03/18/2002 03:20 PM House L&C
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 18, 2002
3:20 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 BILL NO. 355
"An Act relating to the taxation of mobile telecommunications
services by municipalities; and providing for an effective
date."
- MOVED CSHB 355(CRA) OUT OF COMMITTEE
HOUSE BILL NO. 182
"An Act relating to motor vehicles; and providing for an
effective date."
- MOVED CSHB 182(L&C) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 355
SHORT TITLE:MOBILE TELECOMMUNICATIONS TAX
SPONSOR(S): LABOR & COMMERCE BY REQUEST
Jrn-Date Jrn-Page Action
01/23/02 2045 (H) READ THE FIRST TIME -
REFERRALS
01/23/02 2045 (H) CRA, L&C
02/28/02 (H) CRA AT 8:00 AM CAPITOL 124
02/28/02 (H) Heard & Held
02/28/02 (H) MINUTE(CRA)
03/06/02 (H) L&C AT 3:15 PM CAPITOL 17
03/06/02 (H) <Bill Canceled>
03/14/02 (H) CRA AT 8:00 AM CAPITOL 124
03/14/02 (H) Moved CSHB 355(CRA) Out of
Committee
03/14/02 (H) MINUTE(CRA)
03/15/02 2544 (H) CRA RPT CS(CRA) 5DP 1NR
03/15/02 2544 (H) DP: SCALZI, HALCRO,
MURKOWSKI, MEYER,
03/15/02 2544 (H) MORGAN; NR: GUESS
03/15/02 2544 (H) FN1: ZERO(REV)
03/18/02 (H) L&C AT 3:15 PM CAPITOL 17
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
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)
04/11/01 0970 (H) COSPONSOR(S): HALCRO
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
01/16/02 (H) Heard & Held
01/16/02 (H) MINUTE(L&C)
03/06/02 (H) L&C AT 3:15 PM CAPITOL 17
03/06/02 (H) <Bill Postponed>
03/18/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
AMY ERICKSON, Staff
to Representative Murkowski
House Labor and Commerce Standing Committee
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
355, the House Labor and Commerce Standing Committee.
CHUCK HARLAMERT, Juneau Section Chief
Tax Division
Department of Revenue
PO Box 110420
Juneau, Alaska 99811-0420
POSITION STATEMENT: Testified on CSHB 355(CRA).
DARRELL BELL, Director of Taxes
AT&T Wireless
(No address provided)
POSITION STATEMENT: Testified to the simplicity that would be
achieved with [CSSB 355(CRA)].
ED SNIFFEN, Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department of Law
1031 W 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Reviewed the changes encompassed in CSHB
182, Version S.
STEVEN ALLWINE
Alaska Auto Dealers Association
8725 Mallard Street
Juneau, Alaska 99801
POSITION STATEMENT: Expressed concerns with CSHB 182, Version
S.
MARY MARSHBURN, Director
Division of Motor Vehicles
Department of Administration
3300B Fairbanks Street
Anchorage, Alaska 99503
POSITION STATEMENT: Related the division's view of Section 13
in Version S.
ELIZABETH DANNENBERG
The Alliance of Automobile Manufacturers
(No address provided)
POSITION STATEMENT: Expressed concerns with CSHB 182, Version
S.
JOHN MECKE, Legislative Director
Franchise Affairs
Ford Motor Company
16800 Executive Plaza Drive
Dearborn, Michigan 48126
POSITION STATEMENT: Expressed concerns with CSHB 182, Version
S.
WILLIAM HURST, Director
State Franchise Legislation and Strategy
Daimler Chrysler
1000 Chrysler Drive
Auburn Hills, Michigan 48326
POSITION STATEMENT: Expressed concerns with CSHB 182, Version
S.
MARK MUELLER, Manager
Retail Relationship
Daimler Motors
100 Renaissance Center
Detroit, Michigan 48265
POSITION STATEMENT: Indicated that the committee could review
his proposed changes.
STEVE CONN, Executive Director
Alaska Public Interest Research Group
PO Box 101093
Anchorage, Alaska 99503
POSITION STATEMENT: Reviewed some of the consumer-friendly
aspects of Version S of CSHB 182 and expressed the need to leave
Section 45.25.470 [in tact].
TERRY BANNISTER, Attorney
Legislative Legal Counsel
Legislative Legal and Research Services
Legislative Affairs Agency
Terry Miller Building, Room 329
Juneau, Alaska 99801
POSITION STATEMENT: Spoke as the drafter of HB 182 and
responded to questions.
ACTION NARRATIVE
TAPE 02-37, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:20 p.m.
Representatives Murkowski, Kott, Crawford, and Hayes were
present at the call to order. Representatives Halcro, Meyer,
and Rokeberg arrived as the meeting was in progress.
HB 355-MOBILE TELECOMMUNICATIONS TAX
CHAIR MURKOWSKI announced that the first order of business would
be HOUSE BILL NO. 355, "An Act relating to the taxation of
mobile telecommunications services by municipalities; and
providing for an effective date."
Number 0069
AMY ERICKSON, Staff to Representative Murkowski, House Labor and
Commerce Standing Committee, Alaska State Legislature, provided
the following testimony:
State and local governments tax mobile
telecommunications services in a variety of different
ways. And because of the mobility of wireless
equipment, determining which state and local taxes
apply to a wireless call is complicated. The process
of determining where a transaction is taxable is
commonly referred to as "sourcing." In order to
create a more uniform system for taxing wireless
calls, Congress passed the Mobile Telecommunications
Sourcing Act the crafting of which was a joint effort
between industry, state and local [government], and
tax officials. States have until August 1st of this
year to conform to the federal act. And if Alaska
fails to conform, the state will be pre-empted from
imposing taxes on most calls made outside of where the
customer's primary use occurs, that is "roaming"
charges.
This bill conforms Alaska Statutes to the federal
Mobile Telecommunications [Sourcing] Act to allow for
the appropriate taxes and fees on wireless services.
