California’s Supreme Court has handed an important victory to online stores.
Apple succeeded in convincing the court that internet retailers who sell music and downloadable media should not be prevented from collecting personal information from consumers who pay for the downloads via credit card. Apple, Inc v. Superior Court of Los Angeles County.
The California Credit Card Act is a consumer privacy law designed to protect consumers from risk of fraud. This law prohibits retailers from asking a consumer to furnishing any personal identification information on a credit card charge form. Moreover, the retailer cannot refuse to sell a product to a consumer if she refuses to provide her personal information. To give even more teeth to the law, retailers in California cannot use a credit card for which contains pre-printed spaces specifically designed for filling in any personal identification information of the cardholder.
Back in 2011, California’s High Court decided that even zip codes amounted to personal identification that falls within the law’s umbrella. As a result, retailers cannot ask consumers to provide their zip codes. Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524.
This latest case is an important twist on the facts as well as the law. The case involves the download of digital media. A consumer sued Apple Inc. under the California Credit Card Act. The lawsuit complained that Apple requested or required him to provide his address and telephone number as a condition of accepting his credit card as payment on the iTunes store.
The court noted that the Credit Card Act does permit retailers to request to “reasonable forms of positive identification, which may include a driver’s license or a California state identification card, or where one of these is not available, another form of photo identification.” This is supposed to balance consumer privacy, on the one hand, with fraud, on the other.
In the brick and mortar world, a customer’s name, credit card number, expiration date, and security code are all apparent at the checkout counter on the credit card itself when the card is presented during an in-person transaction.
Because of the nature of online purchases, the retailer does not have the same protection of viewing either the credit card or the consumer’s photo ID. For this reason, online retailers should be entitled to protect themselves from fraud by requesting some identification, such as a billing address for the credit card holder.
The Court noted that the California law was written before the internet became a significant source of retail sales. “Because we cannot make a square peg fit a round hole, we must conclude that online transactions involving electronically downloadable products fall outside the coverage of the statute.”
Apple and other online merchants breathed a sigh of relief.