Legislature(2009 - 2010)BUTROVICH 205

02/23/2010 01:00 PM Senate TRANSPORTATION

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01:01:56 PM Start
01:02:39 PM SB272
01:26:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 272 Out of Committee
                   SB 272-RENTAL CAR CHARGES                                                                                
1:02:39 PM                                                                                                                    
VICE CHAIR MENARD announced the consideration of SB 272.                                                                        
SENATOR MEYER joined the meeting.                                                                                               
EDRA MORIEDGE, Staff to Senator Huggins, introduced SB 272 on                                                                   
behalf of the sponsor by reading the following sponsor statement                                                                
into the record:                                                                                                                
     SB 272 is a technical  bill that would allow rental car                                                                    
     companies  to do  in  Alaska what  they  already do  in                                                                    
     thirty other states. Alaska law  is currently silent on                                                                    
     the issue  of separately-listed  charges on  rental car                                                                    
     statements for  the recovery of  fees. This  bill would                                                                    
     require those fees to be  listed separately and clearly                                                                    
     identified on the rental car agreement.                                                                                    
     The industry  standard is to  turn over the  rental car                                                                    
     fleet every  twelve months and  to associate  the costs                                                                    
     of licensing the vehicles,  concessions, and airport or                                                                    
     facility-related  costs with  the vehicles  themselves.                                                                    
     In addition to government  taxes and surcharges, rental                                                                    
     car  companies assess  additional "cost  recovery fees"                                                                    
     to offset those costs.  Consumers should be made aware,                                                                    
     and be able  to see the fees they are  charged, on both                                                                    
     the  rental bill  and in  an outline  quote. This  bill                                                                    
       would provide full disclosure and transparency of                                                                        
    "cost   recovery   fees"   included   in   rental   car                                                                     
     agreements. In addition,                                                                                                   
MS. MORIEDGE  added that  under this legislation  it would  be an                                                               
unfair labor practice to violate this provision.                                                                                
1:04:20 PM                                                                                                                    
VICE CHAIR MENARD asked the impetus of the bill.                                                                                
MS.  MORIEDGE   offered  her  understanding  that   in  2006  the                                                               
Department of Law (DOL) issued  a business advisory to rental car                                                               
companies when it learned that  some companies were charging cost                                                               
recovery fees. However, there is  no statutory ability to dictate                                                               
what a  rental car  company can or  cannot charge.  Although this                                                               
has been an  issue for DOL, it was the  industry that brought the                                                               
issue to the sponsor.                                                                                                           
1:05:55 PM                                                                                                                    
ED SNIFFEN,  Assistant Attorney General, Department  of Law (DOL)                                                               
said he  authored the  2006 business  advisory that  Ms. Moriedge                                                               
mentioned. He  said this  has been  an issue  for DOL  some time.                                                               
When  consumers  complained  about vehicle  licensing  fee  (VLF)                                                               
charges, DOL  investigated and determined that  recovery of those                                                               
fees might violate the Alaska  Consumer Protection Act. DOL asked                                                               
industry to  include those fees  in the advertized  price because                                                               
it looked deceptively like a  mandatory government charge done on                                                               
a per transaction  basis. He likes the bill  because it clarifies                                                               
the law going forward and addresses that issue.                                                                                 
1:08:03 PM                                                                                                                    
SENATOR PASKVAN  asked if DOL  intends that a consumer  who books                                                               
online would see a clear breakdown of these cost recovery fees.                                                                 
MR. SNIFFEN said he believes  that car rental companies break the                                                               
charges out  but the  question is when  in the  process consumers                                                               
become aware of those charges.                                                                                                  
SENATOR  PASKVAN asked  what part  of this  bill would  subject a                                                               
rental car company to scrutiny for an unfair trade practice.                                                                    
MR.  SNIFFEN  replied  DOL  finds   several  parts  of  the  bill                                                               
attractive.  First,  the  bill  adds a  new  Section  .450  [Sec.                                                               
45.45.450]  that  requires  rental car  companies  to  separately                                                               
identify   each  cost   recovery  fee.   This  will   require  an                                                               
explanation of  each fee  somewhere in  the process.  Second, the                                                               
bill  adds a  new Section  .460 [Sec.  45.45.460] that  says that                                                               
rental  car companies  can only  recover  those fees  that are  a                                                               
good-faith estimate  of the actual  fees incurred to  license and                                                               
title a vehicle.  DOL suspects that in some  instances rental car                                                               
companies were using the VLF process  as a profit center. He said                                                               
that  DOL would  continue to  work with  rental car  companies to                                                               
make sure  that their advertising  complies with the  amount they                                                               
recover  and that  all  costs are  itemized  such that  consumers                                                               
aren't misled.                                                                                                                  
1:12:36 PM                                                                                                                    
BILL GARDNER, Regional Vice  President, Enterprise Holdings (EH),                                                               
Seattle,  WA,  said he  oversees  Alaska  operations. EH  is  the                                                               
corporate  parent  of  Enterprise,   Alamo,  and  National.  This                                                               
family-owned company was  started in 1957 and is  now the largest                                                               
rental car  company in  the U.S. They  operate four  locations in                                                               
Alaska - three in Anchorage and one in Wasilla.                                                                                 
SHANE  SKINNER, Controller  and Business  Manager for  Alaska and                                                               
