On Monday, the California Supreme Court, by a slim 4-3 majority, held that California’s Song-Beverly Credit Card Act of 1971 (“Song-Beverly”) does not apply to online purchases in which a product is downloaded electronically, finding that Apple was not liable under the statute for collecting plaintiff Krescent’s telephone number and address in order to complete credit card purchases of various digital downloads from the iTunes store.
In a lengthy opinion that considered the statutory text and legislative history, the Court overturned a lower court’s finding that Song-Beverly prohibited Apple from collecting personal identification information (“PII”) in connection with an online transaction. Song-Beverly generally prohibits retailers from requesting or requiring as a condition to accepting credit card payment, that the cardholder be required to provide PII upon a credit card transaction form or otherwise. In Pineda v. Williams Sonoma Stores—decided in early 2011—the California Supreme Court held that ZIP codes were PII, and that the defendant had violated Song-Beverly by requesting the plaintiff’s ZIP code during a credit card transaction that took place in a traditional brick-and-mortar retail store, a decision that spurred a wave of Song-Beverly litigation in California.
In Krescent, the California Supreme Court determined that Song-Beverly was enacted by the California legislature with the intent of safeguarding consumer privacy while also protecting consumers and retailers from undue risk of fraud. It then reasoned that online purchases are different from brick-and-mortar purchases:
The safeguards against fraud that are provided in section 1747.08(d) are not available to the online retailer selling an electronically downloadable product. Unlike a brick-and-mortar retailer, an online retailer cannot visually inspect the credit card, the signature on the back of the card, or the customer‘s photo identification. Thus, … the key antifraud mechanism in the statutory scheme . . . has no practical application to online transactions involving electronically downloadable products.”