The bill does not impact the rates of taxes or fees
that states and localities impose on the wireless
calls. Each jurisdiction with taxing authority will
continue to determine whether the calls are taxed and
at what rate. House Bill 355 creates the concept that
the customer has a place of primary use, that is the
residential or business street address where the
customer's use of the mobile service primarily occurs.
That determines which jurisdiction has the right to
tax the call. Implementation of [HB] 355 prevents
multiple taxation, achieves administrative simplicity
and cost savings, and avoids expensive audit
litigation when multiple states claim jurisdiction to
tax the same call. The bill is a win-win for industry
and for government. There is no known controversy
surrounding the bill.
CHAIR MURKOWSKI informed the committee that HB 355 was a much
lengthier bill when introduced, but the Department of Revenue
suggested that the bill simply reference the federal act.
Therefore, [CSHB 355(CRA)] allows for compliance with the
federal act within the time period requested.
Number 0295
CHUCK HARLAMERT, Juneau Section Chief, Tax Division, Department
of Revenue, said that in Alaska this is a local tax issue. He
echoed earlier testimony that the bill merely conforms to the
federal act, which controls what telecommunications can and
cannot be taxed.
DARRELL BELL, Director of Taxes, AT&T Wireless, testified via
teleconference. Mr. Bell informed the committee that the
National Governors Association, the National Conference of State
Legislators, the Federation of Tax Administrators, the Multi-
State Tax Commission, and the National League of Cities came
together with the industry to develop [the federal act]. [The
federal act], for example, allows Seward to tax all the revenue
of a customer with a place of primary use in Seward no matter
where that customer uses the phone throughout the United States.
However, [the federal act] doesn't allow Seward to tax customers
who are roaming in Seward. This should be fairly simple and
revenue neutral.
CHAIR MURKOWSKI turned to the concept of the primary place of
use and stressed that [CSHB 255(CRA)] makes it very clear who
will assess the tax.
Number 0573
REPRESENTATIVE HALCRO moved to report CSHB 355(CRA) out of
committee with individual recommendations and the accompanying
zero fiscal note. There being no objection, CSHB 355(CRA) was
reported from the House Labor and Commerce Standing Committee.
The committee took a brief at-ease from 3:29 p.m. to 3:34 p.m.
HB 182-MOTOR VEHICLE SALES AND DEALERS
CHAIR MURKOWSKI announced that the next order of business would
be HOUSE BILL NO. 182, "An Act relating to motor vehicles; and
providing for an effective date."
CHAIR MURKOWSKI reminded the committee that at the last hearing,
January 16, 2002, Version 22-LS0239\P, Bannister, 12/28/01, was
adopted and discussed. Afterwards, folks sent written comments
to the committee and each was reviewed with regard to whether
the [suggestions/concerns] could be accommodated and
incorporated in a new committee substitute (CS) [Version 22-
LS0239\S, Bannister, 3/15/02]. Therefore, the proposed CS is an
effort to consolidate as many of the comments as possible while
recognizing that some of the issues are policy calls for the
committee.
CHAIR MURKOWSKI briefly walked the committee through some of the
major areas of the legislation. She began with the termination
provisions within franchise agreements. In that section,
certain accommodations were made. She directed attention to
page 8 regarding required compensation. There had been
discussion regarding what happens when there is a termination
and the dealer is to be compensated for facilities. The dealers
argued that they should be allowed rent for the unexpired term
or 24 months, while the manufacturers recommended compensation
for 12 months. Chair Murkowski decided to go with 18 months.
She pointed out that the most significant changes are located in
Article 4, Dealer Practices, on page 13 of [Version S]. The
dealers didn't want this section incorporated in this measure.
However, Chair Murkowski [related her belief] that it's a place
for these types of consumer protection provisions to be and thus
it makes sense to include it in the legislation. She noted that
[this section] has been tightened a great deal.
Number 0941
ED SNIFFEN, Assistant Attorney General, Fair Business Practices
Section, Civil Division (Anchorage), Department of Law,
testified via teleconference. He related his belief that
[Version S] looks good and turned to the consumer protection
issues. One of the consumer protection issues raised at the
last hearing focused on some superfluous language with regard to
the prohibited use of advertising terms. Another consumer
protection issue raised was with regard to the sales of used
motor vehicles. In a prior CS there was language that required
a motor vehicle dealer to perform a significant inspection and
inquiry and this information would be reported to the purchaser.
That section was tightened up such that it [refers to the dealer
doing] a reasonable inquiry and informing the consumer of that
information. Furthermore, the inspection was limited to
material defects, which means defects that can't be discovered
through a reasonable inspection by an ordinary consumer or
defects that would impair the safe operation of the vehicle.
CHAIR MURKOWSKI turned to the advertising and selling practices
of used cars. She questioned how much of an obligation a dealer
would have when the person bringing the car to be sold doesn't
disclose problems to the dealer.
MR. SNIFFEN explained that the intent is to not allow the dealer
to turn a blind eye to potential defects. The desire is to have
the dealers at least make the inquiry. If the seller of the
vehicle isn't honest, the inquiry stops. The burden on the
dealer isn't onerous.
Number 1189
CHAIR MURKOWSKI related her understanding that in a situation in
which the seller informs the dealer of a defect, the defect has
to be disclosed in writing to the potential buyer.
MR. SNIFFEN agreed that to be the proposal. Whatever the dealer
knows should be disclosed to the consumer.
CHAIR MURKOWSKI posed a situation in which the seller tells the
dealer there are no problems to report, but perhaps the frame of
the door doesn't look straight. Would such a situation result
in the dealer needing to inspect the body of the vehicle or
would the seller's word be the end [of the inquiry], she asked.
MR. SNIFFEN answered that it would be a "reasonableness" call on
behalf of the dealer. He said he didn't believe specific
language in this type bill could address the gray areas. He
pointed out the language on page 18, lines 5-8, which specifies,
"if the dealer has information that reasonably should lead the
dealer to know of the potential for a material defect in a used
motor vehicle, conduct a further inspection of the vehicle ...."
