which he described as much
smaller. He commented that the bill had "a lot of mechanics in
there that didn't really have any substance."
MR. SEEKINS explained that the [AADA] had approached Mr. Sniffen
regarding consumer concerns, which Mr. Seekins suggested should
be put in separate legislation. He indicated that separate
legislation would add clarity and allow for attention to be
focused directly on the issues. He said that he thought that
the [AADA] had reached an agreement with the Office of the
Attorney General, but apparently had not.
Number 1710
MR. SEEKINS said he was not aware of any federal "lemon laws";
he thought there were state [lemon laws]. He referred to a
conversation in which he was told that the reason for the large
number of pages in the bill was because Alaska was the last
state in the nation to address the issue. He explained that if
there had been previous legislation in place, the changes may
have been few.
Number 1765
MR. SEEKINS said that there were [issues] in the bill that the
[AADA] had deliberately tried to address, however those had been
left out [of Version P], which instead adopted provisions from
the model provided by The Alliance of Automobile Manufacturers
("Alliance"). He offered an example on page 7, [lines 30-31,
and page 8, line 1], which read in part, "the manufacturer or
distributor shall supply the new motor vehicle dealer with
instructions on the method by which the new motor vehicle dealer
is to return the property to the manufacturer or distributor."
He indicated that this was directly from the Alliance's wording.
He interpreted this to mean that if the [manufacturer]
terminates the [dealership], then the [manufacturer] could
request that parts be sent to "Florida," for example, at the
[dealer's expense]; he said that the [dealer] would have to
comply with that because it is state law. He explained that the
[AADA's] version, however, would provide that if the
[manufacturer] terminates a [dealer's franchise], the
[manufacturer] would take possession [and repurchase the
inventory at the dealership site]. He indicated that this made
more sense for a dealership located in Alaska when compared to a
dealership located in the continental United States.
MR. SEEKINS acknowledged that the [AADA] had some differences in
how the national model might look in other states. He explained
that almost all of the provisions the [AADA] requested the
legislature look at came from other states that already had the
[provisions] in statute. He agreed with Mr. Morrison's
statement regarding similar laws in other states. He maintained
that the reason they were there is probably not because the
dealers were friendly with their legislators, but because it was
something that made it difficult for dealers to take care of
their customers.
Number 1845
MR. SEEKINS explained that it can be difficult for a small
company to deal with a large corporation. He said that the AADA
was not trying to be onerous in what it did as an association;
and AADA adopted many of the suggestions from the Alliance. He
explained that he found the bill modeled the Alliance's
suggestions more closely than the suggestions of the AADA. He
said he thinks that the bill still needs a lot of work. He also
suggested that the bill provide more clarity in regard to the
[type] of business cases that have forced the automobile dealers
in Alaska to address these [issues].
MR. SEEKINS commented that the [AADA] was being very reasonable
and consumer-friendly, especially in the area of warranty. He
explained that the [dealer] has an adhesion contract with the
manufacturers that allows the [manufacturer] to change the terms
in which the [dealer] provides warranty to the people of Alaska.
He said there is no way for the [dealer] to handle those
requirements unless they are in statute.
MR. SEEKINS indicated that the AADA wanted a [provision] in the
bill that would require the manufacturer, not the dealer, to
provide transportation for a customer in the event that the
customer was without transportation due to an error on the part
of the manufacturer. Mr. Seekins suggested that some business
cases be reviewed on an item-by-item basis to [become familiar
with the history].
Number 1997
JOHN WHATLEY, Spokesperson, The Alliance of Automobile
Manufacturers (Alliance), testified via teleconference from
Washington D.C. He told the committee that he agreed with
Representative Halcro's statement that "neither side likes what
we see." He referenced the relevant-market-area provisions,
which "we" do not like. He noted that studies indicate that
[relevant market area provisions] are anti-competitive. He
pointed out that the relevant-market-area provision of 14 miles
poses the [manufacturer] some problems when dealing with [small]
towns in the state. He indicated that the [manufacturer] had
proposed a relevant-market-area, which was required, of six and
ten miles. He said that the [manufacturer] prefer that there be
some recognition of the difference between a metropolitan area
and other areas of the state.
