Legislature(2003 - 2004)
05/16/2003 08:00 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 272-MOTOR VEHICLE DEALERS Number 0010 CHAIR WEYHRAUCH announced that the committee would return attention to HOUSE BILL NO. 272, "An Act relating to motor vehicle dealers." [Although an objection to moving proposed committee substitute (CS), Version 23-LS0975\H, Bannister, 5/14/03, before the committee was still pending from the Thursday, May 15, 2003 House State Affairs Standing Committee meeting, Version H was treated as before the committee.] CHAIR WEYHRAUCH announced that public testimony was closed. Number 0220 LINDA SYLVESTER, Staff to Representative Bruce Weyhrauch, Alaska State Legislature, noted that every state in the country takes special care to articulate in statute the relationships between [car] manufacturers, [car] dealers, and consumers. Last year, she said, Alaska, after four years of consideration, passed a 25-page omnibus motor vehicle dealer bill. She reminded the committee that [in previous days' hearings] it had heard testimony on the consumer protection statutes regarding brokers of motor vehicles from 1993. Number 0333 MS. SYLVESTER said that the government is concerned, because a vehicle is the second-most expensive purchase a person in the U.S. will make. Another reason that the government is "very interested," she indicated, is: "The franchise agreements that a manufacturer has with their chosen agents of their product are unilateral agreements and, as such, the franchises are in a very precarious situation, dealing with the manufacturers." MS. SYLVESTER said that HB 182, which passed out of the House Labor and Commerce Standing Committee [during the Twenty-Second Alaska State Legislature], has "oddball things" such as where a manufacturer can establish "a new dealership - a new franchised dealer." She explained that that's a protection for the franchised dealer. She said, "This legislature has taken a lot of interest in establishing whether that range should be 14 miles, 20 miles, 30 miles, a city, or what." The legislature finally decided on a 14-mile range, which she explained means that, by statute - not through a manufacturer's franchise agreement - manufacturers may not establish a new dealership [within 14 miles of] an existing franchise. MS. SYLVESTER clarified that what is being discussed is new vehicles, not used. She said that HB 272 defines what is a new versus a used vehicle. She noted that some previous testimony stated that what makes a used vehicle is when the manufacturer's certificate of origin is converted into a title. Different states consider that, she said; however, Alaska doesn't. Alaska, she said, "talks about a current model year." A current model year is "kind of a squishy term," Ms. Sylvester said, because "that could be 14 or 15 months, depending." She added, "So we've taken care to establish what a used vehicle is." MS. SYLVESTER said that a consumer doesn't expect all of the perks and "neat treats" that come with a new vehicle to come with a used vehicle. She said that everyone has heard of the problems that used vehicles have, and she said, "And that's where the consumer protection angle comes in." She continued as follows: So what we're talking about here is whether or not a broker of used vehicles is allowed to sell a new vehicle. It's not [that] we contest a vehicle that has just simply had a title conversion with 20 miles. What we're saying is that it's the current model year, with some caveats. ... AS 45.25.180 establishes these guidelines for relevant market areas for the new vehicles and used vehicles. ... The manufacturer gives his dealer a ... relevant market range. ... Whether we're talking about Canadian vehicles, [or] vehicles that are being illicitly unloaded by a dealer in another state and given to a broker in Alaska at a reduced cost - what happens is, there's a loophole that's been established, where the ... new cars have been converted, and they come in under the wire that Alaska statute has established and that supports the manufacturers' ... agreement[s] with it's franchises. The issue is: Currently, the Canadian market vehicles or these gray-market vehicles are what's happening now; but what we're talking about is an illicit transaction. And it violates not only the franchise agreement, it violates the spirit of our statutes. And it's a clarification that we need to make. And that is the issue. It's not [North American Free Trade Agreement] (NAFTA) - it's not restraint of trade. We're expanding the trade potential that's available for used car dealers and brokers. But we're also clarifying what a new vehicle is. You've heard testimony ... that should be compelling and convincing, that a vehicle, however it gets to Alaska, if it's got 20 miles on it, it's not a ... used vehicle, it's a new vehicle. And it's a slight of hand. And if it's not illegal in Canada, then that ... it just simply doesn't relate here. The vehicle was acquired through some kind of fraud. Otherwise, the dealers would turn these vehicles right over to the car brokerage or the auction (indisc.) in Washington State. They don't do that. It was illicit, it's unethical, and it doesn't change the fact that it's unethical when they're being sold in the states underneath the wire and ... contrary to the spirit of our statutes. Number 0801 REPRESENTATIVE GRUENBERG said he is looking at AS 45.25.180. He said that it seems to him that it involves new motor vehicle dealers alone. He asked Ms. Sylvester if that is correct. MS. SYLVESTER concurred. She confirmed that that statute addresses current-year vehicles, not used vehicles. She said, "These are new vehicles, and these are the impediments that franchised dealers are required to adhere to." She continued as follows: This is relevant, because ... in close proximity to the franchised dealers, you have a car brokerage that ... is selling new vehicles acquired through illicit means. So, ... if you, Representative Gruenberg, ... wanted to set up a franchise - if you wanted ... do a Ford dealership, you would not be able to. If you wanted to acquire the Ford product through illicit means through Canada, you would be able to, because our statute has a loophole that we're seeking to close. And again, it doesn't' matter if the vehicles come from Canada or if they come from some other illicit source, the fact is, they don't come from the manufacturer directly to the franchise of the new vehicles. Number 0930 REPRESENTATIVE GRUENBERG noted that AS 08.66.015 refers not only to new vehicles, but also current model motor vehicle. He said, "Had they intended to include current model motor vehicle in AS 45.25.180, they would have clearly stated that, wouldn't they?" He clarified that he was suggesting that it was a definite legislative determination not to include current model motor vehicle in the new dealership statute. MS. SYLVESTER stated her belief that Mr. Sniffen, who drafted HB 182, would be the person to "answer that question." She added, "And I believe that both of these things stand on their own." Number 1046 REPRESENTATIVE LYNN referred to an advertisement [which is part of a 5-page handout in the committee packet, apparently provided by the Mendenhall Auto Center in Juneau, Alaska]. The advertisement was about vehicles priced to save the consumer money and "all with warranties." Representative Lynn stated his understanding that a warranty comes from the manufacturer and is built into the price of the [vehicle], while a service contract is something that consumers purchase on their own, sometimes to extend beyond a warranty. He asked if the warranties offered in the advertisement are paid for in addition to the price of the vehicles being sold, or if they are paid for by the dealer who advertised. Number 1135 MS. SYLVESTER stated her understanding that "those are not paid for independently." She referred to the Heritage [Administration Services, Inc., new vehicle limited warranty] form [included in the committee packet, attached to a six-page handout, the first page of which is from the State of Alaska Department of Law]. On the form, she noted, there is an option for deductibles. She said, "So you ... can have different versions of the deductibles." She deferred further comment to Mr. Lyberger, Mr. Allwine, or Mr. Sniffen. REPRESENTATIVE LYNN asked, if he were to buy one of the advertised automobiles, would he have the warranty/service contract as part of the deal, or would he have to buy it as an additional fee. MS. SYLVESTER responded, "These are things that Mr. Lyberger is providing." She stated her understanding that other brokerages that have the Canadian market vehicles where the manufacturer has not extended a warranty are not required to have warranties. Mr. Lyberger, she said, does [have the warranties] to compete within his market. In response to a follow-up question by Representative Lynn, she concurred that if he were to go down the block to buy the vehicle, it may not have that warranty. She offered the following clarification: When a vehicle comes into the country, is imported legally, when it's acquired illicitly from the franchise, turned over to the importer, and is imported legally into the United States, the importer must ... - and this is a federal requirement - ... place