Legislature(2003 - 2004)
05/05/2003 03:30 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 dealers." 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 testify. 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 questions. 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 deleted. CHAIR ANDERSON announced that HB 272 would be held over.