April 18, 2014

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

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, if the legislature had intended to exempt retailers other than brick-and-mortar establishments, they would have.

This brings the application of Song-Beverly back to the opening riddle.  In 2011, the California legislature amended Song-Beverly to exempt gas stations, under the rationale that gas stations have a legitimate need to prevent fraud which outweighs the risk of allowing gas stations to collect and record customers’ ZIP codes.  No such exemption was made for online retailers.  Therefore, counsel for Krescent has argued, Song-Beverly should apply to online retailers.  However, as reported by Scott Graham in The Recorder, during oral arguments Chief Justice Tani Cantil-Sakauye pointed out that the gas station amendment just as reasonably cuts in Apple’s favor.  A gallon of gas and a digital movie or song are similar because each is “immediately downloadable.  You’re not gonna ship it, you’re not gonna deliver it, you’re not gonna service it.”  The Chief Justice seems to imply that given the similarities between the products, the fact that the legislature failed to exempt online retailers along with gas stations may just as reasonably suggest that the legislature never intended Song-Beverly to apply to e-commerce.

Regardless of the outcome, the arguments raised highlight the ongoing difficulties involved with applying laws written prior to the broad expansion of the internet to our quickly-evolving online transactions.  Or, as Apple’s counsel more eloquently described it, laws that were written and passed “at a time when the idea of the Internet, much less purchasing music from the cloud on iTunes, would have seemed like the whimsy of a science fiction novelist.”

©1994-2014 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

About the Author

Jake Romero, Associate, Mintz Levin Law firm

Before joining Mintz Levin, Jacob served as a judicial extern for the Honorable William McCurine Jr. of the US District Court, Southern District of California, where he drafted reports and recommendations on habeas corpus petitions and Social Security appeals.

Prior to that, he worked at the University of San Diego's Entrepreneurship Clinic as a student attorney, interviewing, screening, and assessing issues of potential clients, and researching issues regarding choice of business entity, trademark, and contract waivers for small business owners who were unable to afford legal...


Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.