MR. WHATLEY indicated the Alliance needed clarification on some
areas of the bill and that he wanted to review [members']
concerns.
Number 2062
MR. WHATLEY brought attention to page 5, the section covering
applicability. He said the [Alliance] had a number of ancillary
contracts that a manufacturer may have with its dealers over
real estate or other areas that probably don't need to be
covered by the statute. He commented that he would be concerned
if it were included in the bill.
MR. WHATLEY referred to page 5, AS 45.25.030, subsection (b).
He indicated that the exception was confusing because of the
wording, which he thought was unclear. He suggested that as it
is currently written, it gives the subsidiaries the right to
engage in their usual scope of business, but [he wondered] if it
was not prohibited by the statute. He suggested using the
wording "but otherwise prohibited by the statute".
Number 2139
MR. WHATLEY addressed concerns on page 6, AS.45.25.120, the
termination provision. One concern is the shortened termination
provision for certain convictions of certain crimes. He pointed
out that federal law is not included. Therefore, he suggested
that federal law should be included there. He turned to more
general concerns regarding the three exceptions found on page 6,
lines 18-25. He felt that all three of those things are
"incurable" in a sense. He remarked, "Once you're insolvent,
you're always insolvent. Once you're been convicted of crime,
short of a pardon, you're probably still ...; there's no way to
get out of that." Therefore, he expressed the need to exempt
those from the longer notice provision on the preceding page.
Number 2139
MR. WHATLEY drew attention to page 7, the so-called threat of
termination language in AS 45.25.130. That language doesn't
seem to allow for settlements of legitimate disputes between
manufacturers and dealers when there may be a right to
terminate, he said, and "we" don't want to do so. "We could be
in trouble for threatening to terminate if we try to develop a
settlement that allows (indisc.) to work their way out of a
problem," he explained.
MR. WHATLEY turned to page 11, lines 3-9, and remarked that it's
confusing in regard to what this had to do with replacing a
dealership. He then directed attention to page 12, the
arbitration section. That section raises two concerns because
it references oral franchise agreements, and that language also
appears in the definition section. To his knowledge, he said,
there are no oral agreements in franchise agreements; they
generally have an integration clause that says no other
agreements shall exist. Mr. Whatley expressed concern that
"we'd end up in a (indisc.) evidence fight with the dealer." He
feels that litigation should be limited to just written
agreements, he told members, which he believes is the standard
in most places.
MR. WHATLEY addressed the arbitration requirement law. He
acknowledged the advantages of arbitration, but also expressed
concern regarding small claims. He wondered if it is worth the
while of the dealer and the manufacturer to have to pick three
arbitrators and go through that process, or whether there's a
better way to resolve those kind of issues. He was concerned
with the cost in that situation.
Number 2183
MR. WHATLEY said his remaining concerns are in the definitions.
He referred to a definition on page 24 regarding the
administrator. He said didn't understand how that fit into the
bill, given that some of the provisions were removed from the
earlier version that had reference to the administrator-of-
service contract. He believes that gives it more of a technical
concern. His next two concerns had to do with the definition of
broker. He explained there are certain Internet joint ventures
that manufacturers have with their dealers; those may get swept
into that definition that requires some kind of a license, or
they could be otherwise put out of business. Mr. Whatley
indicated that there are two different definitions of "motor
vehicle dealer" that are not exactly the same in the two places.
He noted that the definition of new motor vehicle dealer doesn't
require the new motor vehicle to have a franchise [license]. He
said, "Normally, you don't want anybody holding the (indisc.)
out of a new motor dealer unless they have the franchise from
one of the manufacturers or distributors."
Number 2277
MR. WHATLEY discussed an enforceability concern. He said, "The
provisions of this bill would be an unfair trade practice under
the Alaska Statute, as I understand it, though that may provide
for it... multiple damages in some cases." He disagreed with
the suggested arbitration process. He said he felt it would be
appropriate if a manufacturer could be sued by the dealer but
not in a situation in which it would result in treble or
multiple damages. He said that in a business dispute he was
concerned that there shouldn't be multiple damages allowed.