a bond on the vehicle ... to cover any recalls. And the registered importer tracks the vehicles that way. MS SYLVESTER stated that that's the only requirement. She said that the registered importer retains that responsibility of keeping the bond for any safety recall. Number 1270 REPRESENTATIVE LYNN asked if he could take the vehicle back to the new car dealer to get a [part on his] vehicle fixed if the manufacturer had a recall [on that part], for example. MS. SYLVESTER answered that the responsibility is with the registered importer, and she stated her belief that the Department of Transportation regulates that very carefully. The importer would contact Representative Lynn, for example, and arrange for the recall to be satisfied, she said. She added, "But ... that's the only requirement. They're not required to ... substitute service contracts in place of warranties. Warranties are something that the manufacturers do, because they believe in their vehicle." Number 1365 REPRESENTATIVE GRUENBERG referred to page 1, line 9, of Version H. He asked what the purpose was of eliminating the words "new or". Number 1430 CLYDE (ED) SNIFFEN, JR., Assistant Attorney General, Fair Business Practices Section, Civil Division (Anchorage), Department Of Law, in response to Representative Gruenberg's question, referred to the [proposed] changes to AS 08.66.015 as a whole, and noted that the current statute is set up into two [subsections] (a) and (b). It read as follows: Sec. 08.66.015. Sale of motor vehicle. (a) A person who does business as a dealer in the state may not offer to sell or sell a motor vehicle as a new or current model motor vehicle unless the motor vehicle retains the manufacturer's certificate of origin. (b) A person who does business as a dealer in the state may not offer to sell or sell a motor vehicle as a new or current model motor vehicle having a manufacturer's warranty unless (1) the dealer has a current sales and service agreement with the manufacturer and the agreement requires the dealer, upon demand of the motor vehicle buyer, to perform or arrange for, within a reasonable distance of the dealer's place of business in the state, the repair and replacement work required of the manufacturer under the warranty; or (2) the dealer offers to give the buyer a rebate to cover the repair and replacement work that the dealer cannot perform or arrange for within a reasonable distance of the dealer's place of business. MR. SNIFFEN noted that the proposed Version H would remove the "current model" language from [subsection] (a). The result would be that a motor vehicle with very low miles on it that does not have a certificate of origin cannot be sold as a new car, but would have to be sold as a used car. Furthermore, he noted, Version H would change the stipulations in [subsection] (b) for selling a current model motor vehicle. REPRESENTATIVE GRUENBERG stated that he does not question the change to subsection (a); however, regarding subsection (b), he asked what possible harm there could be to making the requirement concerning the manufacturer's warranty also apply to new vehicles. He said, "It seems to me to be under-inclusive, and it may conceivably deny some consumers of new vehicles the protection of subsection (b). He asked Mr. Sniffen if he would have a problem with keeping "new" vehicles in that subsection. Number 1572 MR. SNIFFEN responded that in his brief immediate review of Version H, he doesn't see a problem with that. He asked Representative Gruenberg to clarify that he meant he wants the warranty requirement left in for new cars, as well. REPRESENTATIVE GRUENBERG said yes. He explained that his next line of questioning was going to be to ask why the language on page 1, line 10, "[HAVING A MANUFACTURER'S WARRANTY UNLESS]", couldn't be left in, as well as the language on page 1, beginning on line 12, to page 2, line 1, which read as follows: [AND THE AGREEMENT REQUIRES THE DEALER, UPON DEMAND OF THE MOTOR VEHICLE BUYER, TO PERFORM OR ARRANGE FOR, WITHIN A REASONABLE DISTANCE OF THE DEALER'S PLACE OF BUSINESS IN THE STATE, THE REPAIR AND REPLACEMENT WORK REQUIRED OF THE MANUFACTURER UNDER THE WARRANTY]; [OR] REPRESENTATIVE GRUENBERG offered his understanding that that would provide a warranty protection; in addition to the warranty protections under the uniform commercial code, which apply to the manufacturer, it would also add - as a matter of state law - a dealer's warranty. He opined that that's an important additional protection to have the dealer's warranty, as well as the manufacturer's warranty. Number 1733 MR. SNIFFEN offered his understanding that the initial reason the new car dealers wanted to remove that language was to clean up the statute. He said, "I believe they didn't have that concern; if in fact the used car dealers weren't selling these current model motor vehicles, this becomes much less of a concern. Only in the event that they are allowed to continue those sales would that issue be a concern." He said that he doesn't have a problem leaving that language in there, if that's the will of the committee. Number 1773 REPRESENTATIVE GRUENBERG said he is beginning to understand the problems between "these two types of businesses," and he is not looking at the issue from either profession's point of view, but rather from the point of view of the Alaskan car buyer. Number 1810 REPRESENTATIVE CRAWFORD reiterated the question he had asked Mr. Allwine during the May 15, 2003 meeting, regarding whether the language covers "lease fleet vehicles," or if that language should be added to [paragraph] (3) [on page 2, lines 7-8, in Version H]. MR. SNIFFEN said he thinks Mr. Allwine was correct in that the language probably covers those transactions, but he added that he doesn't think it would hurt to clarify that in [paragraph] (3). In response to a question by Chair Weyhrauch, he suggested that perhaps the term "at the end of a lease term" could be added to [paragraph] (3). He said he would have to give it some thought to come up with the appropriate language. Number 1895 REPRESENTATIVE LYNN asked what is wrong with the language the way it is. Number 1925 MR. SNIFFEN opined that there is probably not much wrong with it the way it is; however, he commented that there is a "little gray area" on the lease issue, because all the exceptions [in Version H] deal with transactions that arguably could exclude, for example, a situation where a dealership may have leased a vehicle and the lease had expired. In that case, he explained, "they're technically not purchasing the vehicle back from the consumer, it's not a repossession, it's not in service with a rental fleet, [and] it hasn't been purchased from an auction, so that kind of transaction is sort of excluded from any of those exceptions." He suggested an exception to the effect that "if the vehicle is returned to the dealer at the end of a bona fide lease from the dealer", then that might cover that transaction if it's a concern. Number 1970 REPRESENTATIVE CRAWFORD said he thinks that some people turn their vehicles in without fulfilling the lease terms. He asked, "Does that language actually take care of it?" MR. SNIFFEN responded that he is trying to think as fast as he can and he is not sure. He proffered, "If you have a bona fide lease with a dealer and the vehicle comes back to the dealer, I'm trying to determine if there's some way that a Canadian vehicle would be leased from the dealer in this way." He explained that that's why he's having trouble deciding if that language is really necessary. He revealed that he does not know of many transactions where the current model Canadian vehicles coming back from a consumer under a lease are really going to be a problem. If they are, he added, it would require, essentially, that a dealer be in possession of one of these Canadian vehicles, which, theoretically, they shouldn't be; so, they wouldn't be in a position to lease these vehicles. However, he gave an example where a consumer leases a vehicle in Canada, or from another dealer who "had one of these vehicles," and the lease term expires. He said it would just go back the dealer who actually leased the vehicle. He said, "And if you want to include those transactions in the types of transactions that we want to allow under this statute, it might bear specific attention." Number 2055 REPRESENTATIVE CRAWFORD said that he is not familiar with leases, but knows that he would like for legitimate lease vehicles to be covered in the bill. He added that his concern is not so much whether the vehicles are Canadian or for sale in the U.S., but that he wants to ensure that [the legislature] isn't leaving legitimate business out of the list of exceptions. Number 2104 REPRESENTATIVE GRUENBERG offered an example whereby a motor vehicle dealer leases a three-year leased vehicle to "Joe Consumer," and the vehicle is turned back, or it's at the end of the lease term. At that point, he noted, that vehicle would not be for sale, unless the owner of the vehicle, who would probably be the dealer, wanted to sell it. He asked for confirmation that the purchaser who had been the lessee doesn't have any right to sell it, because he's just renting it. MR. SNIFFEN answered that he thinks that's correct. In any event, he added, that type