Legislature(2003 - 2004)

05/09/2003 03:40 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 272 - MOTOR VEHICLE DEALERS                                                                                                
Number 2266                                                                                                                     
VICE CHAIR LYNN  announced that the next order  of business would                                                               
be  HOUSE  BILL  NO.  272,  "An Act  relating  to  motor  vehicle                                                               
Number 2274                                                                                                                     
LINDA SYLVESTER, Staff to  Representative Bruce Weyhrauch, Alaska                                                               
State  Legislature,   on  behalf  of   Representative  Weyhrauch,                                                               
sponsor, noted that Section 1  is the most controversial section,                                                               
and  that   Section  2  amends   statute  created  by   the  22nd                                                               
legislature's  HB 182.    She  offered that  Section  1 seeks  to                                                               
correct portions of current statute  that are unenforceable.  She                                                               
added:  "Currently  it's not  permitted  to  sell a  ...  current                                                               
year/model vehicle, and that section needs to be changed."                                                                      
MS.  SYLVESTER  turned  attention  to  Amendment  1,  which  read                                                               
[original punctuation provided]:                                                                                                
     Page 2, Line 7                                                                                                             
     INSERT:    (3)  Purchased directly  from  consumer  for                                                                    
     purposes for resale; or                                                                                                    
                (4) Vehicle has been  in service with a bona                                                                    
     fide rental fleet for 6 months.                                                                                            
MS. SYLVESTER  opined that Amendment  1 would allow  current year                                                               
models to  be sold  by car  rental agencies  that have  had those                                                               
cars in their  fleets for six months, and would  allow dealers to                                                               
sell cars that they've purchased  from consumers specifically for                                                               
the purpose of reselling them.                                                                                                  
TAPE 03-49, SIDE B                                                                                                            
Number 2370                                                                                                                     
MS.  SYLVESTER asked  that the  committee take  further testimony                                                               
before considering whether to adopt Amendment 1.                                                                                
VICE  CHAIR LYNN  asked  whether the  paragraph  (4) proposed  by                                                               
Amendment 1 refers  to vehicles that have been in  service for at                                                               
least six months, exactly six months, or less than six months.                                                                  
The committee took an at-ease from 4:27 p.m. to 4:28 p.m.                                                                       
Number 2291                                                                                                                     
CLYDE  (ED)  SNIFFEN,  JR.,   Assistant  Attorney  General,  Fair                                                               
Business   Practices   Section,   Civil   Division   (Anchorage),                                                               
Department  of  Law  (DOL),  suggested   that  that  language  in                                                               
Amendment 1 should read "for at least six months."                                                                              
MR. SNIFFEN  went on to say  that the eight sections  of the bill                                                               
focus  on two  primary  areas.   He said  that  Sections 2-8  are                                                               
clarifications to  the existing  law that  was passed  last year.                                                               
He added  that certain  provisions of HB  272 remove  portions of                                                               
existing  law that  he  felt  were not  necessary  given what  he                                                               
called "Alaska's auto  climate."  Turning attention  to Section 1                                                               
of HB 272, he said:                                                                                                             
     There has  been a primary misconception  about what the                                                                    
     current  state  of  the  law  is in  Alaska.    As  Ms.                                                                    
     Sylvester pointed out, under  current Alaska law, it is                                                                    
     illegal  for   any  auto  dealer  to   sell  a  current                                                                    
     model/year  used  vehicle.   And  let  me repeat  that:                                                                    
     under current law, if you  do not have a manufacturer's                                                                    
     statement  of origin  for a  vehicle,  you cannot  sell                                                                    
     that  vehicle; whether  you're a  new car  dealer or  a                                                                    
     used car dealer, it makes no difference. ...                                                                               
     What Section  1 does  is carve out  an exception  to at                                                                    
     least  allow  you  to  sell  some  current  model  used                                                                    
     vehicles if you receive them  in the ordinary course of                                                                    
     business   in  the   trade,  and   now,  through   this                                                                    
     amendment, perhaps  if it's a bona  fide rental vehicle                                                                    
     or if  you purchased it  from a consumer or  some other                                                                    
     means.  So it just  needs to be remembered that without                                                                    
     this amendment,  we go  back to  the existing  law; the                                                                    
     existing law says, if you're  a car dealer [and] you've                                                                    
     got  a current  model  used vehicle  on  your lot,  you                                                                    
     can't  sell it,  and I  can go  out there  tomorrow and                                                                    
     take all those off your lot.   So we do need to address                                                                    
     that  situation, we  don't take  a position  on whether                                                                    
     this language in  Section 1 is the best  way to address                                                                    
     that, but it's an attempt to do that.                                                                                      
Number 2152                                                                                                                     
MR. SNIFFEN continued:                                                                                                          
     And  I want  to comment  briefly on  testimony received                                                                    
     from  the North  American Automobile  Trade Association                                                                    
     [NAATA] on  Monday, just so  the committee is  clear on                                                                    
     some of  the legal ramifications  of Section 1.   There                                                                    
     was  some  suggestion  that this  section  may  violate                                                                    
     provisions of  the North American Free  Trade Agreement                                                                    
     [NAFTA].   And  we've looked  through NAFTA;  there are                                                                    
     two  chapters of  NAFTA -  chapter 3  and chapter  15 -                                                                    