Number 2320
CHAIR MURKOWSKI commented that she did not see where the bill
allowed for damages.
Number 2332
MR. WHATLEY explained that one of the provisions, Section 11,
page 26, references "violating this section is a violation" of
AS 45.25, which "references back to the unfair trade practices
Act." He continued to say that "we" are not absolutely sure
this is the way it applies, but the cross-reference, AS
45.54.71, would make it a violation of the unfair trade
practices and consumer protection Act.
MR. WHATLEY addressed damages, which he explained are three
times actual damages or a $500 penalty. He continued to say
that in all cases involving a dispute with a dealer, it is the
greater of the two; in this situation it would probably be three
times actual damages available. He said that he's unsure
whether they always have to be imposed by a court. He said,
"That would concern us. This is a business-to-business
relationship, and there are almost no states, or [only] a couple
of states, that have multiple damages allowed for these kinds of
disputes."
Number 2406
JIM MOORS, Legal Counsel, National Automobile Dealer
Association, testified via teleconference. He said his
reference point is how this compares to what is done in other
states. He commented that he has only had a short period of
time to review Version P. He said what is missing from the
bill, which exists in most other states, is found in Section 5
of the prior draft [Version F], particular practices by the
manufacturer. He noted that this section has been removed from
Version P. He indicated that this is the section that gets into
changes in executive management. He remarked that there are a
"lot of issues in there that I don't think are controversial but
have been addressed in other states and they are just (indisc.)
from the bill."
Number 2436
CHAIR MURKOWSKI asked him to be more specific. She told him the
committee did not have the prior draft to review and that there
was confusion over what the prior draft is.
Number 2447
MR. MOORS offered some examples. He mentioned a change in
executive ownership; that a manufacturer can't unreasonably
withhold consent (indisc.); exclusivity; and interference with
the (indisc.) requirements that the dealership is required to
maintain. He suggested using other states as a model and
discussed putting in protections for dealers. He said this is a
one-sided contract and the manufacturers have a lot of
flexibility to modify the agreement. He also reviewed the
franchise agreement. He indicated that the franchise agreement
is being overshadowed by a lot of other agreements, which he
said include some subsidiaries. He suggested that
[subsidiaries] be looked at again, and questioned whether to
just limit this to the franchise agreement.
MR. MOORS turned attention to the brokerage provision. He said
he thought the objective was to make sure new car sales were not
through franchise-regulated dealers. He noted that he might be
incorrect. He discussed the brokerage section and remarked that
the only thing in the brokerage section now is a definition of
broker. He mentioned that "something" was taken out.
TAPE 02-1, SIDE B
Number 2500
MR. MOORS expressed some concerns with the arbitration issue.
He said this is supposed to be a bill to provide some protection
for the franchise dealers in Alaska. His understanding of the
arbitration provision is that if a manufacturer chooses to go to
arbitration, any dispute the dealer has covered under the bill
could move it from the courts to arbitration. He went on to
say, "I have to caveat that because there's a reference to the
Alaska arbitration Act, with which I am not familiar." He
explained that because of the way it was written, it may have
the result of requiring the dealers to go to arbitration on all
the disputes, rather than being able to go through the courts.
He suggested more clarification.
Number 2453
CHAIR MURKOWSKI urged those with specific recommendations or
suggestions to fax or send them to the committee. She asked
that the suggestions be based on of Version P.
Number 2415
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General, Fair
Business Practices Section, Civil Division (Anchorage),
Department of Law, testified via teleconference from Anchorage.
He started out by commending Representative Halcro on his effort
to bring together some very "conflicting views on what this bill
should look like." He acknowledged that the bill is
substantially different from the bill that was originally
introduced. He said he thinks it is necessary because there are
so many conflicts between the practices that dealers and
manufacturers want to see. He said there are going to be some
issues that arise that not everyone will agree on. He noted
that this bill addressed a significant number of consumer
protection issues. He said he thinks these are very necessary,
and he doesn't think there is a better place to put these kinds
of consumer protection issues in.