He stressed that this is a "reasonableness test."
CHAIR MURKOWSKI turned to Section 13, the repealors [of Version
S]. She announced that it has been brought to her attention
that these sections shouldn't be repealed because these relate
to dealings with brokers rather than just Title 45.
MR. SNIFFEN said that Section 13 primarily deals with Title 8,
which addresses the licensing requirements for motor vehicle
dealers. With respect to AS 45.50.471(b)(34), he related his
belief that it deals with brokers. There are provisions in
[Version S] that address that very narrow provision of Title 45.
CHAIR MURKOWSKI surmised then that AS 45.50.471(b)(34) should be
repealed.
MR. SNIFFEN agreed.
Number 1480
REPRESENTATIVE MEYER moved to adopt CSHB 182, Version 22-
LS0239\S, Bannister, 3/15/02, as the working document. There
being no objection, Version S was before the committee.
Number 1502
STEVEN ALLWINE, Alaska Auto Dealers Association, informed the
committee that the association has two areas of concern with
Version S, which Mr. Sniffen already addressed. Mr. Allwine
referred to page 17, AS 45.25.470, the used car inspections. He
informed the committee that the association had hoped that the
section would be eliminated [until such time as] the association
and the Department of Law could work on adjusting the
[language]. Paragraph (1) of AS 45.25.470 requires an inquiry
of the seller. However, there is no certainty as to the
reliability of the information from the seller. It isn't in the
seller's best interest to disclose information that would
potentially diminish the trade value of their vehicle.
Furthermore, subsection (c) of AS 45.25.470 defines "material
defect" in a vague manner, which he believes to be
inappropriate. Although well-intentioned, this section is a bit
onerous to the dealers and may even create more consumer
[protection] issues than it eliminates.
MR. ALLWINE turned to page 25, Section 13 and announced the
association's recommendation to remove Section 13 in its
entirety. He pointed out that AS 08.66.015 protects consumers
from auto brokers and persons [portraying themselves] as new
vehicle dealers when, in fact, there is no substantive
relationship between those persons and vehicle manufacturers.
The remainder of Section 13 regulates persons acting on behalf
of the buyer in negotiating a transaction for the purchase of a
vehicle. Mr. Allwine explained that remaining statutes
referenced in Section 13 came into being under the auspices of
Senator Taylor in 1993 due to the collapse of a Seattle area
auto broker. This particular [Seattle auto broker] defrauded
consumers in Alaska for several million dollars. The intent of
the legislation [that created these statutes being repealed] was
to eliminate the unregulated opportunities for public harm that
automobile brokering provided, especially in the areas of sales
and warranty repair. Simultaneously, the legislation was
intended to permit, in a regulated environment, the
establishment of a means for a consumer to contract with an
individual or a company for the negotiation of a vehicle
purchase on that consumer's behalf. Mr. Allwine informed the
committee that the automobile manufacturers are also in support
of retaining the statutes being repealed in Section 13. In
conclusion, Mr. Allwine recommended that the committee make the
two changes specified and vote to move the legislation from
committee.
CHAIR MURKOWSKI commented that there seems to be some
disagreement with regard to what Title 8 actually refers.
Number 1750
MARY MARSHBURN, Director, Division of Motor Vehicles (DMV),
Department of Administration, testified via teleconference.
Mr. Marshburn said that she has double-checked the repealor in
Section 13 and determined it to be correct with no need for
amendment. She informed the committee that with the new
language, "solicits the sale or lease of five or more new or
used vehicles", [the department] believes that the definition of
dealer includes people who broker sales. She further explained
that Title 8 actually had two sections, one which dealt with
dealers and the other with buyer's agents. In the history of
the division, no buyer's agent has ever been registered with the
division. With [Version S] the definition of dealer is broad
enough to include someone who acts as a buyer's agent. In the
division's opinion, someone engaged in the business [as a
buyer's agent] would have to be registered as a dealer in order
to be covered by the dealer's statute. Therefore, the repealor
that refers to Title 8 [Section 13 of Version S] is correct.
Number 1877
ELIZABETH DANNENBERG, The Alliance of Automobile Manufacturers
(Alliance), testified via teleconference. Although the Alliance
acknowledged that there have been many improvements made with
Version S, there are still concerns with it. She expressed
concern that on pages 4 and 24, the definition of dealer doesn't
exclude joint ventures between manufacturers and dealers. Since
some joint ventures might not fit in the current category for
exemption, the Alliance believes that there should be further
clarification with regard to the [fact] that joint ventures
aren't prohibited or required to obtain a license. Furthermore,
Section 45.25.030 should include a statement that corporate
affiliates aren't precluded from engaging in reasonable and
appropriate business practices consistent with existing trade
practices. The aforementioned statement was included in the
last version, but was omitted in Version S.
MS. DANNENBERG pointed out that Section 45.25.140(a)(3) would
require that a manufacturer repurchase, from a terminated
dealer, the signs, equipment, and furnishings bearing the
trademark or trade name that the dealer purchased within the
last five years. Five years is an unreasonably long period for
such a repurchase obligation. The three years specified in the
prior version is more appropriate. Also, Section
45.25.150(a)(1) requires compensation for rent for an unexpired
lease for up to 18 months. Again, the Alliance believes that 18
months is too long and a 12-month period for compensation would
be more appropriate. Ms. Dannenberg specified that the Alliance
objects to the definition of "relevant market area" (RMA) on
pages 11-12 because using a large single radius for all markets
in the state is inappropriate. The two-tiered RMA is favored.
She explained that the [two-tiered relevant market area] would
cover six miles where the population is greater than 25,000 and
14 miles where the population is less than 25,000.
MS. DANNENBERG turned to the page 12, Section 45.25.320, which
raises several concerns for manufacturers. The period of 18
months for auditing and charge back claims doesn't allow for the
differences between warranty claims and sales incentive claims.