of transaction wouldn't fall under the language of [AS 09.66.015], because it would no longer be a new or current model motor vehicle. REPRESENTATIVE GRUENBERG suggested that if it was a new vehicle that was leased and it was turned back within a couple of months, it would still be a current year model vehicle. But the lessee, he reiterated, would not have any right to sell it, because he/she doesn't own the vehicle. MR. SNIFFEN confirmed that that is correct. Number 2233 REPRESENTATIVE GRUENBERG stated that he is going to offer an amendment as follows: on page 1, line 9, add back in the words "new or"; on page 1, line 12, to page 2, line 1, add back the language "and the agreement requires the dealer, upon demand of the motor vehicle buyer, to perform or arrange for, within a reasonable distance of the dealer's place of business in the state, the repair and replacement work required of the manufacturer under the warranty; or". REPRESENTATIVE GRUENBERG indicated that he didn't want to formally offer the amendment until he had talked to Mr. Sniffen. Number 2316 REPRESENTATIVE GRUENBERG turned attention to Amendment 1, which read as follows: Page 2, lines 2 - 3: Delete "received as a trade-in" Insert "manufactured for sale in the United States and acquired by the dealer" Page 2, line 6: Delete ";" Insert "; or" Page 2, lines 7 - 10: Delete all material and insert: "(3) the vehicle is a current model used vehicle not manufactured for sale in the United States, the dealer acquired the vehicle in the normal course of business, and the dealer complies with AS 45.25.470." Page 5, following line 19: Insert a new bill section to read: "* Sec. 5. AS 45.25.470 is amended to read: Sec. 45.25.470. Sales of vehicles manufactured for sale in a foreign country. Before sale of [,] a motor vehicle not manufactured for sale in the United States, a motor vehicle dealer shall disclose to the consumer in writing, in addition to any other disclosures required for the sale of a used [WHETHER A MOTOR] vehicle, [WAS ORIGINALLY MANUFACTURED FOR SALE IN CANADA OR ANOTHER FOREIGN COUNTRY] (1) that the vehicle was originally manufactured for sale in Canada or another specified foreign country; (2) if applicable, that the vehicle was originally sold new in the specified foreign country identified under (1) of this section and imported into the United States; (3) that the vehicle's odometer was converted from kilometers to miles, and shall provide the consumer with a legal vehicle title, an odometer verification certificate, or another document that verifies the mileage reading after the conversion; (4) if applicable, that the vehicle does not have a manufacturer's warranty; and (5) any other information required by regulations adopted by the attorney general." Renumber the following bill sections accordingly. REPRESENTATIVE GRUENBERG noted that if Amendment 1 is not adopted, then the language on page 2, lines 7-10, of Version H, would not be deleted. The language read as follows: (3) the vehicle has been purchased directly from a consumer in the United States for purposes of resale; (4) the vehicle has been in service with a bona fide rental fleet for at least five months; REPRESENTATIVE GRUENBERG said that the term "five months" may be hard on people in Fairbanks and the north part of the state, because the rental season there is less than five months long. He commented that there have been suggestions to [change the language in the bill] to "three months" or "four months", so that the vehicle could be sold after one rental season. He said he would probably leave Amendment 1 for Representative Holm to offer, or at least for him to be present, because he represents Fairbanks. Number 2390 REPRESENTATIVE GRUENBERG began discussion of what later was labeled Amendment 5, which read as follows [original punctuation provided]: Page 2, lines 27-28: Delete "represent that a savings occurs at a lower [HAVE OCCURRED AT THAT] price." Insert "represent that a buyer would save money by paying a [HAVE OCCURRED AT THAT] price that is lower than the "manufacturer's suggested retail price," "MSRP," or "list price"." REPRESENTATIVE GRUENBERG referred to page 2, lines [24-28 of Version H], which read as follows: (3) whenever using the term "manufacturer's suggested retail price," "MSRP," or "list price," the dealer [SHALL PROVIDE IN THE ADVERTISEMENT A CLEAR AND CONSPICUOUS DISCLOSURE THAT STATES THAT A SALE] may not represent that a savings occurs at a lower [HAVE OCCURRED AT THAT] price. REPRESENTATIVE GRUENBERG offered his understanding that the problem that [paragraph] (3), on page 2, lines 24-28, is designed to cure is the fact that very few vehicles are actually sold at manufacturer's suggested retail price (MSRP), but generally are sold at a lower price, and customers don't know that. He asked if "that whole part of the bill" was designed to require dealers to let customers know that usually vehicles are sold at lower prices. Number 2448 MR. SNIFFEN answered, "In part, yes." He said there has been a practice in the past where dealers will run advertisements comparing prices to MSRP, or other prices. He said a new auto dealer Act was structured under AS 45.25 to prohibit price comparison advertisement, except with MSRP prices, which he said are such nationally known numbers that often are seen on television. He said that a price [on a vehicle] that is lower than the MSRP gives the impression to consumers that they are receiving some kind of a savings, when in fact the vehicle may have never been sold at the MSRP price, but may have been higher or lower. He said, "We had put that section in here, Representative Gruenberg, to make it clear to consumers that when they see those kinds of advertisements, ... they may not actually be saving money." REPRESENTATIVE GRUENBERG stated that although it seemed to him that the purpose of the amendment in [Version H] was to clarify the language, he thought that Amendment  would make it even clearer. He asked Mr. Sniffen if he agreed. Number 2600 CHAIR WEYHRAUCH questioned Mr. Sniffen to find out which amendments he had received by facsimile. CHAIR WEYHRAUCH mentioned issues that had been raised by Mr. Coffey at a previous hearing on HB 272. He asked if Mr. Sniffen had any comments in that regard. Number 2627 MR. SNIFFEN prefaced his comments by opining that Mr. Coffey is an excellent lawyer who is representing the interests of Mr. Lyberger well. Notwithstanding that, he stated that he thinks a lot of the concerns that Mr. Coffey has are "just not substantiated." He continued as follows: The "takings issue" is really nothing that I think has any merit to it for ... one simple reason: We have a law that's been in place since 1993, that already prohibits the conduct that's currently going on, and Mr. Lyberger, for example, opened his shop after that law was in place and knew of the law when he engaged in his business. I don't think a "taking claim" would survive very long, under those facts. He also mentioned some concerns with NAFTA, and I am by no means a NAFTA expert. And I have looked through the provisions of NAFTA, and I find it curious that no one - Ms. Urban, Mr. Coffey, no one - has pointed to any specific provision of that agreement that this legislation could possibly violate. I haven't seen a citation to, you know, Chapter 3, Section 1.65, that says the legislature in the state shall not do this. And no one's been able to point me to any of those provisions, so I'm skeptical that there are any NAFTA concerns at all. The provision I looked at in NAFTA didn't seem to indicated that there was a problem. And, if there was a problem, it's a problem that already exists under our current law. So, nothing that HB 272 does could possibly be any worse than what we currently have. So, these NAFTA concerns and these competition concerns, and our trust concerns are really irrelevant, because if there are concerns, then we already have them, and this bill isn't going to change that. If anything, this bill relaxes those concerns to the extent that it carves out these exceptions now that everyone can use to transact in certain types of vehicles. So, in that sense this is a pro-competitive piece of legislation, because it's opening up the markets for new and used car dealers to sell certain kinds of cars that are already prohibited from being sold. So, I don't have the concerns for NAFTA, or the anti- trust concerns, or these "taking concerns" that I've heard raised. Our supreme court might disagree with me down the road on that, but our review of these issues just doesn't warrant that kind of concern. Number 2764 REPRESENTATIVE SEATON stated that he has some concerns regarding NAFTA. He said the entire idea of NAFTA, whether "we" agree with it or not, was to open trade between "the countries." When [the legislature] says it's going to restrict that trade to certain individuals, he said he thinks there are possibilities of problems. He added, "And definitely it seems to be a restriction in the philosophy of where the country has gone and is continuing to go since we've given the president the authority to negotiate on ... other free trade agreements." He said that he doesn't know that there are any particular provisions of NAFTA that are being considered for change; however, he commented