Number 2381
MR. SNIFFEN went on to say [consumer protection] is important in
Alaska, based on some of the complaints reviewed at the
Department of Law. He noted that all of the provisions come
from one of two places: other state law or court decisions in
Alaska. He reflected on issues in prior cases, one involving a
former Anchorage Nissan dealership. He explained that there is
superior court precedent to support some of the other practices
that have been included in this legislation.
Number 2338
MR. SNIFFEN offered to answer questions about any of the
sections beginning on page 12. He noted that one section needs
modification. He suggested removing some sections that create
some ambiguity in regard to a used-car dealer's obligation to
disclose material defects in an automobile. He said he would
submit [changes] in writing.
Number 2300
CHAIR MURKOWSKI turned attention to page 18. She commented that
she found the whole section a little difficult. She said the
burden is on the motor vehicle dealer to make the diligent
inquiries as to the condition of the vehicle. She remarked that
there are all kinds of issues about what's going to constitute
diligent inquiry. She discussed the obligation of the motor
vehicle dealer to investigate the history of the vehicle. She
indicated she was troubled by the question of how to implement
and enforce those provisions.
Number 2217
MR. SNIFFEN explained that this language came almost verbatim
from a superior court order that was issued in the Anchorage
Nissan case, which imposed some conditions on that car dealer to
remedy some unfair practices. He offered to explain the intent
of this section and suggested redrafting it if "that's necessary
to more clearly evidence that." He explained that the
obligation is placed upon the used motor vehicle dealer to
conduct reasonable inquiries into prior accidents and the repair
history of the vehicle from the person from whom it is
purchased. He continued to say the requirement is for the
dealer to make a reasonable and diligent inquiry from the
seller. He explained that the dealer would be required to ask
whomever they are purchasing the [vehicle] from if the [vehicle]
has been in an accident or if it has a lengthy repair history.
He said if the answer is "no," then that's it.
MR. SNIFFEN continued to say that based upon the inquiry, if
there is some reason to believe that there are material defects,
then there is an additional obligation to conduct a reasonable
inspection of the vehicle, test drive it, look at it, put it up
on a rack to see if there is any frame damage, and then record
what is found. He indicated the language focuses on only
material defects, which are things that could potentially affect
the safety and operation of the vehicle for its intended
purpose. He explained that if there is information that could
be reasonably interpreted to mean that the car might have such a
defect, then the third requirement would be to disclose that
information to the consumer purchasing the vehicle. He said
from that point it is up to the consumer to decide whether
further inspection is necessary, so there is some obligation on
the consumer to do more. He said that "we" don't think those
three elements really impose a incredible burden on the dealer.
Number 2143
CHAIR MURKOWSKI suggested the [section] needs to be "tightened
up." She expressed concern about the reference to material
defect. She pointed out that the subsection that refers to
disclosure simply states "any known defects of the motor
vehicle." She wants to ensure it is limited to material
defects. She said, "There's a difference between reasonable
inquiry and diligent inquiry, or at least I make that
distinction in my mind." She also noted that she is not
comfortable with the language in this section as it [appears].
She pointed out that it would be extremely difficult to
implement.
Number 2094
MR. SNIFFEN agreed with Chair Murkowski's suggestion to provide
more clarity.
MR. SNIFFEN addressed Mr. Whatley's comment on the "multiple
damages" issue. He said that "we" would have inserted a section
at the end of this bill that makes a violation of this chapter,
AS 45.25, an unfair trade practice. He went on to say that
under the unfair trade practice law, a prevailing plaintiff
could recover treble damages, reasonable attorney fees, and so
forth. He said the intent wasn't to allow for double recovery.
He commented that he didn't think the courts would allow that.
He suggested a remedy by editing that section to say that a
violation of AS 45.25, just the specific section dealing with
the consumer protection issues, would be an unfair trade
practice. He suggested leaving the issues relating to the
franchise agreement out of that.
Number 2025
BOB FAVRETTO, Owner, Kenai Chrysler Center and Capital
Chevrolet, testified before the committee. He addressed the
issue of disclosure. He explained that the federal sticker,
which appears in the window of the used cars he sells, discloses
whether or not the car is sold in "as is" condition or in
"warranty" condition. He said on the reverse of that form there
are several line items that outline some of the concerns in the
bill. He went on to say that the [dealership] is required to
have the consumer review and sign the [form] before he/she takes
delivery of that automobile.
