- February 12, 2011
- Posted by: Seth Heyman
- Categories: Business Law, Featured, Internet Law, Internet Marketing, Marketing & Advertising Law, Regulatory Compliance
On Thursday February 10th, the California Supreme Court ruled that a consumer’s ZIP code constitutes “personally identifiable information” and thus falls under the state’s strict consumer data privacy law. The decision means makes it illegal for merchants to request a consumer’s ZIP code prior to or during the course of a transaction and to use that information for marketing purposes. The decision will have enormous consequences for retailers and marketing organizations.
The Song-Beverly Credit Card Act of 1971 (Credit Card Act) (Civ. Code, § 1747 et seq.) is a California statute that prohibits businesses from requesting that cardholders provide “personal identification information” during credit card transactions, and then recording that information. The case was brought against Williams-Sonoma, which, like nearly every large retailer, requested a California consumer’s ZIP code, recorded the information, and used it for marketing purposes.
The ruling overturned two lower court decisions tossing out the lawsuit, and will have a significant and immediate impact on California retailers, as the ruling applies retroactively. If nothing else, the ruling will generate an onslaught of new class action lawsuits based on the “mishandling” of ZIP code information, several of which are already pending. It is still unclear whether merchants can ask for similar information when patrons are paying with cash, debit cards and gift cards; another issue likely to play out in the courts.
The implications for online marketing and sales are clear and ominous. An entire industry relies on the collection and use of consumer information, nearly all of which includes ZIP codes. Online marketing organizations and even some online retailers may find it easier to simply exclude California residents, rather than run the risk of becoming the target of California class action attorneys.