     that   address  themselves   to  trade,   tariffs,  and                                                                    
     antitrust issues.  Actually,  there's an annex to NAFTA                                                                    
     called Annex  300-A, that deals with  auto transactions                                                                    
     specifically.     And   our  review   of  those   NAFTA                                                                    
     provisions do  not suggest that anything  in that would                                                                    
     prohibit  this kind  of legislation.   And  if it  does                                                                    
     prohibit  this kind  of  legislation,  then we  already                                                                    
     have  a   problem  because  our  current   law  already                                                                    
     prohibits  the sale  of these  kinds of  vehicles.   So                                                                    
     that really is not a relevant issue.                                                                                       
     Another  issue   raised  by  the  NAATA   folks  was  a                                                                    
     potential antitrust concern.   Antitrust laws in Alaska                                                                    
     are very complex, but there  is something about the law                                                                    
     that  [is] universally  agreed upon,  and that  is, our                                                                    
     laws do  not protect competitors; they  are intended to                                                                    
     protect  competition.     And  it's  only  [reasonable]                                                                    
     competition at that.   It is unclear  whether Section 1                                                                    
     of  HB 272  would have  any kind  of an  impact, or  at                                                                    
     least an  unreasonable impact, on competition  for this                                                                    
     very small and narrow segment  of automobiles.  To find                                                                    
     out if  it did, it  would require  that we engage  in a                                                                    
     very   lengthy   investigation   that   would   include                                                                    
     identification of product  markets, geographic markets,                                                                    
     relevant market power held by  the competitors in those                                                                    
     markets, and  we'd have to  weigh those  things against                                                                    
     other  market  forces  to   determine  whether  or  not                                                                    
     unreasonable  restraints  on  competition existed.    I                                                                    
     don't believe  NAATA has  done that  - we  haven't done                                                                    
     that; it's  just pure conjecture that  anything in this                                                                    
     bill would raise antitrust concerns.                                                                                       
Number 2101                                                                                                                     
MR. SNIFFEN went on to say:                                                                                                     
     There was  another reference to some  litigation in the                                                                    
     Lower 48  that apparently  addresses itself to  some of                                                                    
     these concerns; that  is only one lawsuit,  that we are                                                                    
     aware   of,   that   has  been   filed   against   auto                                                                    
     manufactures  for  some  antitrust  behavior  that  has                                                                    
     nothing  to do  with the  issues  in this  bill.   That                                                                    
     lawsuit dealt  with a  potential conspiracy  among auto                                                                    
     dealers  in the  United States  and Canada  to prohibit                                                                    
     the  importation of  Canadian  automobiles.   And  that                                                                    
     lawsuit  does not  address itself  to legislation  like                                                                    
     this and  is really  irrelevant to  the issues  in this                                                                    
     bill, although  it does  point out  some of  the issues                                                                    
     that at least some consumers have a concern about.                                                                         
     There  was also  some suggestion  that the  legislature                                                                    
     could  expose itself  to  liability  for enacting  this                                                                    
     kind  of  law.     That  (indisc.  -  paper  shuffling)                                                                    
     ridiculous;  the legislature  enjoys complete  immunity                                                                    
     for its actions here.  If  you do pass [the] law that's                                                                    
     contained in Section  1 ..., and it is found  out to be                                                                    
     either illegal  under NAFTA or our  antitrust laws, the                                                                    
     result  would be,  the  law  becomes unenforceable  and                                                                    
     this   legislature  does   not   concern  itself   with                                                                    
     Now,  if we  get to  the real  root of  what Section  1                                                                    
     tries  to do,  I'm  going  to have  to  let other  auto                                                                    
     dealers speak to how it  has impacted their business to                                                                    
     allow used auto  dealers and brokers to  import ... low                                                                    
     mileage  Canadian  vehicles  that   are  of  a  current                                                                    
     model/year,  and   how  they  have  a   difficult  time                                                                    
     competing with those kinds of  purchases.  It's not the                                                                    
     Department of  Law's job to  really regulate  that kind                                                                    
     of competition; we leave that  up to the competitors in                                                                    
     the  market  place.   It's  our  job  to look  out  for                                                                    
     consumers,  and  it  is  unclear  whether  or  not  the                                                                    
     disallowance of  these kinds  of transactions  would be                                                                    
     beneficial or harmful to consumers.                                                                                        
Number 2027                                                                                                                     
     We do  understand that somewhere in  the process, these                                                                    
     low mileage, current  model/year Canadian vehicles find                                                                    
     their  way to  the U.S.,  probably in  legal ways,  but                                                                    
     somewhere   in  the   chain  there's   an  illegitimate                                                                    
     transaction.    And  I  use that  word  instead  of  an                                                                    
     illegal   transaction  because   I  don't   doubt  that                                                                    
     perhaps, at every step in  the process, something legal                                                                    
     has occurred.   But we have  heard in our office  - and                                                                    
     we  have not  investigated this,  so I  don't have  any                                                                    
     hard  facts  -  that  exporters in  Canada  are  hiring                                                                    
     college kids,  for example,  to go  to car  dealers and                                                                    
     buy vehicles, or they're setting  up dummy companies to                                                                    