that, basically, what is being discussed is a restriction of sales between Canada and the U.S., by saying that the trade between the U.S. and Canada could only be through certain individuals for a certain period of time each year. He concluded that that's his concern with the interaction with NAFTA. Number 2830 MS. SYLVESTER proffered that NAFTA is irrelevant for the following reason: The methods through which a broker can acquire a used vehicle are itemized. Excluded are new vehicles illicitly acquired from a manufacturer. She indicated that, for example, a franchised dealer in California or Washington State who has a deal with a broker and is selling "these new vehicles" to the broker at a cut rate would be excluded as well, because "it's not acquired in these same ways." Currently, she said, there's a market condition based on the favorable exchange rate, coupled with recent changes and modifications, that made it much cheaper for Canadian market vehicles to be converted "to American standards." She added, "There's no guarantee that's going to stay." She explained that that just happens to be the current popular source of the illicit vehicles that are required outside of the manufacturer's franchise agreement with the dealers. She added, "And that's something that Alaska law, and every ... state in the U.S. supports." She concluded, "In no way are we saying that NAFTA is intended to protect illicit trade." REPRESENTATIVE SEATON stated the following: I am quite opposed to the characterization of this, because these vehicles are legally imported into the U.S. by registered importers that are ... certified by the Department of Transportation. So, you are going back and presuming a method of something that's happening in Canada before the vehicles are legally imported into the U.S. And so, to say that these are [fraudulent] or illegal actions is totally incorrect, because everything that is happening in the U.S. -- now it may be in violation, possibly, between some manufacturer and their own personal agreements with people they sell their cars to; however they're continuing to sell those cars to those people. We had testimony yesterday from the importers that said that these were fleet sales that are done legally. I haven't seen anything other than just postulations that college students are buying this. We haven't seen anybody refute that these fleet deals that give extreme discounts and then are imported - that those are illegal in our country. So, I get disturbed when we say that these are illegal, when we have legal importers that are licensed and that are bringing these in, and that people can buy them -- unless we want to make them illegal. But of course, under Alaska law, it's illegal for the franchised dealers to buy them, as well; it's illegal for anybody right now. TAPE 03-68, SIDE B Number 2985 MR. SNIFFEN concurred that the importation process itself perhaps is legitimate, legal, and in accordance with federal and state requirements. He noted that the idea of a registered importer sounds more grandiose than it actually is. He said it is probably easier to become a registered importer than to become a car dealer in Alaska. He added, "You fill out an application and you post a bond." He noted that there's no training or text, for example, and no other requirement other than perhaps a background check. He continued as follows: And it would be curious to get a national highway traffic safety administration person familiar with the import issues to testify before this committee, and I would suspect you would find that there is a tremendous amount of import fraud that takes place. And I'm not sure that just saying, "Well, these are legally imported, ... direct to some of these consumer concerns" -- although I cannot deny that there's a lot of truth to that: that the conduct that perhaps is illicit is something that's occurring outside of Alaska and Canada. And you know, perhaps that's conduct that we should be concerned with. Number 2900 MR. SNIFFEN referred to the previous testimony of "Ms. Urban" [on May 15, 2003] that there are 210,000 Canadian vehicles legally imported. He said he would be curious to find out how many of those were current-model vehicles with less than 150 miles on them, for example. He said he bets a majority of those vehicles with less than 150 miles on them have come into possession of the importers in some "interesting ways." He added, "And I'm not going to say illegal, or even illicit; it's just [that] we've heard testimony from other folks about that, and we haven't done an investigation in our office to verify any of those things, so we can't speak with any authority on it - only what we've heard." CHAIR WEYHRAUCH returned the committee's attention to a portion of Representative Gruenberg's possible amendment, to leave the words "new or" on page 1, line 9. MR. SNIFFEN said he doesn't know if that would violate some of the intent that the new car dealers "were thinking of by removing that language," but he said he can't see any problem with that [amendment, if proposed]. Number 2843 REPRESENTATIVE SEATON said he wasn't sure why "or current model" is in there. He offered his understanding that the desire is to prevent someone from offering to sell a motor vehicle as new [if it isn't]. Number 2831 REPRESENTATIVE GRUENBERG returned attention to Amendment . He referred to the added language in Version H on page 2, line 27, which read, "represent that a savings occurs at a lower". He clarified that with Amendment , [page 2], lines 27-28 of Version H would read as follows [punctuation as stated]: may not represent that a buyer would save money by paying a price that is lower than the "manufacturer's suggested retail price", "MSRP," or "list price". REPRESENTATIVE GRUENBERG suggested the foregoing is more clearly written and asked Mr. Sniffen his opinion. MR. SNIFFEN answered that he believes it sounds fine. Number 2728 REPRESENTATIVE GRUENBERG asked why Section 3 is in the bill. He said the current [statutory] language looks good to him and covers both new and used vehicles as well as related goods or services. It is a much broader protection. MR. SNIFFEN replied: We had modified that section because I don't know that anyone could come up with a really good definition for "related goods". And the intention of this section was to make sure dealers weren't advertising for a whole bunch of cars when, in fact, they only had one at that price. You might have seen advertisements in the past that would lead a consumer to suggest, "Hey, Cal Worthington has 55 Ford Explorers at this price." And you would go down there and they'd say, "Oh, no, that was ... one car at ... this particular configuration, and we don't have that one anymore; it sold a week ago. But, hey, we have these other 45 Explorers that are kind of the same." Number 2663 REPRESENTATIVE GRUENBERG said Mr. Sniffen had convinced him to limit it to the vehicles themselves. He asked whether his feeling is that these used vehicles are a little different from each other and hence this should be limited to new vehicles. MR. SNIFFEN answered in the affirmative. He added that used vehicles, by their nature, are unique; having an expected quantity of specific used vehicles didn't make any sense. Number 2632 REPRESENTATIVE GRUENBERG turned attention to Section 4, [paragraph (1)], found on page 3, lines 7-13, of Version H. Noting that the current [statutory] language appears to require advertisements to include "taxes and everything else," he offered his understanding that the proposed legislation would eliminate this requirement because it is "too variable." MR. SNIFFEN cited variability and that the language is very confusing. He offered his belief that the new language accomplishes exactly the same thing but is much easier to read. REPRESENTATIVE GRUENBERG said he didn't have a problem with that. Continuing with Section 4, he drew attention to [paragraph (10)], found on page 4, lines 21-23, of Version H. He said he gathers that it isn't really a problem, "people passing things off as being offered by a private party." He added that he doesn't know what a "motor vehicle agent" is. MR. SNIFFEN explained that the language is being excluded from current law because "we didn't really know that it added anything to the revised version." He added that the intent is, if a vehicle is to be offered for sale or lease, "you have to include ... your name if you are a dealer." Number 2535 REPRESENTATIVE GRUENBERG responded that he didn't have a problem with that. He then surmised that the reason for eliminating [paragraph (11)] on page 4, lines 25-29, of Version H is that sometimes sales are extended longer than was originally thought. MR. SNIFFEN affirmed that and explained: We found that there were some promotional deals offered by manufacturers to dealers that did not really have an ending date; they would be very open- ended. So if the end of the month came along and you had an advertisement that said, "Hey, come in until March 30th to take advantage of this deal," and then the manufacturer called you up and said, "Well, we're extending this promotion for another 15 days," you as a dealer wouldn't be able to participate in that extended promotion because you've already advertised and you had to do it within a