Legislature(2003 - 2004)

05/05/2003 03:30 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 272 - MOTOR VEHICLE DEALERS                                                                                                
CHAIR ANDERSON announced  that the final order  of business would                                                               
be  HOUSE  BILL  NO.  272,  "An Act  relating  to  motor  vehicle                                                               
LINDA SYLVESTER, Staff to  Representative Bruce Weyhrauch, Alaska                                                               
State  Legislature,  informed the  committee  that  HB 272  is  a                                                               
follow-up to HB 182, omnibus  legislation [offered in the Twenty-                                                               
Second   Alaska   State   Legislature]  that   dealt   with   the                                                               
relationship between manufacturers of  motor vehicles and dealers                                                               
and  franchise  owners  in  the  state.   Section  2  of  HB  272                                                               
addresses  semantic changes  to HB  182.   However, Section  1 is                                                               
more  controversial as  it relates  to  SB 105,  which passed  in                                                               
1993.  Senate Bill 105  addressed consumer protection with regard                                                               
to  how brokers  of automobiles  are  allowed to  operate in  the                                                               
state.   Two provisions in  the statute  [created by SB  105] are                                                               
unenforceable, as  Ed Sniffen,  Assistant Attorney  General, will                                                               
MS. SYLVESTER explained that basically  Section 1 will prohibit a                                                               
dealer from  selling or offering to  sell a motor vehicle  as new                                                               
unless  the vehicle  retains  the  manufacturer's certificate  of                                                               
origin.    Furthermore,  Section  1  prohibits  the  dealer  from                                                               
selling or offering to sell the  vehicle as a current model motor                                                               
vehicle unless the following two  conditions are met:  the dealer                                                               
has a current  sales and service agreement  with the manufacturer                                                               
or the  vehicle is  a current  model used  vehicle received  as a                                                               
trade-in in the normal course of business.                                                                                      
MS.  SYLVESTER  noted that  Mr.  Sniffen  drafted  HB 272.    She                                                               
invited  the  committee  to  assist  in  fixing  Section  1(b)(2)                                                               
because it inadvertently impacts a  common practice of rental car                                                               
companies.   She  explained that  rental  car companies  commonly                                                               
purchase  new  vehicles and  turn  them  over  in under  a  year.                                                               
Therefore,  HB 272  would unintentionally  put  those rental  car                                                               
companies  out  of business.    The  legislation is  intended  to                                                               
address  vehicles  intended  for  the  Canadian  market,  whether                                                               
manufactured  in the  U.S. or  Canada.   There is  a practice  of                                                               
these vehicles  being purchased in  Canada and being sold  in the                                                               
U.S.    Because  of  the   economic  conditions  in  Canada,  the                                                               
manufacturers sell  these cars in  Canada at a  discounted price.                                                               
The manufacturers have  tried to stem the tide  of these vehicles                                                               
entering the U.S., but they have achieved mixed success.                                                                        
Number 1854                                                                                                                     
CLYDE  (ED)  SNIFFEN,  JR.,   Assistant  Attorney  General,  Fair                                                               
Business   Practices   Section,   Civil   Division   (Anchorage),                                                               
Department of Law, offered to  listen to testimony and return for                                                               
Number 1826                                                                                                                     
LORRIE URBAN,  North American  Automobile and  Trade Association,                                                               
informed the committee that  she represents independent importers                                                               
and  exporters of  motor  vehicles,  specifically Canadian  motor                                                               
vehicles  to  the American  market.    Mr. Urban  requested  that                                                               
Section 1  be removed from  HB 272 because  it is harmful  to the                                                               
interests of the  consumer.  Furthermore, it is  an illegal trade                                                               
restriction that exposes the state  government to liability under                                                               
the North American  Free Trade Agreement.  Section  1 was crafted                                                               
solely for  the benefit of  franchised dealers who are  trying to                                                               
prevent competition from independent  dealers who import and sell                                                               
Canadian  automobiles.   These automobiles  meet the  U.S. safety                                                               
and emission  standards, the only  difference is the price.   She                                                               
pointed  out that  independent  dealers are  able  to sell  these                                                               
automobiles  to  consumers for  more  competitive  prices.   Laws                                                               
prohibiting  the   sale  of  current   model  year   vehicles  by                                                               
nonfranchise  independent   dealers  is  ridiculous,   she  said.                                                               
Furthermore,  such  action provides  no  benefit  to commerce  in                                                               
Alaska.  Ms.  Urban said she didn't believe  it's appropriate for                                                               
the  government to  eliminate businesses  and companies  that are                                                               
able to  supply identical goods  at lower prices.   She estimated                                                               