     take  vehicles  so they  can  get  them into  the  U.S.                                                                    
     [And] somewhere along the chain,  it appears that there                                                                    
     is  some  kind  of  an  illegitimate  transaction  that                                                                    
     results  in a  lot of  these vehicles  ... coming  into                                                                    
MR. SNIFFEN concluded:                                                                                                          
     Whether that's good for consumers  or bad for consumers                                                                    
     is  a call  the legislature  will have  to make,  but I                                                                    
     believe  that the  new auto  dealers are  trying to  do                                                                    
     something to  address that situation.   So the language                                                                    
     in Section 1 is not  language the Department of Law has                                                                    
     proposed;  we  have  consulted with  the  [Alaska  Auto                                                                    
     Dealers  Association  (AADA)]  about the  language,  we                                                                    
     don't oppose  it, there might  be some  better language                                                                    
     that we  could come  up with to  deal with  this issue,                                                                    
     but we haven't been able  to come up with that language                                                                    
     in  our  department.  ... I  certainly  understand  the                                                                    
     concern  that  they're  trying  to  address,  [but]  we                                                                    
     simply don't have a position  on whether or not this is                                                                    
     the best  way to address that  or not.  And  with that,                                                                    
     I'd  be happy  to  answer any  questions the  committee                                                                    
REPRESENTATIVE  GATTO  said  that  if  he wanted  to  buy  a  new                                                               
vehicle, he would want  it to truly be a new  vehicle.  He asked,                                                               
is it  a new  vehicle if it  was made in  Canada and  brought in?                                                               
Because it  might have  been made  in Canada,  in any  event, and                                                               
then sold  by "the  local distributor that's  franchised."   Is a                                                               
distinction being  made that  one vehicle is  new and  another is                                                               
MR. SNIFFEN replied:                                                                                                            
     If your vehicle  is manufactured in Canada  for sale in                                                                    
     the United States,  and it comes to a  dealer here from                                                                    
     the manufacturer  with the manufacturer's  statement of                                                                    
     origin, it  is a new vehicle.   If your vehicle  is new                                                                    
     [and] it's purchased from a  consumer or an exporter in                                                                    
     Canada  from   a  Canadian   dealer,  because   it  was                                                                    
     manufactured for  a destination in  Canada - it  has 10                                                                    
     miles on  it and  then it's  brought across  the border                                                                    
     and  (Indisc.  -  coughing) used  car  dealer  here  in                                                                    
     Alaska, and you  go to that lot and it's  a ... 2003 or                                                                    
     2004 ...  Dodge 2500 (indisc.  - coughing) 10  miles on                                                                    
     it - it  is now a used  vehicle in the eyes  of the law                                                                    
     because it has been sold once and titled.                                                                                  
Number 1867                                                                                                                     
     And there  are some serious implications  to that fact;                                                                    
     you  might think  you're buying  the same  product, ...                                                                    
     but  because  it's a  used  vehicle,  you do  not  have                                                                    
     Alaska lemon  law protection, for example,  because our                                                                    
     lemon law  only applies to  new vehicles.  So  your low                                                                    
     mileage  Canadian   vehicle  is  now  a   used  vehicle                                                                    
     (indisc. - coughing) excluded  from making claims under                                                                    
     our lemon  law.   Somewhere in  that process,  too, the                                                                    
     odometer on that vehicle has  probably been changed; we                                                                    
     have  reports  that  a  lot   of  those  changes  don't                                                                    
     necessarily  happen in  conformance  with federal  law.                                                                    
     So  you don't  know if  the  miles on  that are  really                                                                    
     accurate or not,  although I suspect a lot  of them are                                                                    
     documented fairly well.                                                                                                    
     And  there is  another recent  consumer issue  that has                                                                    
     come  to  the  attention   of  our  office,  that  your                                                                    
     manufacturers warranty  may not be valid  in the United                                                                    
     States.   Vehicles manufactured for sale  in Canada are                                                                    
     subject to  factory warranties so  long as  they remain                                                                    
     registered  in Canada;  as soon  as  you register  that                                                                    
     vehicle  in  the  United States,  manufacturers  aren't                                                                    
     required to honor  those warranties.  In  the past they                                                                    
     have,   [but]   I   understand   that   some   of   the                                                                    
     manufacturers are now declining to do that.                                                                                
MR. SNIFFEN concluded:                                                                                                          
     And  that's  information   that  (indisc.  -  coughing)                                                                    
     consumer  that the  fix  may not  be  to prevent  these                                                                    
     transactions,  the fix  may be  just to  provide better                                                                    
     consumer awareness, so the  consumer can evaluate those                                                                    
     risks  and then  determine  whether or  not  this is  a                                                                    
     transaction he'd like to make.                                                                                             
REPRESENTATIVE  GATTO  asked  whether  total  disclosure  of  the                                                               
aforementioned  issues would  make  those  types of  transactions                                                               
MR. SNIFFEN  said not under  current Alaska law, which  says that                                                               
as  soon as  that  manufacturer's statement  of  origin (MSO)  is                                                               
lost, that  sale is illegal.   So, current  law would have  to be                                                               
changed in order to make such transactions legal.                                                                               
VICE  CHAIR LYNN  asked:   "How many  cars are  we talking  about                                                               