certain timeframe. Number 2501 REPRESENTATIVE GRUENBERG turned attention to [paragraph (12), beginning on page 4, line 30, of Version H]. He asked why the current [statutory] language isn't being retained, since it seems to protect consumers against unscrupulous people who would require the purchase of not only the vehicle, but also features that are added at the dealership. MR. SNIFFEN answered: We couldn't come up with a good situation that actually was occurring in the normal practice of selling cars where a buyer wouldn't know what was on a vehicle when they went into a car dealer to purchase it. And the example that I like to use is that block heaters in Alaska, which are very common, if a customer came into a dealership and said, "I want this car, but I see you've installed a block heater, and that's not something that was installed by the factory, I want you to take it off," it would require the dealer to take that off. Sometimes these cars come in and dealers will put accessories on them - sometimes spoilers or mud flaps or little things - and this language required dealers to actually go in and disassemble those things if they weren't installed by the factory. And there are some things that come, actually, with the vehicles, that the factory asked the dealer[s] to install themselves. And there was an argument to be made that if it didn't come off the barge with [these] things ... on there from the factory, that ... if a consumer wanted to force the issue, they could make you take those things off before they took delivery of the vehicle -- and it wouldn't make the car any cheaper; it would just mean that these things would have to come off. And we didn't see any practical application for that in the normal transaction between a dealer ... and a consumer. REPRESENTATIVE GRUENBERG surmised that it wasn't as much of a problem as it might appear to be to a layperson like himself. He said he was willing to bow to Mr. Sniffen on that issue. He announced that this completed his questions on Section 4. Number 2374 REPRESENTATIVE GRUENBERG turned attention to Section 5. Referring to existing language on page 5, lines 24-25, he asked why this is limited to the sale of new motor vehicles. He suggested striking "new" and providing this protection for the sale of all motor vehicles. MR. SNIFFEN answered that this relates to when a new motor vehicle comes in off a barge with some damage that is repaired by the dealer and hence the consumer doesn't know that the vehicle wouldn't be in new condition without this repair. Number 2377 REPRESENTATIVE GRUENBERG said that answered his question. He then expressed concern about the following proposed phrase on page 5, line 28: ", or $1,000, whichever amount is greater". He said it seems to be lessening consumer protection, because $1,000 is 5 percent of a vehicle costing $20,000. If the vehicle is being sold for less - $15,00 for example - that amount would only be $750, he noted. In other words, he said, "This protection wouldn't kick in, whereas, under current language it is for cheaper cars." He noted that the people who buy cheaper cars are generally people without as much money who really need the protection even more than people with a little more means. Number 2310 REPRESENTATIVE GRUENBERG said that he would like to delete "or $1,000,", because he said he thinks it not good for the consumers, particularly folks who live in parts of town like his. Number 2277 MR. SNIFFEN remarked that that's an excellent observation, and he added that it is curious, because [Representative Gruenberg's point] is the exact reason why that language was included in the first place. He said that [the language] wasn't [added with the intention] to not provide consumers protection. MR. SNIFFEN explained that there are dealers who sell cars for under $10,000, and when they get some of these cars they find they have little scratches on the fender, for example, and they might have to spend $500 in labor to buff out the scratches or replace a panel. The cost of doing those repairs can quickly exceed the 5 percent limit that is in statute; therefore, [one of the dealers] asked for the rule to be relaxed a little, for the reason that if they do work on a low-value car, they would have to disclose [that information], which could make it difficult to sell the car, or might create some kind of impression that the car really isn't new, whereas dealers who do exactly the same thing on higher-valued cars would not have to disclose this type of work. MR. SNIFFEN stated that he would have no objection to removing that language if that's the will of the committee. He suggested perhaps another number could be chosen, perhaps $800, for example. He explained that a limit needed to be put in that would allow all dealers to at least work up to a certain range without making disclosures - to level the playing field. Number 2168 REPRESENTATIVE GRUENBERG asked if "dings," for example wouldn't come under the phrase, "cosmetic parts", on page 5, line 30. MR. SNIFFEN said it would not, because the cosmetic part language is intended to include things that can be replaced in whole, like bumpers, for example. In response to a follow-up question by Chair Weyhrauch, he said that a hubcap would also be an example of a cosmetic part. Number 2130 REPRESENTATIVE GRUENBERG announced that he would probably bring up, for the purpose of discussion, reducing the $1,000 to $800, which was the amount that Mr. Sniffen suggested. Number 2100 CHAIR WEYHRAUCH asked if anyone had any thoughts regarding that possible change. Number 2089 REPRESENTATIVE CRAWFORD commented that the way vehicles cost today, he doesn't think there's a huge difference between $800 and $1,000. CHAIR WEYHRAUCH said that he feels $1,000 is an easier number to work with. REPRESENTATIVE LYNN indicated that he is not concerned. REPRESENTATIVE GRUENBERG said, "Okay, well we will not worry about that then." Number 2060 CHAIR WEYHRAUCH asked if there were any questions on Sections 6, 7, and 8. There being none, he said the committee would focus on Section 1. [The hearing on HB 272 was temporarily suspended to address the next bill.] HB 272-MOTOR VEHICLE DEALERS Number 0045 CHAIR WEYHRAUCH announced that the committee would return to HOUSE BILL NO. 272, "An Act relating to motor vehicle dealers." Before the committee was the proposed committee substitute (CS), Version 22-LS0975\H, Bannister, 5/14/03. Number 0160 REPRESENTATIVE CRAWFORD moved to adopt [a new] Amendment 1, which read as follows [original punctuation provided]: Page 2, Line 11: Insert "The vehicle is a current model used vehicle that has been leased by a consumer and has been returned to the leasing dealer; or" Renumber accordingly REPRESENTATIVE CRAWFORD stated that he believes fleet vehicles need to be included, and Amendment 1 would do that. Number 0189 REPRESENTATIVE GRUENBERG referred to a two-page amendment labeled [23-LS0975\H.1, Bannister, 5/15/03], which he said he had referred to previously as [Amendment] 1, which read as follows: Page 2, lines 2 - 3: Delete "received as a trade-in" Insert "manufactured for sale in the United States and acquired by the dealer" Page 2, line 6: Delete ";" Insert "; or" Page 2, lines 7 - 13: Delete all material and insert: "(3) the vehicle is a current model used vehicle not manufactured for sale in the United States, the dealer acquired the vehicle in the normal course of business, and the dealer complies with AS 45.25.470." Page 5, following line 22: Insert a new bill section to read: "* Sec. 5. AS 45.25.470 is amended to read: Sec. 45.25.470. Sales of vehicles manufactured for sale in a foreign country. Before the sale of [,] a motor vehicle not manufactured for sale in the United States, a motor vehicle dealer shall disclose to the consumer in writing, in addition to any other disclosures required for the sale of a used [WHETHER A MOTOR] vehicle, [WAS ORIGINALLY MANUFACTURED FOR SALE IN CANADA OR ANOTHER FOREIGN COUNTRY] (1) that the vehicle was originally manufactured for sale in Canada or another specified foreign country; (2) if applicable, that the vehicle was originally sold new in the specified foreign country identified under (1) of this section and imported into the United States; (3) that the vehicle's odometer was converted from kilometers to miles, and shall provide the consumer with a legal vehicle title, an odometer verification certificate, or another document that verifies the mileage reading after the conversion; (4) if applicable, that the vehicle does not have a manufacturer's warranty; and (5) any other information required by regulations adopted by the attorney general." Renumber the following bill sections accordingly. REPRESENTATIVE GRUENBERG noted that if the committee subsequently adopts that amendment [Version H.1], then Representative Crawford's Amendment 1 would become moot; however, he said, "But I have no objection to this being in there with that understanding." Number 0259 CHAIR WEYHRAUCH asked if there was any objection to [Representative Crawford's] Amendment 1. There being no objection, it was so ordered. Number 0425 The committee took an at-ease from 1:47 p.m. to 1:48 p.m. Number 0486 MR. SNIFFEN, in response to a comment by Chair Weyhrauch, confirmed that he did draft the language of Amendment 