Consumer Federation of California

Internet retailers of music and other downloadable products may seek personal identifying information from consumers, the California Supreme Court ruled 4 to 3 on Monday.

The state high court said Apple Inc., which sells music on iTunes, and similar retailers were not covered by a consumer law that prevents California businesses from collecting personal information from credit card users.

‘While it is clear that the Legislature enacted the Credit Card 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,’ Justice Goodwin Liu wrote for the majority.

The Credit Card Act prevents California retailers from recording ZIP Codes or any personal identifying information as a condition of accepting a credit card. In exempting Apple and similar businesses from the law, the court said Internet retailers do not have the same safeguards against fraud as traditional stores.

‘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,’ Liu wrote.

Justice Joyce L. Kennard retorted in a dissent that the decision would leave ‘Internet retailers free to demand personal identification information from their credit-card-using customers and to resell that information to others.

‘The majority’s decision is a major win for these sellers, but a major loss for consumers, who in their online activities already face an ever-increasing encroachment upon their privacy.’