here? ... How big a problem is this?"                                                                                           
MR. SNIFFEN offered an estimate of between 500 and 1,000 cars.                                                                  
VICE  CHAIR LYNN  asked whether  all "Canadian  cars" conform  to                                                               
"American specs".                                                                                                               
MR. SNIFFEN indicated that they did.                                                                                            
Number 1678                                                                                                                     
VICE CHAIR LYNN returned the gavel to Chair Anderson.                                                                           
REPRESENTATIVE GUTTENBERG asked whether Section  1 of the bill is                                                               
MR. SNIFFEN  offered that  the controversy  of Section  1 centers                                                               
around whether or not used  car dealers should be prohibited from                                                               
selling current  model Canadian vehicles.   Current law prohibits                                                               
it under all  circumstances.  Section 1 would  modify current law                                                               
to  allow  certain types  of  such  transactions  to occur.    If                                                               
Section  1  were   to  be  deleted,  the  status   quo  would  be                                                               
maintained.  He added that  current law is problematic to enforce                                                               
because  he would  have  to go  to  every car  lot  and tell  all                                                               
dealers that  they cannot  sell any  current model  used vehicles                                                               
that don't have an MSO.                                                                                                         
REPRESENTATIVE GUTTENBERG  turned attention  to page 6,  line 20,                                                               
and noted that 10 miles is being  changed to 100 miles.  He asked                                                               
whether  the  10-mile limit  has  been  problematic and,  if  so,                                                               
whether  providing  for  more  than a  100-mile  limit  would  be                                                               
MR. SNIFFEN  indicated that the  aforementioned change is  one of                                                               
the "cleanup  provisions" of the bill.   The change to  100 miles                                                               
will  allow dealers  in Wasilla,  for example,  to send  vehicles                                                               
received as trade-ins to Anchorage  for repairs or detailing.  He                                                               
opined that the  100-mile limit will be more  than sufficient for                                                               
that purpose and will still protect consumers.                                                                                  
Number 1455                                                                                                                     
REPRESENTATIVE  LYNN  referred  to  Amendment  1  [text  provided                                                               
previously], and indicated  that he wished to amend  it such that                                                               
the last line  would read, "(4) Vehicle has been  in service with                                                               
a bona fide rental fleet for  at least 6 months."  [The amendment                                                               
to Amendment 1 was treated as adopted.]                                                                                         
Number 1428                                                                                                                     
REPRESENTATIVE  LYNN  made a  motion  to  adopt Amendment  1  [as                                                               
amended].   There being  no objection,  Amendment 1  [as amended]                                                               
was adopted.                                                                                                                    
Number 1412                                                                                                                     
STEVE  ALLWINE,   Secretary,  Alaska  Auto   Dealers  Association                                                               
(AADA),  said that  the  AADA supports  HB 272  as  amended.   He                                                               
opined that the goal of the  bill is to provide clear and concise                                                               
corrections to  previous legislation while trying  to retain that                                                               
legislation's intent.  He went on to say:                                                                                       
     I and the dealers that  I represent believe that HB 272                                                                    
     accurately  provides these  corrections.   With respect                                                                    
     to Section 1,  ... it is not our  intent, as automobile                                                                    
     dealers,  to preclude  used  car  dealers from  selling                                                                    
     current model used cars.   I have to echo Mr. Sniffen's                                                                    
     comments ...  that the statute  as it  currently exists                                                                    
     precludes  all dealers  from  selling  a current  model                                                                    
     used  vehicle.   With the  changes we've  proposed, all                                                                    
     dealers  -  not just  new  car  dealers, but  used  car                                                                    
     dealers  as well  - will  be  able to  take and  market                                                                    
     current used  [vehicles] when  they're traded  in, when                                                                    
     they're purchased from an  individual consumer, or when                                                                    
     they  come  from a  bona  fide  rental fleet  -  either                                                                    
     through an auction  or directly - when  they've been in                                                                    
     service for specified period of time.                                                                                      
     Starting  at  the  beginning ...,  the  acquisition  of                                                                    
     these vehicles is legal, but  essentially it amounts to                                                                    
     the manufacturing of a used  vehicle.  I have given you                                                                    
     some attachments, one  of those is a  good indicator of                                                                    
     that - [it] is the  advertisement that says the vehicle                                                                    
     has  30 miles  on it.   That  is not  a bona  fide used                                                                    
     vehicle.    The  process  ...  can  involve  a  college                                                                    
     student, it  can involve somebody ...  handing somebody                                                                    
     $100 so  that the  vehicle is titled  in their  name in                                                                    
     Canada.    These vehicles  that  come  from Canada  are                                                                    
     built specifically  for sale and use  in their specific                                                                    
     country.   In  your attachment  you  have a  copy of  a                                                                    
     manufacturer's  invoice to  a dealer  that says  at the                                                                    
     bottom, in  our case, [that]  the vehicle is  built for                                                                    
     the U.S. market and is supposed to be sold there.                                                                          
Number 1291                                                                                                                     
MR. ALLWINE continued:                                                                                                          
     Problems   when  the   vehicle  enters   this  country:                                                                    
     prerequisite is  the speedometer  must be  changed from                                                                    
     kilometers  to  miles.   Two  issues  and concerns  are                                                                    
     raised when this is done.   The first one:  an error in                                                                    