Number 1941
CHAIR MURKOWSKI asked if this is for used vehicles.
Number 1938
MR. FAVRETTO answered "yes" to Chair Murkowski's question. He
suggested that the form be required, rather than adding
additional language. He indicates that Ralph Seekins and Rick
Morrison may be able to identify the form and the source of the
form.
Number 1930
MR. SEEKINS explained that he uses a mandatory Federal Trade
Commission form that informs the customer on a used vehicle
whether there's any warranty on the vehicle or whether it's sold
"as is." He offered to provide a copy of the requirements.
Number 1927
MR. SNIFFEN indicated that he is very familiar with that form.
He suggested that some of the "duplicated language" be removed
from the bill.
Number 1923
STEPHEN CONN, Executive Director, Alaska Public Interest
Research Group (AkPIRG), testified via teleconference. He
thanked Representative Halcro and his staff for their hard work,
and he also thanked Rick Morrison and Ed Sniffen for their
collaboration over the many months. He explained that those at
AkPIRG, the state's largest and oldest consumer protection
group, were pleased a bill that spoke to the needs of the much
beleaguered used and new car buyers, had finally come to the
attention of the legislature. He explained that he also had a
limited time to review [Version P].
MR. CONN spoke about taking out prior provisions related to the
consumers that he said were redundant regarding state law and
federal law. He commented that "we" didn't get everything "we"
wanted. He continued to speak about dealer practices, which he
said "lead to protracted and unnecessary conflict and litigation
in the realm of new cars and in the realm of used cars." He
suggested that there is a new level of clear and valuable
information being provided to the consumer, which he concluded
"will find themselves a happier buyer." He predicted that the
consumer will return to a dealer and will keep the money
circulating within the Alaskan economy.
Number 1823
MR. CONN urged the committee not to do a "great deal of damage
or watering down at this juncture." He suggested that the bill
is "compromised legislation." He turned attention to Article 4,
AS 45.25.460, and AS 45.25.470, which he indicated would provide
the consumer with an understanding of the frequently used
terminology. He said this would allow for the consumer to know
what "as is" is and what the "is" means to the extent that the
dealer and sales person knows what "is" is. He also said this
provides disclosure to the new-car buyer when there has been
substantial damage to the vehicle. He went on to say that
[AkPIRG] has stayed out of the debate/dispute between
manufacturers and dealers, assuming that they would work it out
so the bill would pass muster with the legislature and be found
constitutional by the court.
MR. CONN said that [AkPIRG] is respectful of the small-business
people who are the car dealers of Alaska and has had a great and
positive experience working with them. He noted that [AkPIRG
personnel] will be very happy to sit down with them again and
continue to work with them. He went on to say, "On the other
hand, we are not in favor of a kind of feudal entrenchment,
whether it be in the political community or in the business
community."
MR. CONN urged those consumers interested in the "business of
buying and selling cars" to get a hold of this bill before it
changes. He suggested taking a look at the work that has been
done and urged them to join "us." He suggested this would allow
all three of the groups to put something together that will come
out of the legislative session and advance everyone's interests
in this process.
Number 1660
DUANE BANNOCK, Kenai Chrysler Center, Inc., testified via
teleconference from Kenai. He referred to the comment Mr. Conn
made about "the much beleaguered new or used car buyer." Mr.
Bannock commented, "Right now, it might be the new or used car
dealer that is being beleaguered."
Number 1619
CHAIR MURKOWSKI commented that she thinks Version P is a great
work product. She indicated that the subcommittee had a good
foundation from which to work. She asked that those interested
parties who would like to submit suggestions to the committee
fax them to the committee aide. She said she would like to get
to a point where "everybody's disliking it a little less." She
indicated that the subcommittee will produce the proposed
committee substitute, which will then be presented to the
committee for consideration. [HB 182 was held over.]
ADJOURNMENT
Number 1517
There being no further business before the committee, the House
Labor & Commerce Standing Committee meeting was adjourned at
4:35 p.m.
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