She explained that although 18 months may be sufficient for
warranty claims, manufacturers typically need 24 months for
auditing sales incentive claims. Furthermore, in situations
where fraudulent claims are suspected there should be no time
limit on the manufacturers ability to audit those claims. Also,
the term "related expenses" in the definition of claim under
Section 45.25.320 should be deleted due to its vagueness. She
informed the committee that on page 23 the definition of
"franchise" should clarify that a franchise agreement allows a
franchise dealer to use the manufacturer's trade name, service
mark, or related characteristics. Finally, on page 23 the
definition of "administrator" should be deleted because it
doesn't seem to be applicable to Version S.
CHAIR MURKOWSKI noted that some of the Alliance's concerns are
with regard to compromises. For example, the 18 months on page
8 was a compromise between the 12 months the manufacturers
wanted and the 24 months that the dealers wanted.
Number 2148
JOHN MECKE, Legislative Director, Franchise Affairs, Ford Motor
Company, testified via teleconference. Mr. Mecke turned to the
issue raised with regard to joint ventures and informed the
committee that the Ford Motor Company already has a joint
venture with its dealers. In this joint venture, the Ford Motor
Company will have a minority interest. He noted that the Ford
Motor Company is also involved in a joint venture in which it is
already a minority interest. Therefore, he expressed the need
for there to be a slight adjustment to the [joint venture]
exemption. Mr. Mecke echoed Ms. Dannenberg's comments with
regard to the lack of the corporate affiliates language, which
was included in a previous draft. He then directed attention to
page 8 and pointed out that the rental assistance for the
facilities should be reflected consistently in paragraphs (1)
and (2) under Section 45.25.160(a). With regard to the relevant
market area, he said that [the Ford Motor Company] has been able
to work with the dealers. Obviously, the density of populations
in any state is such that it would make sense to have a large
expansive area. Conversely, in a metropolitan area it's
important to maintain a balance between the dealers and the
competition. Therefore, Mr. Mecke requested that the committee
consider the two-tiered system. Mr. Mecke turned to incentive
programs and said that it would be reasonable to treat
warranties and sales incentives slightly different [in the
context of] Section 45.25.320.
Number 2350
WILLIAM HURST, Director, State Franchise Legislation and
Strategy, Daimler Chrysler, testified via teleconference. Mr.
Hurst directed attention to page 4 and the definition of
"dealer." He noted that joint ventures always sell the vehicle
through a [licensed] dealer.
TAPE 02-37, SIDE B
MR. HURST indicated the need to have [joint ventures] exempted.
With regard to the claim audits and charge backs, Mr. Hurst
pointed out that the sales incentives could go for six months to
a year, and therefore only six months would be left to file a
claim that was filed at the beginning of the program. As an
alternative, the sales incentive claim could be made [within] 24
months or 18 months after the end of the program rather than 18
months after the filing of the claim. Furthermore, there needs
to be an exception for fraud because the very nature of fraud is
to conceal it.
Number 2290
MARK MUELLER, Manager, Retail Relationship, Daimler Motors,
testified via teleconference. He indicated that the committee
could review his proposed changes.
Number 2269
STEVE CONN, Executive Director, Alaska Public Interest Research
Group (AkPIRG), testified via teleconference. Mr. Conn
commended the committee on its work on this bill. He
highlighted the clear language in the sales and service contract
provision on page 20, which he characterized as consumer
friendly. Additionally, there is very good language related to
advertising. With regard to the issues the dealer's association
finds with Section 45.25.470, Mr. Conn found it hard to believe
that professional dealers wouldn't like to distinguish
themselves from "sidewalk sellers" in some form, which is what
this section offers. He expressed surprise that dealers who
seek to protect their franchise, and thereby limit competition
and the entrance of new dealers, would suggest this section be
eliminated. Consumers view this section as a modest bit of
progress in their relationship with automobile dealers.
Therefore, Mr. Conn expressed his hope that this section would
be left [in tact] and the bill pass out of the committee.
CHAIR MURKOWSKI referred to the definition of "dealer" on page 4
of Version S, which is a slightly different definition of
"dealer" than that specified at the end of the bill. She asked
if the two should [have the same definition].
Number 2142
TERRY BANNISTER, Attorney, Legislative Legal Counsel,
Legislative Legal and Research Services, Legislative Affairs
Agency, answered that such would probably be a good idea. The
two were different because the terms [are referred to] in two
different chapters. She said that she had not received any
information with regard to why the two chapters defined "dealer"
differently. After hearing Ms. Marshburn's comments, Ms.
Bannister said that the one definition should be used and
referenced in the other chapter.
REPRESENTATIVE HALCRO explained that originally there were two
different definitions because one addresses the relationship
between the manufacturer and the dealership, which no one wanted
to apply to recreational vehicles and such dealerships.
However, the desire was to apply consumer protection articles to
those type of [dealerships].
MS. BANNISTER pointed out that AS 45.25 now includes a new
definition of motor vehicle, which would probably "handle it for
those sections." Perhaps the two definitions could be unified,
she said, although she highlighted that one of the definitions
refers to manufacturers and the other does not.
CHAIR MURKOWSKI related her belief that a dealer would refer to
anyone other than a manufacturer.
REPRESENTATIVE HALCRO recalled that there was a reason that
language was excluded.
MS. MARSHBURN explained that the definition of "dealer" in
[Title] 8 refers to those who are required to register as
dealers, including recreational vehicle sellers and motorcycle
sellers. However, the definition of "dealer" [on page 22] of
Version S applies only to those for which the relationship and
consumer provisions apply. The relationship and consumer
provisions are quite different for recreational vehicle sellers
and motorcycle dealers. Ms. Marshburn noted that the desire was
to cover everyone for the purposes of dealer registration or
licensing. However, not everyone could be uniformly covered in
the same way as the manufacturers. Therefore, the definitions
for licensing are good in the view of the DMV.
CHAIR MURKOWSKI asked whether it would be appropriate to specify
on page 4 of Version S that a dealer is other than a
manufacturer who sells leases or solicits in the definition of
"dealer".
MS. MARSHBURN answered that she didn't believe such would be
problematic, however she deferred to Mr. Sniffen or the Chair.