     the  mileage  of a  vehicle  will  render it  basically                                                                    
     worthless on  the retail market.   The stigma  of miles                                                                    
     unknown on  an odometer statement is  significant, it's                                                                    
     huge, and  it basically will render  the car worthless.                                                                    
     These mistakes  can happen,  and frequently,  when they                                                                    
     do these  type of conversions; however,  one mistake is                                                                    
     going to cost  the consumer thousands of  dollars.  The                                                                    
     second:   temptation for speedometer fraud  is strong -                                                                    
     the  difference  in a  popular  model  pickup truck  at                                                                    
     3,000 miles  versus 20,000 is  in excess of $600.   Oh,                                                                    
     by the way,  how do we change these  speedometers?  You                                                                    
     can buy  the equipment over  the Internet - you  have a                                                                    
     copy of the article - [for] about $1,800 ....                                                                              
     Title fraud:   If you  bring a vehicle in  from Canada,                                                                    
     because  of  how  the title  is  transitioned,  if  the                                                                    
     vehicle has been totaled, if  it's been in a flood, you                                                                    
     don't  know.    And  ultimately  the  consumer  has  no                                                                    
     recourse;  there's  no   recourse  with  that  Canadian                                                                    
     importer.    Ever try  to  sue  a business  in  another                                                                    
     country?   Another problem is  manufacturer's warranty:                                                                    
     ... a  number of the manufacturers  have eliminated the                                                                    
     manufacturer's  warranty  from  their vehicles.    What                                                                    
     some of  the used  car dealers have  taken to  doing is                                                                    
     they have  said, "We're putting  a service  contract on                                                                    
     your vehicle."  However,  they're not indicating it's a                                                                    
     service contract;  they're stating  in this, in  the ad                                                                    
     that  you have  - [it's]  a classic  example -  they're                                                                    
     saying it's  a warranty.  There's  a difference between                                                                    
     a manufacturer's  warranty and a service  contract.  It                                                                    
     is  misleading,  it is  not  honest,  and it  does  not                                                                    
     provide the same coverage.                                                                                                 
Number 1193                                                                                                                     
MR. ALLWINE concluded:                                                                                                          
     ... I  sent you a  letter; ... in my  closing paragraph                                                                    
     ...  I said  ...that  ultimately, if  the consumer  has                                                                    
     difficulty with a current model  used car, there's only                                                                    
     one  place they  go -  they come  to a  new car  dealer                                                                    
     because  a new  car dealer  has the  investment in  the                                                                    
     equipment and in  the tools and in the  training and in                                                                    
     the facilities.  If you've got  a car that's one or two                                                                    
     years  old,  and you  have  a  problem, your  used  car                                                                    
     dealer ...  is going to  say, "Well, that's  okay; it's                                                                    
     got a  warranty, it's got  a service contract,  take it                                                                    
     to a  new car  dealer."   It is  not appropriate  for a                                                                    
     used  car dealer  to have  the  ability to  sell a  new                                                                    
     vehicle   without   having    any   responsibility   or                                                                    
     obligation  after the  sale.   This  is a  manufactured                                                                    
     used car;  it is not the  same as what we're  trying to                                                                    
     correct here for bona fide used car commerce.                                                                              
MR.  ALLWINE, in  response  to  a question,  said  that used  car                                                               
dealers have some obligation by  virtue of a service contract, if                                                               
they have  a facility, to fix  the vehicles they sell.   However,                                                               
99 out of 100  used car dealers do not have  the special tools or                                                               
the special training to fix current model vehicles.                                                                             
REPRESENTATIVE GATTO asked whether a  new car dealer in Anchorage                                                               
has the  obligation to  honor the factory  warranty of  a vehicle                                                               
that was purchased new in Indiana, for example.                                                                                 
MR. ALLWINE said yes.                                                                                                           
REPRESENTATIVE GATTO asked  whether the same would be  true for a                                                               
vehicle purchased new in Canada.                                                                                                
MR. ALLWINE said it would be true  if the owner of the vehicle is                                                               
a Canadian citizen.                                                                                                             
REPRESENTATIVE GATTO  asked whether  a U.S.  citizen who  went to                                                               
Canada to  purchase a new vehicle  could expect a new  car dealer                                                               
in Anchorage to honor the manufacturer's warranty.                                                                              
Number 1088                                                                                                                     
MR. ALLWINE replied:                                                                                                            
     The answer is that it would  be difficult for you, as a                                                                    
     consumer from  this country, to  go to Canada  and make                                                                    
     that purchase,  and would be  highly unlikely.   In the                                                                    
     event  you  did, because  that  vehicle  was built  and                                                                    
     manufactured for sale and use  in Canada, that vehicle,                                                                    
     in  many   cases,  would  not  have   a  manufacturer's                                                                    
REPRESENTATIVE ROKEBERG asked  whether the aforementioned service                                                               
contracts are insurance products or "underwritten separately."                                                                  
MR. ALLWINE replied:                                                                                                            
     Service   contracts,  in   a  number   of  cases,   are                                                                    
     underwritten  by  some  other  company.    But  service                                                                    
     contracts  are  not  like  warranties  in  as  much  as                                                                    
     they're not  all inclusive.   They will  cover specific                                                                    