1, which was just adopted. Number 0600 REPRESENTATIVE GRUENBERG offered Amendment 2 [labeled 23- LS0975\H.3, Bannister, 5/15/03, which was originally labeled Amendment 3], which read as follows: Page 6, following line 1: Insert a new bill section to read: "* Sec. 6. AS 45.25 is amended by adding a new section to read: Sec. 45.25.530. Disclosure regarding receipt of commissions. If a motor vehicle dealer's service operations employees receive a commission for the amount of work they perform, the motor vehicle dealer shall post a conspicuous sign that is visible to service customers that the dealer's service operations employees work on commission." Renumber the following bill sections accordingly. REPRESENTATIVE GRUENBERG recalled testimony revealing that it is often a practice that people in service centers work on commission; therefore, the more repairs sold, the larger the commission. He added, "That's happened to me." He noted that Amendment 3 would ensure full disclosure. Number 0655 MR. SNIFFEN, in response to a request by Chair Weyhrauch, said that he understands the intent behind [Amendment 2] and does not see any harm in it. CHAIR WEYHRAUCH said that [Amendment 2] has some appeal to him. He explained that his mother just bought tires for her car and, while on a trip, was told at a station that she needed a whole new set, and she bought them. He said he thinks people are vulnerable to this. Number 0698 REPRESENTATIVE CRAWFORD noted that the only place where this type of thing has happened to him was at Sears, where he was solicited to buy "numerous oil changes, and that sort of thing." He stated that he is not so sure that Sears would be included under "motor vehicle dealer". Number 0760 CHAIR WEYHRAUCH said that [the amendment] does relate to motor vehicles, and he said that he is "trying to keep within the scope of this." REPRESENTATIVE CRAWFORD said that he doesn't know if the committee is directing the amendment to what the actual problem is. He commented that he doesn't have much experience with new car dealers. REPRESENTATIVE GRUENBERG responded that he offered the amendment in response to what happened to him. He added that he is not saying that the people were at all dishonest, but that he "just didn't know." Number 0815 CHAIR WEYHRAUCH asked if there was any objection to Amendment 2. Number 0830 MR. SNIFFEN referred to AS 45.45.150, which he said is titled "notice to customer" and requires an automobile repair facility to notify a customer that he/she is entitled to a return of the replaced parts from the repair of an automobile. It also requires the repair shop to post in a conspicuous location a sign that informs the consumer of its requirement to provide those parts when requested. He said he was wondering if "this type of language would fit better in that statute, as opposed to this statute." Number 0885 REPRESENTATIVE GRUENBERG replied that he would ask that the staff work with Legislative Legal and Research Services counsel to see "whether it would go better here or in 45.45.150." He added that he doesn't care where it goes. Number 0916 CHAIR WEYHRAUCH said, "We will make that note on Amendment 2, and, seeing no objection, Amendment 2 is adopted." Number 0925 REPRESENTATIVE GRUENBERG offered an amendment labeled [23- LS0975\H.5], which he called Amendment 3, which read as follows: Page 1, line 8, through page 2, line 6: Delete all material and insert: "(b) A person who does business as a dealer in the state may not offer to sell or sell a motor vehicle as a new or current model motor vehicle [HAVING A MANUFACTURER'S WARRANTY] unless (1) if the vehicle is offered for sale or sold as having a manufacturer's warranty, the dealer has a current sales and service agreement with the manufacturer and the agreement requires the dealer, upon demand of the motor vehicle buyer, to perform or arrange for, within a reasonable distance of the dealer's place of business in the state, the repair and replacement work required of the manufacturer under the warranty; [OR] (2) the vehicle is a current model used vehicle received as a trade-in in the normal course [DEALER OFFERS TO GIVE THE BUYER A REBATE TO COVER THE REPAIR AND REPLACEMENT WORK THAT THE DEALER CANNOT PERFORM OR ARRANGE FOR WITHIN A REASONABLE DISTANCE OF THE DEALER'S PLACE] of business;" REPRESENTATIVE GRUENBERG asked Mr. Sniffen if he remembered previously discussing page 1, line 8 through page 2, line 1, [in Version H], on the record with him. MR. SNIFFEN answered yes. REPRESENTATIVE GRUENBERG said, "What this will do is deal with subsection (b)." CHAIR WEYHRAUCH noted that he had interrupted Mr. Sniffen's preliminary comments earlier in the morning. Because the bill was drafted as a result of concerns that Mr. Sniffen voiced originally, he said he wants to make certain that the committee has the full benefit of hearing any additional thoughts and views of Mr. Sniffen's. [No action was taken on the proposed Amendment 3 at this time.] Number 1124 MR. SNIFFEN responded that he did listen to a lot of testimony last night and would appreciate the opportunity to follow up on some of the comments from "our department's perspective." He noted that his department is charged with protecting consumers under [Alaska's] consumer protection Act, and he stated his concern with some of representations that "might be taken out of context by the committee here." He continued as follows: One of those deals with the idea that a registered importer has some kind of consumer protection responsibility because they are bonded and licensed and other things, and, as I'd mentioned earlier today, that process is a very simple one - it's not very difficult to become a registered importer. But, more importantly, the registered importer has no interaction with the consumer. Consumers purchase these vehicles from dealers. Dealers get these cars from importers or from auctions, and then the auctions deal with the importers. We had a case here, just last year, from a consumer who purchased a Canadian vehicle - it was 1996 Chevy product - and it had an onboard diagnostic chip that could not be recalibrated to conform [to] U.S. emissions standards. He took that vehicle back to the dealer, and the dealer essentially wanted to wash his hands of the problem and said, "Well, you know, it was imported that way." When the consumer tried to get some documentation from the dealer who actually tried to find who the importer was and find out if there was some recourse against the importer, it was just impossible to do, because the relationship that the consumer sees is he's buying from the dealer, he's not buying from an importer. The consumer doesn't know who this importer is; he's not aware of this bond. I don't know that any consumer would know how to bring an action against an importer's bond. It would take some savvy. So, the notion that there is some consumer protection here because of the obligations on an importer to comply with federal standards and might go to jail for 20 years if they tamper with odometers and those things, those protections don't really filter down to the consumer, and this bill, I think would help prevent some of those things in its present form. And another issue I wanted to bring up dealt with the whole warranty issue that several of the Lyberger employees testified about, and, you know, if every used car dealer in Alaska was a Lyberger, perhaps we wouldn't have as many problems as we do. And the testimony we've heard from used-car dealers are reputable used-car dealers - ... the Budgets and the Lybergers and the Affordables - but there are 347 other used-car dealers in the state, and all of these other used-car dealers may not be as forthcoming with these types of disclosures and information as Mr. Lyberger's folks are. And we're going to create, perhaps, an opportunity for consumer fraud if ... we allow these kinds of transactions to proceed if we don't monitor them very carefully. And, I think it was brought up earlier: these dealers aren't required to offer warranties on these cars. Lyberger does and that's great. I think Mr. Hass (ph) testified earlier, and he didn't suggest that he offered these kinds of warranties on vehicles. So, there's no guarantee that these warranties are going to go with these vehicles, so discussing when they apply, whether there are service contracts, whether there are warranties - I think that's important stuff, but for a majority of car dealers that may become irrelevant. And if we're going to sanction these transactions now that are currently prohibited, I would be cautious that we're opening up a new ground for perhaps some used-car dealers who don't sell these vehicles to now start selling them. And we might run into some of these problems in the future. I would just like the committee to consider those comments as you go through some of the original intent of this bill, and why we need to do something with the current law, but at the same time, provide some consumer protection. And I'm just leery that you might be thinking that, "Well, ... importers are protecting consumers," because I have some serious reservations whether they are. I also have reservations about whether free warranties with vehicles from used car dealers are going to help protect consumers, as well. Number 