CHAIR MURKOWSKI pointed out that the two definitions of "dealer"
are almost identical, except for the phrase "other than a
manufacturer".
MS. MARSHBURN surmised then that Chair Murkowski was proposing
the insertion of the language "other than a manufacturer" in
Section 8(1). She reiterated that she didn't believe it would
be a problem.
MR. SNIFFEN agreed that inclusion of the aforementioned language
wouldn't be a problem. He pointed out that on page 24 there is
a subsection (f) that isn't included in the definition on page
4. However, that language seems to be incorporated in
subsection (b) on page 4.
Number 1853
REPRESENTATIVE ROKEBERG requested clarification on the concerns
expressed with regard to prohibiting joint ventures.
REPRESENTATIVE HALCRO recalled that there have been attempts by
some manufacturers to enter into some side businesses. The
dealers are concerned that "undercutting" could occur with the
joint ventures. Therefore, the language offers protection for
the dealers.
REPRESENTATIVE ROKEBERG said he thought that the
[manufacturer's] referred to joint ventures between
manufacturers.
MS. DANNENBERG specified that the concern with joint ventures is
in regard to the definition "dealer" on page 4 and 24. She
related her understanding that the concern is with the joint
ventures between manufacturers and dealers. There is the desire
to ensure that there is no prohibition of joint ventures between
manufacturers and dealers reviewing new ways to distribute cars
to consumers. With joint ventures there is also the desire not
to create a separate licensing requirement. The issue with
corporate affiliates is actually separate from the joint venture
issue. The concern with corporate affiliates relates to
financial subsidiaries of manufacturers. Ms. Dannenberg said
that [the Alliance] believes that manufacturers shouldn't use
financial affiliates to do what can't be directly accomplished
in HB 182. However, those affiliates would be at a competitive
disadvantage to other financial businesses that aren't captive
to [automobile] manufacturers [unless there is] clarification
that the financial affiliates can perform typical and usual
business practices in the finance industry.
CHAIR MURKOWSKI related her understanding then that under
Section 8 the [Alliance] would recommend an exclusion specifying
that the dealer doesn't include a joint venture between
manufacturers and dealers.
MS. DANNENBERG answered that such was her understanding.
Furthermore, there are some ventures between manufacturers and
dealers that [the Alliance] would want to exclude as well.
REPRESENTATIVE ROKEBERG commented that [this language] should be
under Title 8 and 45. Perhaps, [the Alliance] could suggest
some language, he remarked.
REPRESENTATIVE HALCRO related his assumption that [Ms.
Dannenberg's] concern with the financing arms was related to the
affiliates and subsidiaries. He recalled subcommittee
discussions in which the dealers said they wouldn't do anything
that would place their financial arm at a market disadvantage.
Number 1530
MR. ALLWINE explained that in certain circumstances [the
manufacturer] will provide the capital and place an operator [in
a location] for a buy-sell agreement, a joint venture. Although
that individual will be the dealer, the manufacturer still
provides the capital investment. Over a period of time, that
individual buys out the manufacturer. There is no intent to
preclude such an arrangement. However, he said he didn't
understand why there would be the need for an exemption for such
joint ventures because the dealer should be licensed. With
regard to the financial [affiliates], Mr. Allwine said that none
of this is intended to hinder the competitiveness of the captive
financial groups.
CHAIR MURKOWSKI related her understanding that [the
manufacturers] didn't want to have to register this joint
venture.
REPRESENTATIVE ROKEBERG interjected that in the joint venture
whoever is the "dealer" would have to be licensed.
CHAIR MURKOWSKI pointed out that such is Mr. Allwine's
testimony.
MS. DANNENBERG clarified that the intent isn't to exempt the
dealer from licensing requirements in a joint venture. The
concern is that a combined joint venture wouldn't require a
separate license in addition to the license that already exists
for the dealer in that relationship.
CHAIR MURKOWSKI said that she didn't see how it could ever be
implied that the entity setting up this dealer would also have
to register.
MS. DANNENBERG said that the aforementioned is the desired
outcome. Perhaps, that could be stated in a separate exemption
or made clear that a separate second license wouldn't be
required.
CHAIR MURKOWSKI pointed out that everyone around the table has
this understanding, and therefore she questioned whether
additional language would make it any clearer. However, she
agreed to entertain any suggested language.
Number 1321
CHAIR MURKOWSKI highlighted that some of the manufacturers'
testimony had expressed concerns with the corporate affiliates
section on page 5. There was concern that subparagraph (B) had
been removed. That subparagraph said, "This section does not
limit the right of a person included within the scope of this
section to engage in reasonable and appropriate business
practices consistent with an existing trade practice that is not
otherwise prohibited by this chapter."
CHAIR MURKOWSKI informed the committee that some people said the
aforementioned language in subparagraph (B) sounded confusing
and thus she eliminated it. Therefore, it seems that it may be
appropriate to insert it, she commented.
MR. ALLWINE, in regard to the manufacturers' comments, noted
that the manufacturers discovered what appears to be a typo for
the 18 months versus the 12 months for rentals. In response to
Chair Murkowski, Mr. Allwine said that for claim audits and
charge backs 18 months is reasonable. Mr. Allwine said he
understood that the manufacturers have programs that last for a
year and thus the manufacturers question whether the 18 months
meant that they have 6 months to do what they need to do.
However, the manufacturer audits [claim audits and charge backs]
on a continual basis, without regard to the dealer. He
reiterated that the 18 months is reasonable for most of these
whether it's warranties or sales incentives. With regard to
fraud, Mr. Allwine agreed with the manufacturers that there
should be recourse if someone is stealing. He said that he
didn't think it's the intent of the bill to preclude recourse in
the event of fraud.
CHAIR MURKOWSKI recalled the suggestion that it would be helpful
to have the 18 months for charge backs to start at the end of
the program rather than when the claim was submitted. She asked
Mr. Allwine's opinion.