     things, but  it is  incumbent on  the consumer  to find                                                                    
     somebody who is willing to  make that repair and accept                                                                    
     payment  from that  service contract  company.   In our                                                                    
     instance,  we  do  sell a  service  contract,  and  our                                                                    
     service  contract  is  backed  by  the  manufacturer  -                                                                    
     Daimler Chrysler.   Ford Motor Company  offers the same                                                                    
     thing as do  most of the manufacturers.   But there are                                                                    
     offshore and there are  independent companies that also                                                                    
     offer service contracts.                                                                                                   
REPRESENTATIVE GUTTENBERG  asked whether  HB 272 prevents  a used                                                               
car dealer from selling a new car.                                                                                              
MR. ALLWINE replied:                                                                                                            
     The law prevents  a used car dealer from  selling a new                                                                    
     car.    A  new  car  is an  untitled  vehicle  that  is                                                                    
     purchased from the  manufacturer and is sold  by one of                                                                    
     the  manufacturer's agents.  ...  This  bill, with  the                                                                    
     recommended amendment, does not  preclude that used car                                                                    
     dealer  from selling  a bona  fide  current model  used                                                                    
REPRESENTATIVE  LYNN   asked  whether  extended   warranties  are                                                               
actually warranties or just service contracts.                                                                                  
MR.  ALLWINE said  that  those are  just  service contracts,  and                                                               
indicated  that  the practice  of  calling  them "warranties"  is                                                               
misrepresentation.  In response to another question, he said:                                                                   
     At  this  point  in  time,  you  will  see  rental  car                                                                    
     companies  starting  to  let loose  of  some  of  their                                                                    
     rental fleets,  which would be  current model.   And so                                                                    
     those  vehicles will  start to  show up.   The  current                                                                    
     statute, as  it exists, precludes anybody  from selling                                                                    
     a  current model  used vehicle.   What  we're proposing                                                                    
     allows everybody  to do it,  but it doesn't  permit the                                                                    
     wholesale manufacture of a used vehicle from Canada.                                                                       
MR. ALLWINE reiterated  that a used vehicle is one  that has been                                                               
Number 0690                                                                                                                     
CHRIS   HESTER,    Lyberger's   Car   and   Truck    Sales,   LLC                                                               
("Lyberger's"), said that he strongly  believes that Section 1 of                                                               
HB 272 needs to be deleted.  He  offered an example of how HB 272                                                               
would affect the consumer:                                                                                                      
     About  a year  ago, a  husband and  a wife  purchased a                                                                    
     current  model  vehicle  from  Lyberger's,  a  Canadian                                                                    
     vehicle that we  got from an auction.   The couple knew                                                                    
     that  it was  Canadian  because we  do have  disclosure                                                                    
     forms that  they signed.   Two months later,  the woman                                                                    
     came in almost in tears  and explained that her husband                                                                    
     was the man  who ran over an elderly  lady walking home                                                                    
     with her  husband.  This  was a  story that was  in the                                                                    
     newspapers, it  was on the news.   And she came  in and                                                                    
     she asked  John if  he would buy  the car  back because                                                                    
     her husband was going to  jail and she wouldn't be able                                                                    
     to afford this car payment.   Not only did John buy the                                                                    
     car back, he refunded 100 percent of her money.                                                                            
     Now, if  Section 1 of HB  272 was in effect,  she would                                                                    
     only be able to purchase  that vehicle at the franchise                                                                    
     dealership  and,  with  her  unforeseen  circumstances,                                                                    
     would have no other alternative  but to take it back to                                                                    
     the  franchise   dealership  to   sell  it   back;  the                                                                    
     franchise dealer,  knowing that  it was the  only place                                                                    
     she could  get rid of  the vehicle and knowing  how bad                                                                    
     she  needed to  get rid  of it,  would have  a monopoly                                                                    
     advantage ...  and would probably give  her the lowest,                                                                    
     rock-bottom  price.   This would  not have  helped this                                                                    
     lady  in  her circumstances.    Not  only is  this  how                                                                    
     Lyberger's  treats their  customers, but  it shows  you                                                                    
     that we are  there for the consumer.  And  this bill is                                                                    
     definitely not  there helping them  in any  way, shape,                                                                    
     or form.  Thank you.                                                                                                       
Number 0574                                                                                                                     
CARROL LYBERGER, Lyberger's Car and Truck Sales, LLC, remarked                                                                  
that the problematic word in HB 272 is the word "current".  She                                                                 
went on to say:                                                                                                                 
     There is a  difference between a new  and used vehicle.                                                                    
     [With] a new  vehicle that is sold ...  to a franchised                                                                    
     dealer,  from the  manufacturer,  the manufacturer  got                                                                    
     paid  for  that  vehicle  [and]  it  was  sent  to  the                                                                    
     franchised  dealer.    The franchised  dealer,  whether                                                                    
     it's U.S.  or Canadian, was  paid for that  vehicle the                                                                    
     price they  were asking.   I know  what a  used vehicle                                                                    
     is:  as soon  as it is sold, it is used  - the value of                                                                    
     that vehicle will never be the same.                                                                                       
     To Steve  [Allwine], I am  a member of the  Alaska Auto                                                                    
     Dealers Association  [but] was  never informed  of this                                                                    