1429 REPRESENTATIVE SEATON referred to [paragraph] (2) on page 2, [beginning on] line 2, which read as follows: (2) the vehicle is a current model used vehicle received as a trade-in in the normal course [DEALER OFFERS TO GIVE THE BUYER A REBATE TO COVER THE REPAIR AND REPLACEMENT WORK THAT THE DEALER CANNOT PERFORM OR ARRANGE FOR WITHIN A REASONABLE DISTANCE OF THE DEALER'S PLACE] of business; REPRESENTATIVE SEATON asked, "Isn't that essentially ... what is being satisfied with either the Heritage warranty, or offering to do that in-house with his own ... repair facilities or with a short distance?" MR. SNIFFEN replied as follows: I think it does to some extent, but I don't know that that was the original intent of this section. The way statute currently reads is you can't sell a new or current-model car having a manufacturer's warranty. The Heritage warranty is not a manufacturer's warranty, it's really an after-market service contract or warranty, if you will - technically it is a service contract. But I think the current statute has this language in here to prevent, perhaps, folks in the Bush who don't have access to repair facilities, from selling a new vehicle to a consumer with a manufacturer's warranty, but then not have the ability to actually perform the warranty service. So, under those circumstances, if you had to fly from Bethel to Fairbanks, or from some remote area to a repair facility to get the work done, then you could only sell the warranty if you agreed to reimburse the consumer for those expenses. And I think that was the situation that this language addressed. I don't know that it necessarily was meant to allow used car dealers to sell current-model Canadian vehicles so long as they had a replacement service contract of some kind to go along with them, because those aren't manufacturer's warranties. MR. SNIFFEN, in response to a question by Representative Gruenberg, confirmed that he had not yet received [Amendment 3]. REPRESENTATIVE GRUENBERG offered Amendment 4 [originally labeled Amendment 3], which read as follows [original punctuation provided]: Page 5, following line 22: Insert a new bill section to read: "*Sec.5. AS 45.25.465 is amended by adding a new subsection to read: (c) When a motor vehicle dealer sells a used motor vehicle, the motor vehicle dealer shall disclose to the buyer in writing in a manner that is clear and conspicuous (1) that the warranty provisions of AS 45.45.300-45.45.360 do not apply to the purchase of the motor vehicle; and (2) that, if applicable, the vehicle is not subject to a manufacturer's warranty." Renumber the following bill sections accordingly REPRESENTATIVE GRUENBERG said that that would include a current- model motor vehicle also. Number 1729 REPRESENTATIVE LYNN objected for the purpose of discussion. Number 1750 MR. SNIFFEN, in response to a question by Representative Gruenberg, said that he doesn't believe that the words "or current-model motor vehicle" have to be added. He stated, "I'm not sure that [paragraph] (2) would have any relevance to a lot of motor vehicles covered by this language. The vehicles (indisc.) to a manufacturer's warranty is almost assumed and obvious in so many used vehicle transactions that making it a requirement might ... just add another unnecessary layer of paperwork to an otherwise ... normal used-car transaction." He proffered that it really makes the most sense to require that disclosure when you're selling a vehicle "that a consumer might confuse the new vehicle, which would be these current-model year vehicles." Number 1790 REPRESENTATIVE GRUENBERG suggested the following amendment to Amendment 4 as follows: After "used motor vehicle" Before "," Add: "or a current-model motor vehicle" MR. SNIFFEN confirmed that that would be the right term to use. Number 1830 REPRESENTATIVE SEATON stated his understanding that "current- model motor vehicle" would include a new vehicle. REPRESENTATIVE GRUENBERG responded no. He explained, "New is different." REPRESENTATIVE SEATON said, "No, a current model can be neither [either] new or used, but it's a current model." Number 1855 MR. SNIFFEN responded as follows: That was exactly my first reaction, is that if we just said "current-model motor vehicle", that would include the universe of all new cars. And it would have to read something to the effect of "current-model used motor vehicle". REPRESENTATIVE GRUENBERG acquiesced to the suggestion of inserting the words "current-model used motor vehicle" instead. He asked Mr. Sniffen if he could support Amendment 4, [as amended]. MR. SNIFFEN said yes. He added, "The more information we can give a consumer about these transactions, ... the better." Number 1920 REPRESENTATIVE GRUENBERG said that his staff had added the words "clear and conspicuous" to Amendment 4 after a discussion he had had with Representative Lynn. He asked Representative Lynn if that addition was satisfactory. Number 1933 REPRESENTATIVE LYNN suggested a "bumper-sticker-sized sign" on the window that says, "Canadian vehicle, current, no factory warranty." He added that it would also say in small print, "see disclosure forms for further information." Number 1988 REPRESENTATIVE GRUENBERG said that he would accept that as a "conceptual friendly amendment" [to Amendment 4]. He suggested that it could read: After "clear and conspicuous" Insert "and posted in the window of the car" REPRESENTATIVE LYNN repeated his idea for the information to read "Canadian vehicle" and "no factory warranty". He rephrased his previously stated suggestion to recommend that [the sticker] also read in small print, "See detailed disclosure." REPRESENTATIVE GRUENBERG said he thinks that the amendment should also include "that it's not subject to the lemon law." REPRESENTATIVE GRUENBERG suggested another amendment to Amendment 4 would be to delete the word "and" [preceding paragraph (2)], and [after the corrected word "warranty", to delete "." and] insert ";" and "(3) and stating the country of manufacture if not the United States." REPRESENTATIVE GRUENBERG, in response to a question by Representative Lynn, said that he would like the language to be broad enough [to encompass other countries]. Number 2080 MR. SNIFFEN, in response to a question by Chair Weyhrauch, noted that there is already a statute - AS 45.25.470 - that requires the disclosure in writing to a consumer whether a vehicle was originally manufactured for sale in Canada or another foreign country; therefore he said he doesn't know that that language needs to be included in here. Number 2100 REPRESENTATIVE LYNN reiterated his idea to require a sticker on the car. He noted that a lot of vehicles manufactured overseas arrive into the U.S. in a legitimate manner. He clarified that he wants to separate those cars that come in from the "grey- market" from those that come in through a new-car dealer in the normal course of business. He suggested an alternative would be to "withdraw the friendly amendment and just vote against the whole thing." REPRESENTATIVE GRUENBERG read AS 45.25.470 as follows: Sales of vehicles manufactured for sale in a foreign country. Before sale, a motor vehicle dealer shall disclose in writing whether a motor vehicle was originally manufactured for sale in Canada or another foreign country. REPRESENTATIVE GRUENBERG said, "So, my suggestion would simply be to have as a category, 'subject to AS 45.25.470,' and that would do exactly what you want." He asked Mr. Sniffen if that was true. MR. SNIFFEN said he believed so. Number 2198 REPRESENTATIVE LYNN withdrew his friendly amendment. Number 2225 REPRESENTATIVE GRUENBERG clarified that [a new paragraph (3)] would read as follows: (3) that, if applicable, the vehicle is subject to AS 45.25.470 REPRESENTATIVE GRUENBERG said he would make that conceptual, because "we don't want to just cite the statute." He said that it would have to say clearly that it's made in another country, subject to sale in the United States. Number 2770 CHAIR WEYHRAUCH asked if there was any objection to the amendment to Amendment 4 that would add "or a current-model used motor vehicle". Number 2299 REPRESENTATIVE CRAWFORD said, "It's getting awfully confusing to me, and I don't know if it's really needed, but ..." Number 2315 REPRESENTATIVE LYNN stated that he would vote against [Amendment 4] no matter what is added to it. CHAIR WEYHRAUCH continued: And then ... adding, "(3) that, if applicable, the vehicle is subject to AS 45.25.470." Okay, as a friendly amendment we'll just add those. CHAIR WEYHRAUCH, in response to a question by Representative Gruenberg, said that he thinks the committee has the idea [of what the amendments are about]. He asked Representative Gruenberg if there was anything else [to discuss] regarding Amendment 4. REPRESENTATIVE GRUENBERG answered no. CHAIR WEYHRAUCH said, "Okay, there's a motion on Amendment 4 [as amended and] an objection. Is there any further discussion? Secretary call the roll." [The friendly amendments to Amendment 4 were treated as adopted; therefore, Amendment 4 would read as follows:] Page 5, following line 22: Insert a new bill section to read: "*Sec.5. AS 45.25.465 is amended by adding a new subsection to read: (c) When a motor vehicle dealer sells a used motor vehicle or a current-model used motor vehicle, the