Legislature(2017 - 2018)BARNES 124

04/02/2018 03:15 PM House LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
Moved HCS CSSB 155(L&C) Out of Committee
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
             HB 136-MOTOR VEHICLE DEALER FRANCHISES                                                                         
4:50:01 PM                                                                                                                    
VICE CHAIR WOOL announced that  the final order of business would                                                               
be  HOUSE  BILL  NO.  136,  "An Act  relating  to  motor  vehicle                                                               
franchises, motor vehicle transactions, motor vehicle dealers,                                                                  
motor vehicle manufacturers, and motor vehicle distributors."                                                                   
4:50:27 PM                                                                                                                    
REPRESENTATIVE MATT  CLAMAN, Alaska State  Legislation, presented                                                               
HB 136  as prime sponsor.   He paraphrased the  sponsor statement                                                               
to the  CS to HB 136,  Version R, [included on  committee packet}                                                               
which reads as follows [original punctuation provided]:                                                                         
     House  Bill 136  updates Alaska  statutes dealing  with                                                                    
     franchise agreements between  Alaska's auto-dealers and                                                                    
     the  automobile  manufacturers  and  distributors.  The                                                                    
     need  for  a  change  in  franchise  agreements  became                                                                    
     apparent  after  the  2008 market  crash  when  General                                                                    
     Motors   and   Chrysler    terminated   roughly   2,000                                                                    
     dealerships.  As of  2016, Alaska  dealerships directly                                                                    
     or indirectly employed 6,876 people.  In the same year,                                                                    
     car sales accounted for 14.1%  of total retail sales in                                                                    
     Alaska. House Bill 136  recognizes the contributions of                                                                    
     auto-dealers and manufacturers  to Alaska's economy and                                                                    
     updates Alaska statute to update protections for both.                                                                     
     The work draft   CS HB 136  Version R - is a product of                                                                    
     extensive  negotiations between  the Alaska  Automobile                                                                    
     Dealers  Association  and  the Alliance  of  Automobile                                                                    
     Manufacturers.  Both  groups  have worked  together  to                                                                    
     find solutions  that protect the consumer,  protect the                                                                    
     investments of Alaska's  auto-dealers, and maintain the                                                                    
     brands of the manufacturers.                                                                                               
     House Bill  136 updates  statutes relating  to warranty                                                                    
     repair  work,  requiring  a   manufacture  to  pay  for                                                                    
     warranty work at a competitive  rate that is consistent                                                                    
     with  the retail  rate for  non-warranty work.  It also                                                                    
     outlines  the  requirements  for warranty  repairs  for                                                                    
     consumers  who  are  100  miles or  more  away  from  a                                                                    
     dealership.   The   bill    expands   upon   dealership                                                                    
     terminations. It  sets out good cause  for terminations                                                                    
     and  sets  out   the  manufacturers  and  auto-dealers'                                                                    
     financial  responsibilities  during  terminations.  The                                                                    
     bill  also   updates  the  provisions  and   terms  for                                                                    
     transferring or selling  a dealership. Manufactures may                                                                    
     not unreasonably  prevent the transfer of  a dealership                                                                    
     to  someone who  meets  their standards.  Manufacturers                                                                    
     may  use   the  right   of  first  refusal   except  in                                                                    
     circumstances  involving the  transfer of  a dealership                                                                    
     to  family members  or managing  employees owning  more                                                                    
     than 15%  of the  dealership. Lastly, the  bill defines                                                                    
     certain unfair practices.                                                                                                  
     House  Bill  136  brings   the  auto  dealer  franchise                                                                    
     agreements in-line  with similar laws in  other states.                                                                    
     It is  the intent  that with  this legislation,  we may                                                                    
     provide  support  for  an industry  that  services  and                                                                    
     employs thousands of Alaskans.                                                                                             
4:52:41 PM                                                                                                                    
REPRESENTATIVE CLAMAN addressed the sectional analysis, which                                                                   
reads as follows:                                                                                                               
     Section 1                                                                                                                  
     Adds legislative intent language to uncodified law:                                                                        
     It is in  the public interest to  protect have warranty                                                                    
     service  for  new  motor  vehicles  and  maintain  fair                                                                    
     competition among auto manufacturers and auto dealers.                                                                     
     Section 2                                                                                                                  
     Amends AS 45.25.010:                                                                                                       
     Applicability:  AS   45.25.020  -045.25.310   apply  to                                                                    