MR. ALLWINE opined that he didn't believe it made a difference
because the sales claims are audited on a continual basis. Of
everything that is done in relation to incentives and
warranties, the sales claims are probably the least confusing.
Therefore, the 18 months is reasonable.
MR. ALLWINE turned to Section 13. He pointed out that the
reason there has never been a registered buyers' agent is
because of the [the statutes in Section 13], which are specific
with regard to what and who brokers are and who can sell new
automobiles and represent them as such. Therefore, Mr. Allwine
suggested eliminating Section 13 and leaving those statutes
[specified in Section 13] in tact unless there would be any harm
in doing so.
CHAIR MURKOWSKI recalled that AS 45.50.471(b)(34) was different
than the other Title 8 statutes listed in Section 13. In
response to whether there would be any harm in leaving the
aforementioned statutes in tact, Chair Murkowski surmised that
there may be some extraneous overlap.
MR. SNIFFEN agreed and pointed out that there would be
duplication and who would decide which law to follow under a
given circumstance. He wasn't sure that these statutes are the
reason that Alaska doesn't have any buyers' agents.
CHAIR MURKOWSKI expressed the need to be cautious when
repealing. She suggested that perhaps the repealors could be
left in, while making certain that it's clear in Title 45 that
these [statutes] aren't completely gone.
Number 0805
REPRESENTATIVE CRAWFORD recalled that Mr. Allwine didn't like
the material defect section of the bill and asked if there is a
reasonable way in which to deal with that section.
MR. ALLWINE responded that there is no easy answer. He
explained that a vehicle with frame damage that has been
repaired properly shouldn't be an issue, however, there are
implications to the dealer down the road. There seems to be a
liability issue that needs to be cleared up. Mr. Allwine
specified that he supported the concept of the section, although
it needs to be clearer.
REPRESENTATIVE CRAWFORD related that in December he purchased a
used vehicle and ten miles later the brakes failed completely
due to bad brake cylinders. Representative Crawford said that
he would've liked an inspection to have taken place. Therefore,
he didn't want to merely delete this section, although he
expressed the need to accommodate the [dealers].
MR. ALLWINE said that there are certain circumstances in which a
vehicle will look perfect from underneath, but will fall apart
ten miles later. Mr. Allwine suggested, "If you eliminated the
first section and identified it as the second section, unsafe to
drive, then you have something I think everyone would be hard-
pressed to argue with." Mr. Allwine, speaking on his own
behalf, said that he didn't believe that it's unreasonable to
have to look at a vehicle and identify potential problems, which
is what most dealers do already. If the vehicle is unsafe to
operate, then it's repaired or disclosed to the consumer.
Number 0523
REPRESENTATIVE HALCRO agreed that it would be best to be as
clear as possible [with regard to liability].
MR. SNIFFEN, in response to Chair Murkowski, informed the
committee that when he drafted AS 45.25.470(c)(1)-(2) he
discussed this with other assistant attorneys general in states
that have similar [statutes]. The problem with deleting AS
45.25.470(c)(1) and leaving only AS 45.25.470(c)(2) is that it
leaves out a lot of information that the dealer may know but
doesn't disclose to the consumer because it might not impact the
safe operation of the vehicle. There may be things that a
consumer may want to know about a vehicle that don't impair the
safe operation of the vehicle. Therefore, [AS 45.25.470(c)(1)]
attempts to inform the consumer.
CHAIR MURKOWSKI said she couldn't think of an example of
something that the consumer wouldn't be able to see upon a
reasonable inspection and wouldn't impact the safe operation of
the vehicle. Chair Murkowski related her belief that the
language joining AS 45.25.470(c)(1) and (2) should be "and" or
"which" rather than "or". She indicated that having AS
45.25.470(c)(1) as the sole reason for the material defect
seemed problematic.
MR. SNIFFEN highlighted that currently the bill only requires
the dealer to make a "reasonable inquiry" and thus if there are
things that the dealer doesn't know and those things don't
impair the safe operation of the vehicle, there is no obligation
to find those things. The obligation is only in place if the
dealer has information that should reasonably lead the dealer to
know of a potential for a material defect. Mr. Sniffen noted
the difficulty in developing a definition of "material defect"
that includes everything, but isn't too overbearing.
CHAIR MURKOWSKI directed attention to AS 45.25.470(3) on page
18.
TAPE 02-38, SIDE A
CHAIR MURKOWSKI pointed out that if a dealer knew that a vehicle
had been in a rolled in an accident, then the dealer would have
an obligation to disclose that information regardless of whether
it impairs the safe operation of the vehicle.
MR. SNIFFEN agreed. The issue is whether consumers should be
told such things if the dealer doesn't believe that [the roll
over or other incident] impacts the safe operation of the
vehicle. He posed a situation in which a vehicle had been
repaired to factory specifications. He ventured to guess that
consumers would still want such information.
Number 0130
CHAIR MURKOWSKI inquired as to why AS 45.25.470(c)(1) has to be
included. She related her belief that the dealer would have an
obligation to disclose what the dealer knows about the vehicle,
whether it impairs the safe operation of the vehicle or not.
MR. SNIFFEN explained that if "material defect" isn't defined to
include information that couldn't be discovered by a reasonable
inspection by an ordinary consumer, then the dealer will have to
make the call. He said he didn't know that the dealer would
have an obligation to inform the consumer of a defect that the
dealer didn't believe would impact the safe operation of the
car. In such a case, disclosure wouldn't be required.
Number 0276
REPRESENTATIVE ROKEBERG related his understanding that dealers
will be prohibited from advertising the sale of specific
vehicles. Won't that be problematic, he asked.
MR. ALLWINE replied no and explained that the language doesn't
preclude advertising specific vehicles. However, it does
require a means to identify that vehicle. This isn't an
unreasonable or unusual request.
REPRESENTATIVE ROKEBERG asked how advertising would work when a
new model comes in with a base price. He asked if the new model
could be advertised without specifying the options.