that there  are approximately 351  auto dealers and  31 franchise                                                               
dealers  in  this  state.    Many  of  these  dealers,  including                                                               
franchise dealers, do sell Canadian automobiles to consumers.                                                                   
MS.  URBAN acknowledged  that recently,  automobile manufacturers                                                               
have increased  their interest in preventing  imports of Canadian                                                               
automobiles  into the  U.S.   However, this  is legal  trade; the                                                               
[U.S.]   Department   of   Transportation   licenses   registered                                                               
importers   to  import   Canadian  automobiles   into  the   U.S.                                                               
Basically,  the  only  modification necessary  to  an  automobile                                                               
being   imported  from   Canada  is   the  odometer.     Although                                                               
[automobile  manufacturers] are  trying  to prevent  the sale  of                                                               
Canadian  automobiles to  U.S. consumers,  regulatory constraints                                                               
have  been eliminated  to allow  these automobiles  to enter  the                                                               
U.S. from  independent dealers.   Ms. Urban noted  that currently                                                               
there  is a  multi-billion dollar  lawsuit against  manufacturers                                                               
and dealers  which alleges that many  manufacturers are colluding                                                               
with each  other to stop  competition from independents  who sell                                                               
Canadian automobiles.  Furthermore,  the Federal Trade Commission                                                               
(FTC) is investigating the  anti-trust implications for consumers                                                               
and  the  committee  packet should  include  documents  that  she                                                               
provided on this matter.  Ms.  Urban expressed the need to remove                                                               
Section 1 from HB 272 in  order to eliminate the state from being                                                               
part of the scheme.                                                                                                             
Number 1577                                                                                                                     
DARRELL FRIESS,  Budget Car and  Truck Sales,  Budget Rent-A-Car,                                                               
announced his agreement  with Ms. Urban in regard to  the need to                                                               
remove  Section  1  entirely.    As a  whole  tourism  and  local                                                               
consumers  will  be  harmed  if  they  aren't  able  to  purchase                                                               
vehicles at  lower prices that  are offered through  local rental                                                               
car  companies  liquidating  through local  auctions  when  those                                                               
automobiles are purchased by independent dealers.                                                                               
Number 1508                                                                                                                     
JIM ARPINO, General  Manager, Affordable Used Cars,  said that HB
272,  as currently  written, isn't  good for  the customer.   The                                                               
issue  of  rental  car  sales  is one  of  the  reasons  why  the                                                               
legislation  isn't good  for the  customer as  already addressed.                                                               
The normal course of the rental  car business is not only to take                                                               
automobiles in  on trade  but also  to purchase  vehicles through                                                               
various avenues,  such as  auctions.  Mr.  Arpino stated  that HB
272 would essentially give franchise  dealers a monopoly on those                                                               
vehicles  for approximately  15-16  months.   The  aforementioned                                                               
doesn't help  fair trade in  the state.   He predicted  that most                                                               
likely there  will be discussion  [from those supporting  HB 272]                                                               
regarding the laws in the State of Washington.                                                                                  
Number 1351                                                                                                                     
DAN  SHERMAN, Variety  Motors, pointed  out  that both  franchise                                                               
dealers and  used [car dealers]  can purchase at  these auctions.                                                               
"So, it  really doesn't  effect anyone unfairly,"  he said.   Mr.                                                               
Sherman  informed the  committee that  when this  legislation was                                                               
drafted no independent automobile dealers were contacted.                                                                       
PHIL HAWS, Phil Haws Auto  Outlet, informed the committee that he                                                               
worked in  new automobile care  [dealers] for years and  it seems                                                               
like that  group is trying to  corner the market.   Mr. Haws said                                                               
that he didn't  understand [this legislation] because  a used car                                                               
is a used car.                                                                                                                  
Number 1219                                                                                                                     
JOHN LYBERGER, Lyberger's  Car & Truck Sales,  began by informing                                                               
the committee  that he sells  a number of Canadian  vehicles and,                                                               
as  was noted  earlier,  there is  almost  no difference  between                                                               
Canadian and American vehicles.   Mr. Lyberger related his belief                                                               
that  the  rebates,  hold  backs,   advertising,  and  0  percent                                                               
interest  deals  allow all  dealers  to  compete.   He  expressed                                                               
concerns  with regard  to  Section  1 and  suggested  that it  be                                                               
CHAIR ANDERSON announced that HB 272 would be held over.                                                                        

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