motor vehicle dealer shall disclose to the buyer in writing in a manner that is clear and conspicuous (1) that the warranty provisions of AS 45.45.300-45.45.360 do not apply to the purchase of the motor vehicle; (2) that, if applicable, the vehicle is not subject to a manufacturer's warranty; and (3) that, if applicable, the vehicle is subject to AS 45.25.470." Renumber the following bill sections accordingly A roll call vote was taken. Representatives Gruenberg, Holm, Seaton, Crawford, and Weyhrauch voted in favor of Amendment 4, as amended. Representative Lynn voted against it. Therefore, Amendment 4, as amended, was adopted by a vote of 5-1. Number 2400 REPRESENTATIVE GRUENBERG offered Amendment 5 [text provided previously]. REPRESENTATIVE LYNN objected for the purposes of discussion. Number 2420 MR. SNIFFEN, in response to a question by Representative Gruenberg, said, "We have no opposition to that amendment." REPRESENTATIVE LYNN withdrew his objection to Amendment 5. Number 2436 CHAIR WEYHRAUCH asked if there was further objection. There being none, Amendment 5 was adopted. Number 2485 REPRESENTATIVE GRUENBERG referred to Amendment 3. He addressed Mr. Sniffen as follows: It was my thought that the law currently allows somebody who is selling a current-model motor vehicle to provide a rebate to cover the cost of repair, or to have a current sales and service agreement. I actually wanted to just retain the current law. REPRESENTATIVE GRUENBERG referred to [paragraph (2)] of Amendment 3, which read as follows: (2) the vehicle is a current model used vehicle received as a trade-in in the normal course [DEALER OFFERS TO GIVE THE BUYER A REBATE TO COVER THE REPAIR AND REPLACEMENT WORK THAT THE DEALER CANNOT PERFORM OR ARRANGE FOR WITHIN A REASONABLE DISTANCE OF THE DEALER'S PLACE] of business;" REPRESENTATIVE GRUENBERG said, "We had continued to delete that," but he said that he thinks that language should probably be left in. He asked Mr. Sniffen if he agreed. Number 2571 MR. SNIFFEN said it looks as though that language is repeated in [paragraph] (1) of [Amendment 3]; therefore he said he's not sure "what the purpose of keeping that language in would be." Number 2582 REPRESENTATIVE GRUENBERG said that that is what he had thought initially; however, he noted that the rebate is not mentioned [in paragraph (1)], and he thinks that's important to include. CHAIR WEYHRAUCH, in response to a request for clarification from Representative Crawford, said that the committee is discussing Amendment 3 "that was earlier discussed and then withdrawn," which is labeled, 23-LS0975\H.5, [Bannister, 5/16/03]. REPRESENTATIVE GRUENBERG reiterated that [paragraph (2)] is not exactly the same as [paragraph (1)], because of the reference to the dealer's ability to give the buyer a rebate. Number 2666 REPRESENTATIVE SEATON pointed out another difference [between the two paragraphs] is that paragraph (1) talks about a new car having a manufacturer's warranty, while paragraph (2) addresses used vehicles. He stated that he agrees with Representative Gruenberg that the deleted language should be left in for consumer protection. Number 2695 MR. SNIFFEN responded as follows: I don't know that I have a problem with the concept or the intent here, but when we're trying to amend current Version H to include these warranty issues things get a little complicated for me as well, and I have to share Representative Crawford's confusion a little bit. I think the intent of the initial amendment was to clean up [AS] 08.66.015, so it was very simple and easy to understand. If you're selling a new car, this is what you have to do. If you're selling a current- model car that's not new, this is what you have to do to sell that. And we took out these warranty issues, because they simply weren't a problem up here in Alaska. And I think working with that language over ... at least the four years I've been here, and speaking with the new car dealers, I think the manufacturers' service agreements with the dealers have sort of removed some of the concerns that that warranty language was intended to protect against. If we want to address these warranty issues - selling cars, whether or used with a warranty, and what you have to do - it might be better to put that into a separate provision in and of itself, so we're not combining these concepts. And I think that might keep it cleaner and easier to understand. Number 2755 REPRESENTATIVE GRUENBERG suggested he could offer [Amendment 3] as a conceptual amendment and ask the drafter to work with staff and Mr. Sniffen to set the language out in a separate section, if necessary. MR. SNIFFEN responded that he thinks that would be a better approach, and he stated that he would be happy to work with the drafters on either coming up with a separate section or "a separate provision within this section" that just addresses these warranty concerns. Number 2833 REPRESENTATIVE CRAWFORD asked if there is a problem with the way our Version H is written. He said, "I thought we had worked this language out that was pretty much acceptable." CHAIR WEYHRAUCH said, "And I object too, for that reason. I think I want to keep that as simple as possible on this one." He asked if there were any further comments from the committee. Number 2860 MR. SNIFFEN, in response to a question by Representative Gruenberg, said that Amendment 3 raises some confusion for various reasons that he said he did not know if the committee had time to get into. He concluded, "I don't know that it helps our cause any." Number 2875 REPRESENTATIVE GRUENBERG withdrew [his motion to adopt Amendment 3]. Number 2885 REPRESENTATIVE GRUENBERG moved to adopt Amendment 6, [labeled 23-LS0975\H.1, Bannister, 5/15/03]. Number 2889 REPRESENTATIVE LYNN objected for the purpose of discussion. Number 2900 REPRESENTATIVE GRUENBERG reviewed the highlights of Amendment 6 [text provided previously]. TAPE 03-69, SIDE B Number 2999 MR. SNIFFEN mentioned the "sale approach." He added, "And I think I've testified previously on our concerns with it, but leave it to the committee to decide how they would like to approach it." Mr. Sniffen continued as follows: [Amendment 6] certainly would be something that would help the consumer. I don't know that it would be as effective as the language currently contained in Version H, simply because we're dealing with so many used-car dealers and their ability to make these disclosures in an informed way is something that our office doesn't have a lot of faith in, to be frank. And I remember testimony by one of the members of this committee that when they visited Lyberger's lot this year, they weren't even told that these vehicles were manufacturers' (indisc.). So, having this law and making sure that all of the 350 some-odd used- car dealers in Alaska who sell these vehicles comply with it is a different story, and since we are dealing with a fairly large purchase - if not the single largest purchase a consumer might make in their lifetime, then perhaps the second largest, followed closely by their home - it's risky. ... But it does accomplish some of the goals that we're trying to achieve. Number 2930 REPRESENTATIVE CRAWFORD said he thinks he's addressed this issue several times. He noted that there are "homegrown franchised dealers" [in Alaska], and [the legislature] has seen fit in the law to say that there can't be other new-car dealers within 14 miles of [another same dealership]. He continued as follows: These cars that are coming in - they are used, under the law, but pretty much as a technicality, as far as I see. And they're new to the consumer. They may be used to the law, but they're new to the consumer, and I believe that undercuts and puts our franchised dealers in a non-competitive situation, and I can't vote for it. Number 2900 REPRESENTATIVE LYNN said, "Ditto." Number 2910 REPRESENTATIVE HOLM apologized for his absence during the earlier portion of the meeting. He referred to [Amendment 6] and asked for a definition of "normal course of business". Number 2869 MR. SNIFFEN said that he doesn't believe that that term is defined anywhere in statute. He said that it's an assumed definition, such as "reasonable person," which he said really isn't defined anywhere, other than in some jury instructions. Number 2853 REPRESENTATIVE GRUENBERG said there has been considerable testimony that there are various ways that "people do obtain these vehicles." Some of those ways, he noted, are purchasing a used vehicle as a trade-in, directly from a consumer, or "from a rebel fleet or a repossession." However, he stated his understanding that the primary way that dealers obtain these vehicles is at dealer auctions. He asked Mr. Sniffen if he agreed with that assessment. MR. SNIFFEN said that that is the testimony that he's heard, as well. Number 2811 A roll call vote was taken. Representatives Holm, Seaton, and Gruenberg voted in favor of Amendment 6. Representatives Dahlstrom, Lynn, Crawford, and Weyhrauch voted against it. Therefore, Amendment 6 failed by a vote of 3-4. Number 2759 REPRESENTATIVE DAHLSTROM moved to report CSHB 272(STA), Version 23-LS0975\H, [Bannister, 5/14/03], as amended, out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 272(STA) was reported out of the House State Affairs Standing Committee.