MR. ALLWINE answered that in those situations, compliance would
be achieved by advertising for people to come and see the new
model, specifying the base price. He noted that [dealers]
choosing to advertise vehicles that were coming to them would
have the serial number or identifying number for the vehicle.
In further response to Representative Rokeberg, Mr. Allwine said
that [a dealer] would be able to advertise that there are "50
Chevys" without specifying prices and the advertisement could
specify, without specifying the serial numbers, that the
[Chevys] are priced from $15,000 to $20,000. However, most
dealers wouldn't advertise in the aforementioned manner. Mr.
Allwine said that Mr. Sniffen has clarified some things that
needed to be clarified.
CHAIR MURKOWSKI directed the committee to the definition of
"dealer" on page 4. She recalled the discussion regarding the
need to "marry" the definitions of "dealer" found in Section 8
and Title 45. The language "other than a manufacturer" would
need to be inserted in order to make the definition of "dealer"
consistent with that found in Title 45. And Section 8(3) would
still allow for the distinction that motor vehicle registrations
wouldn't include motor homes, recreational vehicles, or
motorcycles.
Number 0654
CHAIR MURKOWSKI moved that the committee adopt the following
conceptual amendment [Amendment 1] that would [on page 4, line
8, after "person", insert "other than a manufacturer"] in order
to make the definition in Section 8 consistent with that found
in Title 45. There being no objection, the conceptual amendment
[Amendment 1] was adopted.
Number 0716
REPRESENTATIVE HALCRO moved that the committee adopt the
following amendment, [Amendment 2]:
Page 5, line 2,
Delete "45.25.310"
Insert "45.25.320"
There being no objection, [Amendment 2] was treated as adopted.
Number 0716
CHAIR MURKOWSKI recalled the discussion regarding Section
45.25.030 subparagraph (b) that was eliminated, perhaps hastily.
Therefore, she expressed the need to incorporate that language
back into the bill. That language would read, "This section
does not limit the right of a person included within the scope
of this section to engage in reasonable and appropriate business
practices consistent with an existing trade practice that is not
otherwise prohibited by this chapter. She labeled the
aforementioned as conceptual Amendment 3. There being no
objection, conceptual Amendment 3 was adopted.
Number 0795
CHAIR MURKOWSKI then turned to page 8, Section 45.25.150, and
recalled the discussion regarding the 18-month compensation to
the dealers. She moved that the committee adopt the following
conceptual amendment [conceptual Amendment 4]:
Page 8, line 19,
Delete "12"
Insert "18"
There being no objection, conceptual Amendment 4 was adopted.
Number 0843
CHAIR MURKOWSKI announced that she would like to make a
conceptual amendment that relates to the chargebacks. She
recalled discussion that there shouldn't be any limitation on
fraudulent claims. Although she had no language to offer, she
said that the drafters could develop language to accomplish the
aforementioned.
REPRESENTATIVE ROKEBERG asked whether under common law fraud or
statutory fraud there is a statute of limitations.
MR. BANNISTER answered that she didn't know.
CHAIR MURKOWSKI requested that the drafters determine the answer
to Representative Rokeberg's question.
REPRESENTATIVE ROKEBERG pointed out that under fraud causes of
action civil and criminal [causes] already exist. He asked if
additional language was necessary.
REPRESENTATIVE HALCRO said that he didn't know why one would
insert additional language. He pointed out that fraud is a
justifiable reason to terminate franchise agreements.
Therefore, he didn't believe [additional language is] necessary.
CHAIR MURKOWSKI commented that it might not be necessary to
state it.
CHAIR MURKOWSKI then turned to the "material defect" section of
Version S and inquired as to how the committee would deal with
the concern expressed by Mr. Allwine.
REPRESENTATIVE ROKEBERG remarked that using the standard of an
ordinary consumer is fairly low.
Number 1090
REPRESENTATIVE HALCRO agreed that there is a fine line. There
are sufficient Federal Trade Commission (FTC) protections in
place. For example, all used vehicles sold in the nation must
have an FTC buyer sticker, which outlines some of the areas that
consumers are encouraged to review. Additionally, many dealers
and used car lots allow customers to take the car to a mechanic
of their choice before the purchase. Although there will always
be situations in which one should've seen something, most
dealers don't want to find themselves in a liability situation.
Therefore, Representative Halcro said he wasn't too worried with
this [section].
REPRESENTATIVE ROKEBERG asked if there is an ordinary consumer
standard in law.
MS. BANNISTER clarified that there is a "reasonable person"
standard in law but she didn't know what an "ordinary consumer"
is.
REPRESENTATIVE ROKEBERG said if there is going to be a
reasonable inspection, then the question is in regard to the
caliber of knowledge used to make the inspection. He related
his belief that an ordinary consumer [without knowledge of
automobiles] isn't qualified to make an inspection.
CHAIR MURKOWSKI announced that she wasn't satisfied with the
definition of "material defect". She said that her initial
reaction is that AS 45.25.470(c)(1) could be eliminated and [the
bill] could be moved to the House Finance Committee while some
thought is given with regard to how to deal with it.
Number 1393
REPRESENTATIVE ROKEBERG asked if the FTC has any other
standards.
REPRESENTATIVE HALCRO reiterated that the FTC sheet is provided
to the consumer. He noted the possibility of having the dealers
who take trade-ins from private parties to obtain a signed sheet
specifying that the vehicle hasn't been in any accidents.
REPRESENTATIVE ROKEBERG pointed out that there have been lemon
laws around the country for years, and therefore there should be
significant case law on this matter.
REPRESENTATIVE HALCRO interjected, "But not with used cars." He
pointed out that dealers have the ability to sell a car with or
without a warranty. Therefore, buyer beware.
REPRESENTATIVE ROKEBERG asked if that would be the case under
this legislation.
REPRESENTATIVE HALCRO related his belief that the FTC's sticker
provides protection to the dealer.
