The Unforeseeable Transaction: Apple Argues That The California Song-Beverly Credit Card Act Should Not Apply To Online Retailers

Author:Mr Jake Romero
Profession:Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

When is a gallon of gas like an iTunes track?  That may sound like a riddle from a Lewis Carroll novel, but it was one of the questions considered by the California Supreme Court during oral arguments in Apple v. Superior Court (Krescent) as Apple, Inc. attempted to persuade the Court that the Song-Beverly Credit Card Act of 1971 , which prohibits retails from recording a customer's personal identification information as a condition of accepting a credit card payment, does not apply to online retailers.

As used in Song-Beverly, "personal identification information" means information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number.  In 2011, the Court held in Pineda v. Williams-Sonoma Stores, that, in the interest of advancing the privacy protection goals of Song-Beverly, the term "personal identification information" should be read broadly to include the ZIP codes of customers.  The suit brought against Apple was one of a number of class action suits filed shortly thereafter, arguing that Song-Beverly should apply to online merchants as well as brick-and-mortar stores.

Apple has argued that the Song-Beverly Act, originally passed in 1971 and last revised in 1991, could not have contemplated, and is ultimately incompatible with, online retail stores selling a downloadable service.  Section 1747.08 of the Act, Apple argues, seeks to establish a balance between privacy and fraud prevention, by authorizing retailers to require "reasonable forms of positive identification."  Online retailers, Apple has argued, must be permitted to collect personal identification information because it is the only way for an online retailer to prevent fraud.  Counsel for Krescent has argued that when Song-Beverly was updated in 1991, credit card payments made over the phone were already common and, therefore,...

To continue reading