     franchise agreements  between manufacturers  and Alaska                                                                    
     auto dealers.                                                                                                              
     Section 3                                                                                                                  
     Amends AS 45.25.110(a):                                                                                                    
     Manufacturers may  not terminate an auto  dealer unless                                                                    
     they have  complied with notice requirements  and shown                                                                    
     good  cause for  termination. Auto  dealers have  up to                                                                    
     120 days  to correct areas  out of compliance  with the                                                                    
     franchise agreement. The manufacturer may terminate a                                                                      
     franchise  if the  dealer has  systemically engaged  in                                                                    
     Section 4                                                                                                                  
     Adds new subsection to AS 45.25.110:                                                                                       
     Good cause  to terminate  a franchise does  not include                                                                    
     the failure of an auto  dealer to meet sales or service                                                                    
     goals due to  factors beyond the control  of the dealer                                                                    
     including market  conditions or insufficient  supply of                                                                    
     new motor vehicles.                                                                                                        
     Section 5                                                                                                                  
     Amends AS 45.25.140(a):                                                                                                    
     Updates   and  amends   the  manufacturers   repurchase                                                                    
     requirements   upon   termination    of   a   franchise                                                                    
     agreement.  The  manufacturer must  repurchase  current                                                                    
     year models  of new  motor vehicles, certain  new motor                                                                    
     vehicle models  from the  prior year,  parts, trademark                                                                    
     signs   and   equipment,   special   tools,   computer,                                                                    
     printers, and electronic hardware.                                                                                         
     Section 6                                                                                                                  
     Amends AS 45.25.150(b)                                                                                                     
     If a  franchise termination  occurs, auto  dealers have                                                                    
     an  obligation to  mitigate damages  under a  lease and                                                                    
     mitigate   the    costs   of    facility   relocations,                                                                    
     alterations or remodels.                                                                                                   
     Section 7                                                                                                                  
     Adds new subsection to AS 45.25.150:                                                                                       
     If a  franchise termination occurs,  manufacturers must                                                                    
     pay the  costs of relocation, alteration  or remodeling                                                                    
     of an auto dealers facilities  if they were required by                                                                    
     the manufacturer and were  completed within three years                                                                    
     of termination.                                                                                                            
     Section 8                                                                                                                  
     Repeals and reenacts AS 45.25.160:                                                                                         
     This section  establishes a procedure for  the proposed                                                                    
     transfer of a dealership.                                                                                                  
        • Manufacturers may not prevent the sale of a                                                                           
          franchise to  a potential buyer who  is capable of                                                                    
          being  licensed as  an auto  dealer and  who meets                                                                    
          the manufacturers' standards.                                                                                         
        • Upon receipt of the notice to transfer the                                                                            
          franchise, manufacturers  have 30 days  to request                                                                    
          supplemental    information   after    which   the                                                                    
          manufacturer  has  75  days   to  give  notice  of                                                                    
          rejection of the transfer.                                                                                            
        • The manufacturer has the right of first refusal                                                                       
          to a  transfer with limitations.  The manufacturer                                                                    
          has the same notice  requirements for the right of                                                                    
          first  refusal  as  they have  for  rejecting  the                                                                    
          transfer   outright.   A  manufacturer   may   not                                                                    
          exercise  the  right  of   first  refusal  if  the                                                                    
          transfer of  the franchise is  to a  family member                                                                    
          or  a managerial  employee owning  15% or  more of                                                                    
          the  dealership. If  a manufacturer  exercises the                                                                    
          right  of  first  refusal, then  the  manufacturer                                                                    
          must  provide  the  auto   dealer  with  the  same                                                                    
          compensation  as offered  by  the proposed  buyer.                                                                    
          The  manufacturers must  also pay  the legal  fees                                                                    
          incurred for the preparation  of the void transfer                                                                    
     Section 9                                                                                                                  