MR. ALLWINE agreed that is the case. Furthermore, the FTC
sticker specifies that [a potential buyer] can take the vehicle
off the lot and have it inspected by the technician or mechanic
of the consumer's choice. The FTC sheet also specifies the
areas in which there could be potential problems. This sheet
has been around for about 30 years and is quite extensive. He
assured everyone that they have seen this sheet because it must
be placed on every new and used vehicle or the dealer faces a
$10,000 fine.
Number 1573
REPRESENTATIVE CRAWFORD asked if Section 45.25.470(c)(1) was
deleted, would the consumer still be able to obtain the
information the dealer obtained from the owner.
MR. ALLWINE answered that he believed that would be the case due
to the language [found in Section 45.25.470].
REPRESENTATIVE CRAWFORD expressed the need to ensure that the
dealer passes along knowledge that he/she has.
CHAIR MURKOWSKI related her understanding by paraphrasing
Section 45.25.470 (b), which reads: "A motor vehicle dealer
shall make available to all sales staff and provide in writing
to a prospective buyer of the vehicle before sale all
information obtained by a motor vehicle dealer under this
section, along with all information relating to repairs made to
the vehicle by the dealer." She posed a situation in which a
seller didn't inform the dealer that the vehicle rolled over in
an accident, but the dealer had previous knowledge regarding the
roll over and thus made the dealer perform an inspection. If
the inspection reveals that the roll over doesn't impair the
safe operation of the vehicle, is the dealer required to report
that to the potential buyer, she pondered. She said she
understood that keeping Section 45.25.470(c)(1) would require
the dealer to provide information even when the dealer
determines that there would be no impairment to the safe
operation of the vehicle.
REPRESENTATIVE HALCRO pointed out that even without Section
45.25.470(c)(1), [the consumer] would be protected because of
the specifications Section 45.25.470 requires when a dealer
obtains a used vehicle. Furthermore, Section 45.25.470(b)
requires that this information be passed on to the potential
buyer.
CHAIR MURKOWSKI surmised that if a dealer, after an inspection,
determines that a rollover wouldn't impair the safe operation of
a vehicle, then the dealer wouldn't have to disclose that in
writing.
MR. SNIFFEN responded that Chair Murkowski's assessment was
correct. Mr. Sniffen said that if eliminating Section
45.25.470(c)(1) would satisfy the dealers, then "that gets us 90
percent of the way home." The focus is in regard to the safe
operation of these vehicles, he pointed out.
Number 1873
REPRESENTATIVE HALCRO related his interpretation that the
language in Section 45.25.470(b) says that if a dealer is
informed that a trade-in has been in an accident, [the dealer]
is required to provide that information to the next person
interested in purchasing the vehicle. It doesn't seem to be an
option.
MR. SNIFFEN agreed with Representative Halcro's interpretation
and noted that a parenthetical clause could be added to make it
clearer. Perhaps a new section stating, "Regardless of whether
the information results in a determination that the safe
operation of the motor vehicle has been impaired." could be
added, he suggested.
REPRESENTATIVE HALCRO and CHAIR MURKOWSKI indicated agreement
with Mr. Sniffen's suggestion.
REPRESENTATIVE ROKEBERG asked whether it's already a state or
federal law to disclose that a vehicle has been in an accident.
MR. SNIFFEN said that he believes such information has to be
disclosed to the DMV if the vehicle has be salvaged. However,
he said he wasn't aware that the private seller had any
obligation to inform the dealer that the vehicle had been in [an
accident].
REPRESENTATIVE ROKEBERG related that he believes that the DMV
should have a [records] of the damage done to a vehicle.
MR. ALLWINE specified that Representative Rokeberg's thinking
isn't exactly the case. Only in the past few years, under the
auspices of the dealers' association, was the Department of
Administration forced to stamp the title when a vehicle is
totaled. There is no federal regulation with regard to totaled
vehicles, which is one of the reasons for the concern with this
particular section. Mr. Allwine said that this section is
complicated, and therefore he suggested eliminating it and
allowing [the interested parties] to work on it with Mr.
Sniffen.
Number 2040
CHAIR MURKOWSKI commented that she believes that [the committee]
can fix the problems with [the definition of] "material defect."
Therefore, she suggested eliminating Section 45.25.470(c)(1) on
page 18 and in Section 45.25.470(b) on page 18, line 9, insert
language specifying that the written information provided to the
prospective buyer include all the information obtained by the
dealer even if it was determined that it wouldn't be a material
defect that impaired the safe operation of the vehicle.
REPRESENTATIVE HALCRO related that the same could be
accomplished by on page 18, line 10, after "sale", delete "the",
and insert "all". Representative Halcro moved that the
committee adopt the aforementioned as conceptual Amendment 5.
There being no objection, conceptual Amendment 5 was adopted.
Number 2173
REPRESENTATIVE HALCRO moved that the committee adopt Amendment
6, which reads as follows:
Page 18, lines 14-15,
Delete "(1) cannot be discovered by a reasonable
inspection by an ordinary consumer; or"
Renumber accordingly.
There being no objection, Amendment 6 was adopted.
CHAIR MURKOWSKI turned to page 23 and recalled that the
manufacturers had discussed some concern with the definition of
"administrator". There was comment that "administrator" was a
term left over from one of the drafts that included warranty
provisions. [The manufacturers] expressed that "administrator"
is extraneous.
MR. ALLWINE agreed that it seemed to be left over from one of
the many drafts and had no impact.
Number 2236
CHAIR MURKOWSKI moved that the committee adopt Amendment 7,
which reads as follows:
Page 23
Delete lines 25-29
There being no objection, Amendment 7 was adopted.
CHAIR MURKOWSKI directed attention to page 25, Section 13 and
related her belief that the section needs to be reviewed.
TAPE 02-38, SIDE B
CHAIR MURKOWSKI announced her inclination to leave Section 13 in
the draft and if it needs to be eliminated, then such a
recommendation could be made to the House Finance Committee.
Number 2222
REPRESENTATIVE ROKEBERG moved to report CSHB 182, Version 22-
LS0239\S, Bannister, 3/15/02, as amended out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, CSHB 182(L&C) was reported 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
5:50 p.m.
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