The California Supreme Court heard oral argument in a challenge to the state's Song-Beverly Credit Card Act, which limits the collection of personal information when a credit card is used for a purchase.
Apple told the court that the law should only apply to brick-and-mortar stores and not online businesses.
Last year, the court issued the Pineda v. Williams-Sonoma decision, where it held that retailers may not collect zip codes from consumers who use their credit cards at the time of purchase.
The court's determination that zip codes constitute "personal identification information" under the Song-Beverly Credit Card Act spawned dozens of class action suits against retailers, including one against Apple.
Named plaintiff David Krescent alleged that Apple violated the Act when it requested his address and phone number to establish an iTunes account. A state trial court judge denied Apple's demurrer to the suit, and an appellate court declined to reverse.
On appeal to the state's highest court, Apple argued that the Act should be limited to physical stores where credit card verification is easier. Online companies need information such as an address and phone number in order to prevent credit card fraud and identity theft, Apple told the court.
"Computer criminals can engage in online credit card fraud on a vast automated scale, requiring even greater vigilance and verification than in person-to-person transactions," the company argued in its brief. "Unlike brick-and-mortar transactions, the only effective means that an online e-retailer has to prevent fraud is to ask the customer for personal identification information that a fraudster would have difficulty obtaining, namely, the cardholder's billing address and telephone number."
Despite passage of the law prior to the existence of sites such as iTunes, Krescent contends that the intent of the Act is to protect consumers and that it should be broadly interpreted. "The purpose of the Act is to prevent merchants from overreaching in their personal information requests," according to his brief. "The Legislature could have limited the Act, and could have stated the Act does not apply to any transaction where the merchant does not actually physically obtain the credit card. . . yet the Legislature deliberately chose not to do so."
A decision from the California Supreme Court is forthcoming. To read Apple's brief to the court, click here.
To read the plaintiff's brief to the court, click here.
Why it matters: A decision from the court applying the 1971 law to online transactions in 2012 could have huge ramifications for e-retailers, the vast majority of which collect information covered by the Song-Beverly Act.