Washington, Enterprise  Holdings, Seattle,  WA, described  SB 272                                                               
as a  great bill  for consumers; it  provides full  disclosure of                                                               
fees and taxes at booking.  Similar legislation has been embraced                                                               
by  a  majority  of  states.   It  creates  equality  within  the                                                               
industry, he said.                                                                                                              
1:14:52 PM                                                                                                                    
SENATOR PASKVAN  asked what information  other than  vehicle cost                                                               
recovery fees would be available to the online consumer.                                                                        
MR. SKINNER  replied the  bill addresses three  sets of  fees and                                                               
taxes.  It addresses  rental car  taxes including  sales tax,  it                                                               
addresses  airport  fees  that  are  collected  and  remitted  to                                                               
airport authorities, and it addresses  the vehicle licensing fee,                                                               
which is  paid to the state.  The bill expressly states  the fees                                                               
allowable  to the  car rental  industry so  it would  protect the                                                               
consumer  from fees  like the  energy recoupment  fee. I've  been                                                               
with the industry for 13 years  and I don't really know what that                                                               
is, he said.                                                                                                                    
SENATOR PASKVAN  asked if he's  saying that if this  becomes law,                                                               
then  collecting fees  like the  energy recoupment  fee would  be                                                               
MR. SKINNER said yes.                                                                                                           
SENATOR  PASKVAN  asked  if  this  would  provide  a  competitive                                                               
advantage to one rental car business over another.                                                                              
MR.  SKINNER replied  there are  very few  examples of  companies                                                               
charging  such unique  fees,  but this  would  level the  playing                                                               
field for all car rental companies.                                                                                             
SENATOR  PASKVAN asked  if  the energy  recoupment  fee would  be                                                               
posted in the section talking  about the charge for not returning                                                               
the car with a full tank of fuel.                                                                                               
MR. SKINNER said yes.                                                                                                           
1:17:59 PM                                                                                                                    
VICE CHAIR  MENARD asked if it  is more expensive to  do business                                                               
in Alaska than in other states.                                                                                                 
MR.  SKINNER said  Alaska  taxes  the rental  car  industry at  a                                                               
higher rate than other states  so he imagines overall costs would                                                               
be higher.                                                                                                                      
MR.  GARDNER  said  that  a   consolidated  rental  facility  was                                                               
recently built  at Anchorage International  Airport so  there are                                                               
additional fees  to fund that,  but overall he believes  the fees                                                               
are competitive.                                                                                                                
SENATOR PASKVAN  asked if their  business model  includes revenue                                                               
sharing agreements with other businesses.                                                                                       
MR. GARDNER said  he doesn't believe that they have  deals with a                                                               
hotel chain or Expedia, for example.                                                                                            
MR.  SKINNER clarified  that  they do  pay  commissions to  third                                                               
party bookers, but they're a cost of doing business.                                                                            
SENATOR PASKVAN asked  if those costs are included  in the rental                                                               
fee itself, not separately.                                                                                                     
MR.  SKINNER said  yes, and  this bill  would limit  what can  be                                                               
broken out and charged as separate fees and taxes.                                                                              
1:20:57 PM                                                                                                                    
SENATOR  PASKVAN asked  if online  discounts are  disclosed to  a                                                               
consumer who rents at the counter.                                                                                              
MR. GARDNER  said the  rates may  vary if  you book  ahead versus                                                               
coming to the counter with no  reservation, just as it would at a                                                               
SENATOR PASKVAN asked if it would  be cheaper for someone to make                                                               
an online  same day booking versus  going to the counter  to book                                                               
without a reservation.                                                                                                          
MR. GARDNER  said the only  online discount is that  it's cheaper                                                               
to  book  online directly  with  Enterprise,  National, or  Alamo                                                               
versus booking through a third party agent.                                                                                     
1:23:07 PM                                                                                                                    
SENATOR  PASKVAN  asked if  he  can  assume that  their  discount                                                               
structure could  be directly compared to  a competitor's discount                                                               
MR. GARDNER said yes.                                                                                                           
MR.  SKINNER  added  that  this   bill  only  allows  car  rental                                                               
companies  to recoup  the actual  cost of  the license  and title                                                               
fees.  This protects  consumers  from  excessive or  manipulative                                                               
VICE CHAIR MENARD closed public  testimony and asked for comments                                                               
or questions.                                                                                                                   
SENATOR PASKVAN asked if the  administration has taken a position                                                               
on the bill.                                                                                                                    
MR. SNIFFEN  said DOL doesn't  endorse or oppose  the legislation                                                               
but  the  bill does  provide  some  guidance  to make  the  issue                                                               
enforceable. Current law  is too vague to take any  action on, he                                                               
1:25:49 PM                                                                                                                    
VICE CHAIR MENARD asked the will of the committee.                                                                              
SENATOR  PASKVAN  moved to  report  SB  272 from  committee  with                                                               
individual  recommendations and  attached  fiscal note(s).  There                                                               
being no objection,  SB 272 moved from  the Senate Transportation                                                               
Standing Committee.                                                                                                             

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