     Section 1 in  [HB 272]; I learned of it  last week.  As                                                                    
     far  as  the  warranty  and service  contract  goes,  a                                                                    
     warranty  is free.    A service  contract  is what  the                                                                    
     consumer buys -  the consumer pays for  ... the service                                                                    
     contract.   That is the  difference between  a warranty                                                                    
     and a service contract. ...                                                                                                
     As  far  as the  independent  [which  some claim]  that                                                                    
     nobody can  possibly find  - a  mechanic that  would be                                                                    
     able to  work on the  newer models - there  are several                                                                    
     independent  mechanics  that  do  have  very  expensive                                                                    
     equipment in  their shops, and  they do  warranty work.                                                                    
     Even a  lot of the new  cars stores will sublet  out to                                                                    
     some of your  independents on stuff.  I  believe it was                                                                    
     about  two years  ago  that  the independent  mechanics                                                                    
     sued the  manufacturers for the codes  because they had                                                                    
     the  equipment  but  the  codes could  not  go  to  the                                                                    
     independents  until about  six months  to a  year after                                                                    
     that vehicle came out.  So  now they're able to get the                                                                    
     codes  whenever  the  manufacturers   give  it  to  the                                                                    
     franchised dealers and mechanics. ...                                                                                      
MS. LYBERGER concluded:                                                                                                         
     This bill,  when they say current,  there is definitely                                                                    
     a difference between current, new,  and used.  The word                                                                    
     "current" is  ... a bad  word; there  is a new  car and                                                                    
     there is a used car.   And I thank you for listening to                                                                    
     me, and ...  anybody that wishes to  ask any questions,                                                                    
     I'll be glad to answer.                                                                                                    
MS.  LYBERGER, in  response to  questions,  said that  Lyberger's                                                               
does offer  an "after market"  service contract.  She  added that                                                               
when   a  customer   buys  a   Canadian  vehicle   that  has   no                                                               
manufacturer's   warranty,  Lyberger's   gives  the   customer  a                                                               
"replacement"  warranty  for free.    She  noted that  there  are                                                               
several shops  in town that "do"  the warranty work, and  went on                                                               
to list  five such shops,  adding that there are  some franchised                                                               
dealers that  will also  honor the  after market  warranty though                                                               
one of those does not do so for 2003 models.                                                                                    
Number 0283                                                                                                                     
TERI PETRAM, Lyberger's Car and  Truck Sales, LLC, said that when                                                               
Lyberger's sells a vehicle that's  been imported from Canada, all                                                               
of the documents  are disclosed to the customer.   Also, whenever                                                               
Lyberger's  sells  any vehicle,  the  customer  is also  given  a                                                               
"Carfax"  report,  which  provides details  about  the  vehicle's                                                               
history.    She  opined  that  it is  ridiculous  to  think  that                                                               
Lyberger's would sell a vehicle  with a "rolled back" odometer or                                                               
a wrong  odometer reading.   And  if such a  vehicle did  come to                                                               
them,   she  added,   Lyberger's  wouldn't   sell  it;   instead,                                                               
Lyberger's would absorb the expense.                                                                                            
MS. PETRAM noted  that used car dealers have to  purchase most of                                                               
their inventory from auctions because  there is no way they could                                                               
keep enough cars on the  lot, solely with trade-ins and purchases                                                               
through individuals,  to stay  in business.   To  illustrate this                                                               
point,  she  added  that Lyberger's  sells  100-some  vehicles  a                                                               
month.  Thus, Lyberger's must  supplement its inventory by buying                                                               
vehicles from  auctions, most  of which  acquire the  majority of                                                               
their  vehicles from  Canada.   She  remarked:   "We  want to  be                                                               
competitive  and  offer something  that  the  consumer wants,  so                                                               
we're  going  to  find  the  lowest  mileage  vehicles  that  are                                                               
available.   We personally don't  import these vehicles;  we have                                                               
nothing to do with the import  process, we just buy them from the                                                               
people that [import them]."                                                                                                     
MS.  PETRAM  relayed  that  according   to  the  "General  Motors                                                               
Acceptance  Corporation,"  a warranty  is  free  and an  extended                                                               
service contract is  something the consumer pays for.   So on the                                                               
back of  the warranty  that Lyberger's gives  to the  customer to                                                               
replace the  manufacturer's warranty, it specifically  lists what                                                               
is not  covered on that  warranty.  In conclusion,  she suggested                                                               
that  the way  current  statute  and HB  272  have evolved,  they                                                               
appear  to  have  the  goal of  eliminating  any  competition  to                                                               
franchised dealers.                                                                                                             
REPRESENTATIVE LYNN asked what  percentage of Lyberger's vehicles                                                               
are Canadian.                                                                                                                   
MS.  PETRAM  offered  that approximately  50-60  percent  of  the                                                               
vehicles that Lyberger's sells are Canadian.                                                                                    
TAPE 03-50, SIDE A                                                                                                            
Number 0001                                                                                                                     
CHAIR  ANDERSON  determined  that  Lorri  Urban  from  the  North                                                               
American  Automobile  Trade  Association had  provided  testimony                                                               
during  the May  5  hearing on  HB 272,  and  indicated that  the                                                               
committee would  take testimony from  those that did  not testify                                                               
