Apple Inc. (NASDAQ:AAPL) has spent a lot of time in courtrooms fighting intellectual property claims, in federal courts and foreign courts around the world, but now some lawyers are in front of the California Supreme Court this week to discuss the merits of a 20-year-old law that balances credit-card information for purchases and giving out personal information to prevent fraud.
The Song-Beverly Credit Card Act of 1991 is a state statute that restricts the amount of personal information that stores can gather when verifying a credit-card purchase. The statute is under challenge by Apple Inc. (NASDAQ:AAPL) with support from several retailers from Wal-Mart Stores Inc. (NYSE:WMT) to eBay Inc. (NASDAQ:EBAY), which are claiming that the law does not apply to online retailers, which have a very different process and more difficulty in verifying the legitimacy of a credit-card purchase.
Apple Inc. (NASDAQ:AAPL) is arguing that the law applies only to physical retailers, where credit-card purchases can be easily verified with looking at the credit card and a photo ID. However, online retailers like the Apple Inc. (NASDAQ:AAPL) App Store or iTunes – or the Amazon.com Inc. (NASDAQ:AMZN) Marketplace, as well – claim that the law is too restrictive and increases the risk of fraud because these e-retailers need some personal information in order to verify purchases without the ability to inspect cards or IDs. Consumer advocates say that the law should apply to all transactions and that e-retailers don’t need as much information as they claim to prevent fraud – they say it’s more about marketing and targeted advertising in the future, plus privacy concerns.
“This case is an early warning sign about what we’re going to be seeing,” said Pam Dixon of World Privacy Forum. “There is a balance that needs to be found between the prevention of fraud and the over-collection of consumer information.”
If this law stands, how do you think it will affect e-retailers? If you were like billionaire fund manager David Tepper of Appaloosa Management LP and heavily invested in Apple Inc. (NASDAQ:AAPL) stock, how would you see this legal battle and its impending result? We’d like your comments!