     Amends AS 45.25.180(d)                                                                                                     
     Expands  the  factors  that  the  superior  court  must                                                                    
     consider  in a  lawsuit addressing  whether good  cause                                                                    
     exists to establish or relocate a dealership.                                                                              
     Section 10                                                                                                                 
     Adds new subsection to AS 45.25.180                                                                                        
     Establishes  the   burden  of  proof  in   a  franchise                                                                    
     lawsuit.  A manufacturer  has the  burden  of proof  to                                                                    
     establish good  cause for establishing or  relocating a                                                                    
     dealership that the manufacturer  has proposed. An auto                                                                    
     dealer must establish good  cause for any establishment                                                                    
     or relocation that the auto dealer proposes.                                                                               
     Section 11                                                                                                                 
     Amends AS 45.25.190                                                                                                        
     This section  updates the  statutory references  in the                                                                    
     arbitration section.                                                                                                       
     Section 12                                                                                                                 
     Adds new sections to article 2 of AS 45.25                                                                                 
     This section addresses warranty  work and pay rates for                                                                    
     warranty work:                                                                                                             
          Sec  45.25.200: A  manufacturer must  pay an  auto                                                                    
          dealer for  all warranty  work if the  auto dealer                                                                    
          provides  documentation   of  the  need   for  the                                                                    
          repairs.  The auto  dealer must  submit the  claim                                                                    
          within  90 days  of the  completed warranty  work,                                                                    
          and a  manufacturer must approve the  claim within                                                                    
          30 days  of receipt.  If the  manufacturer rejects                                                                    
          the  claim  they  must  provide  notice  of  their                                                                    
          reasons to  the auto dealers, who  may correct the                                                                    
          issues   within  30   days  of   receipt  of   the                                                                    
          rejection. A manufacturer may  conduct an audit of                                                                    
          warranty  repairs performed,  which  must be  done                                                                    
          within a year of the  claim. Only one audit can be                                                                    
          performed per year.                                                                                                   
          Sec  45.25.210: A  manufacturer must  provide auto                                                                    
          dealers  with  a   schedule  of  compensation  for                                                                    
          warranty work. The rates may  not be less than the                                                                    
          rates that  the auto dealer charges  customers for                                                                    
          similar  retail work.  To establish  this warranty                                                                    
          rate, auto  dealers shall submit  100 sequentially                                                                    
          ordered  claims.  Rates  for  special  events  and                                                                    
          manufacturer specials  are not considered  in this                                                                    
          Sec  45.25.220:   If  a  vehicle   needs  warranty                                                                    
          repairs and is located in a remote location, the                                                                      
          manufacturer  shall  make  reasonable  efforts  to                                                                    
          repair the vehicle in the  remote location. If the                                                                    
          repairs cannot  be made on site,  the manufacturer                                                                    
          may arrange, at no cost  to the owner, to ship the                                                                    
          vehicle  to  a  location   where  repairs  can  be                                                                    
          completed.  The  manufacturer is  responsible  for                                                                    
          returning  the  repaired  vehicle  to  the  remote                                                                    
          location.   The  manufacturer   may  direct   auto                                                                    
          dealers to refer customers  in remote locations to                                                                    
          the  manufacturer.  Auto dealers  may  subcontract                                                                    
          warranty  work  in   a  remote  location.  'Remote                                                                    
          location'  refers  to  a   location  that  is  not                                                                    
          accessible by  road or is  100 road miles  or more                                                                    
          from an auto dealer.                                                                                                  
          Sec  45.25.230: Manufacturers  shall provide  auto                                                                    
          dealers   with  specific   instructions  for   the                                                                    
          preparation  of new  vehicles  before delivery  to                                                                    
          buyers, compensation for  the preparation, and the                                                                    
          amount of time allowed for preparation.                                                                               
     Section 13                                                                                                                 
     Repeals and reenacts AS 45.25.300                                                                                          
     Regarding unfair practices, manufacturers may not:                                                                         
        • Require or coerce auto dealers to relocate or                                                                         