at that prior meeting.                                                                                                          
Number 0045                                                                                                                     
BRUCE MUSICK, Affordable Used Cars,  said that under HB 272, when                                                               
a new car is released, there  will be a period ranging between 17                                                               
and 24  months during which  that car can not  be sold as  a used                                                               
vehicle.  He  pointed out that the bill's  restrictions will also                                                               
apply to cars  that aren't Canadian, but won't apply  to used car                                                               
dealers  in the  Lower  48.   He  mentioned  that  many used  car                                                               
dealers in Alaska acquire inventory in the lower 48.                                                                            
Number 0161                                                                                                                     
DIANA PFEIFFER, President,  Alaska Automobile Dealers Association                                                               
(AADA);  President,  Alaska  Sales  and  Service,  expressed  her                                                               
support of HB 272.  On  the issue of odometer readings, she added                                                               
that  franchised  automobile  dealers   have  a  computer  system                                                               
connected  to  the manufacturer  that  allows  dealers to  verify                                                               
mileage.  She said she did  not believe that independent used car                                                               
dealers have access  to that information.  She  listed the issues                                                               
that others  have already spoken  to, and  relayed that a  lot of                                                               
people who  come into her  dealerships don't know how  to operate                                                               
their  vehicles.    She  said that  as  a  franchised  automobile                                                               
dealer,  her  firm invests  millions  of  dollars in  facilities,                                                               
training, special  tools and equipment,  and the  proper delivery                                                               
of  automobiles to  consumers.   She noted  that since  franchise                                                               
dealers have  direct communication  with manufacturers,  if there                                                               
are  safety issues  with [certain]  vehicles,  a "stop  delivery"                                                               
order or a recall  can be issued.  She offered  an example of one                                                               
such situation,  and said that  used car  dealers in her  area at                                                               
that  time were  attempting to  sell such  cars as  "newly used."                                                               
She offered  her belief that  Canadian titles do not  show liens.                                                               
In conclusion, she requested the committee's support of HB 272.                                                                 
Number 0366                                                                                                                     
RICHARD  HIATT,   General  Service  Manager,  Alaska   Sales  and                                                               
Service,  on the  issue of  how many  vehicles are  exported from                                                               
Canada,  suggested  that  in 1996  it  was  approximately  16,000                                                               
vehicles,  200,000 vehicles  in 2002,  and that  the practice  is                                                               
still  quite prevalent.   He  relayed  that many  people who  buy                                                               
"like new" cars from used car  dealers in the area come to Alaska                                                               
Sales and Service  in an effort to get a  better understanding of                                                               
how to  operate those vehicles.   He opined that those  who bring                                                               
Canadian cars into  Alaska for the purpose of  reselling them are                                                               
committing fraud.                                                                                                               
Number 0494                                                                                                                     
DARRELL  FRIESS,  Budget  Car  & Truck,  said  he  questions  Mr.                                                               
Hiatt's  assertion that  200,000 Canadian  vehicles are  exported                                                               
yearly.   He relayed  that he  opposes Section 1  of HB  272, and                                                               
opined  that there  is  a difference  between a  new  and a  used                                                               
vehicle.    He  offered  his  belief  that  current  law  already                                                               
stipulates that a  used vehicle is one that has  been titled.  He                                                               
also opined that  there should not be any  resale restrictions on                                                               
any vehicle  purchased at  what he  called a  recognized auction,                                                               
and suggested that HB 272 be amended to reflect that point.                                                                     
Number 0567                                                                                                                     
MARTEN MARTENSEN,  Continental Honda,  relayed that Honda  took a                                                               
very firm  stance on  imported Canadian  vehicles, and  that many                                                               
other  manufacturers  have  followed  suit.   He  explained  that                                                               
although  people who've  bought used  Canadian vehicles  at local                                                               
dealers have come  to his firm for warranty  work, Honda's stance                                                               
is that  it will  not provide  any kind  of assistance  for those                                                               
Canadian vehicles.   He opined that  even if a person  can get an                                                               
independent shop  to honor a  warranty on those  vehicles, he/she                                                               
is not getting  the same quality of work that  can be provided by                                                               
a franchised dealer.                                                                                                            
CHAIR ANDERSON closed public testimony on HB 272.                                                                               
Number 0686                                                                                                                     
REPRESENTATIVE ROKEBERG moved  to report HB 272,  as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying zero fiscal note.                                                                                                  
Number 0705                                                                                                                     
REPRESENTATIVE  GUTTENBERG objected.   He  relayed that  when the                                                               
original legislation  passed, there was strong  opposition to any                                                               
consumer protection being  built into it, and opined  that HB 272                                                               
simply  continues in  that vein.   Lacking  consideration of  the                                                               
consumer in  HB 272, he said  he does not support  any continuing                                                               
restructuring of the relationship between auto dealers.                                                                         
Number 0760                                                                                                                     
A roll  call vote  was taken.   Representatives  Lynn, Dahlstrom,                                                               
Gatto,  Rokeberg,  Crawford,  and  Anderson  voted  in  favor  of                                                               
reporting  HB 272,  as amended,  from committee.   Representative                                                               
Guttenberg  voted  against  it.   Therefore,  CSHB  272(L&C)  was                                                               
reported from the House Labor  and Commerce Standing Committee by                                                               
a vote of 6-1.                                                                                                                  

Document Name Date/Time Subjects