California Supreme Court Decision Signals Victory For Online Retailers

by Perkins Coie

The California Supreme Court recently issued a landmark ruling in Apple Inc. v. Superior Court (formerly Krescent v. Apple Inc. in trial court proceedings), a case with wide-reaching implications for consumer privacy in e-commerce. The issue before the Court was whether California’s Song-Beverly Credit Card Act (the Act), which generally prohibits retailers from collecting or requesting personal identification information (PII) as a condition of accepting credit card payments, should apply to online retailers. The Act, which defines PII to include customer addresses and telephone numbers, has traditionally been applied to “brick and mortar” businesses.

In Apple Inc., the Court rejected the plaintiff’s effort to expand the Act, holding that—based on the statute’s text, structure and purpose—the Act does not apply to web-based credit card transactions involving electronic or downloadable purchases.

The Court began by noting that because the law was enacted in 1990, when Internet commerce “was not even a twinkle in Steve Jobs’s eye,” its text alone could not be conclusive on the issue.  Instead, the Court looked to the purpose of the Act, namely, consumer protection.  The Court was persuaded by arguments—identical to those advanced by Perkins Coie on behalf of some of its e-commerce clients—that web merchants and consumers alike would be at unreasonable risk of fraud without the ability to collect some personal information during the transaction for verification.  Noting that the heightened need for identity verification in the digital age created some tension with the statute’s privacy aims, the Court explained that “[w]hile it is clear that the Legislature enacted the . . . Act to protect consumer privacy, it is also clear that the Legislature did not intend to achieve privacy protection without regard to exposing consumers and retailers to undue risk of fraud.”

The Court also relied heavily on a provision in the law that allows retailers to request positive identification and even to record identification information in transactions where the card is not physically present.  This proviso, the Court wrote, “demonstrates the Legislature’s intent to permit retailers to . . . combat fraud and identity theft—objectives that not only protect retailers but also promote consumer privacy.” The Court reasoned that this supported interpreting the statute to not bar collection of PII during online transactions.

The decision is also notable for what it does not include—the court expressly did not resolve what types of information may be essential for verification purposes online.  The court held only that there must be some mechanism by which retailers can verify that a person using a credit card is authorized to do so. In the court’s view, “[n]o such mechanism would exist in the context of online purchases of electronically downloadable products if the statute were read to apply to such transactions.”

The Court also expressly indicated that it was not deciding whether the Act applied to the online sales of physical goods or to other transactions (such as mail or telephone orders) in which there is no face-to-face interaction between customer and retailer. In dicta, however, the Court observed that it “[did] not think such transactions, which often involve shipping [or] delivery . . . of the purchased merchandise . . . are readily likened to online purchases of electronically downloadable products with respect to possible means of preventing or detecting fraud.”

Ultimately, the Court resolved that because attempting to apply the decades-old statute to e-commerce was like trying to “make a square peg fit a round hole, [it] must conclude that online transactions involving electronically downloadable products fall outside the coverage of the statute.” 

Contact counsel to discuss how this decision affects your legal rights and responsibilities as an online merchant, and check back here for more updates on this and related issues.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.