          remodel  their  facilities   if  the  changes  are                                                                    
        • Require auto dealers to purchase a set number of                                                                      
          certified  pre-owned  vehicles   or  lease  return                                                                    
        • Refuse to deliver for sale a line or make of                                                                          
          vehicles that manufacturer makes.                                                                                     
        • Require auto dealers to purchase unreasonable                                                                         
          advertising displays or  an unreasonable number of                                                                    
        • Require auto dealers to accept vehicles, parts,                                                                       
          accessories or equipment  they did not voluntarily                                                                    
        • Increase the price of a vehicle ordered by the                                                                        
          auto dealer between the time of order and the                                                                         
          time of payment.                                                                                                      
        • Require or coerce auto dealers to join an                                                                             
          advertising association or contribute to an                                                                           
          advertising campaign.                                                                                                 
     Section 14                                                                                                                 
     Repeals and reenacts AS 45.25.990(19)                                                                                      
     Defines "terminate" for this chapter.                                                                                      
     Section 15                                                                                                                 
     Adds new paragraph to AS 45.25.990                                                                                         
     Defines 'schedule of compensation" and "warranty work"                                                                     
     for this chapter.                                                                                                          
     Section 16                                                                                                                 
     Repeals AS 45.25.320                                                                                                       
4:58:33 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON asked  whether the  bill represents  an                                                               
agreement between the two sides.                                                                                                
REPRESENTATIVE CLAMAN  said the  dealers would present  what they                                                               
like about the  proposed bill and the manufacturers  would do the                                                               
4:59:46 PM                                                                                                                    
GARY SLEEPER, Attorney, testified in support  of HB 136.  He said                                                               
the automobile  manufacturers present  franchise agreements  on a                                                               
"take  it or  leave it"  basis.   He  mentioned requirements  for                                                               
remodeling dealership  premises, payment for warranty  repairs on                                                               
manufacturing defects at  70 percent or less,  or termination due                                                               
to a failure  to meet sales goals.  He  explained that in Alaska,                                                               
the law governing  automobile franchises was adopted  in 2002 and                                                               
has not been updated.  He  highlighted Section 12 of the proposed                                                               
bill,  which  provides  for  manufactures  to  pay  for  warranty                                                               
repairs at  the same rate as  paid by consumers for  similar non-                                                               
warranty work.                                                                                                                  
5:07:51 PM                                                                                                                    
MR. SLEEPER  shared his appreciation for  Representative Claman's                                                               
work on the proposed bill.                                                                                                      
5:09:08 PM                                                                                                                    
VICE CHAIR WOOL opened public testimony on HB 136.                                                                              
VICE CHAIR WOOL held over HB 136.                                                                                               

Document Name Date/Time Subjects
SB108 Power Point vsn I 3-29-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
SB108 Supporting Document Flow Chart 2016.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
SSSB108 Version U 1-18-18.PDF HL&C 4/2/2018 3:15:00 PM
SB 108
SB108 Supporting Document Backlog Stats DCCED 2-13-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
CSSSSB108(FIN) Explanation of Changes 3-14-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
CSSSSB108(FIN) Fiscal Note DCCED 3-14-18.PDF HL&C 4/2/2018 3:15:00 PM
SB 108
CSSSSB108(FIN) Sectional Analysis 3-14-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
CSSSSB108(FIN) vsn I 3-14-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
CSSSSB108(FIN) Sponsor Statement 3-13-18.pdf HL&C 4/2/2018 3:15:00 PM
SB 108
CSHB136 Ver. R 3.23.18.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
HB136 Additional Documents-AADA Provisions and List of Alaska Businesses 3.6.17.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
HB136 Additional Documents-AADA Why Franchise Laws 3.6.2017.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
HB136 Additional Documents-NADA Alaska 2016 Annual Contribution 3.23.18.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
CSHB136 Sectional Analysis 03.23.18.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
HB136 Fiscal Note LAW-CIV 3.10.17.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
SB155 Supporting Document - AMC Registry Fees - Lexology Article.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
CSHB136 Sponsor Statement 3.23.18.pdf HL&C 4/2/2018 3:15:00 PM
HB 136
SB155 Supporting Documents - State AMC Bond Requirements.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Version O.PDF HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Suuporting Document - AMC Framework - Lexology Article.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Version R.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 DCCED AMC Extension Request.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Explanation of Changes V.A to V.O.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Fical Note DCCED-CBPL 3.5.18.PDF HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Sectional Summary CSSB 155 (FIN).pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Sponsor Statement V.O.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Support Letters 3.31.18.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Amendment R.2.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Amendment R.3.pdf HL&C 4/2/2018 3:15:00 PM
SB 155
SB155 Amendment R.1.pdf HL&C 4/2/2018 3:15:00 PM
SB 155