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Web Merchants Win in Court

May 1, 2009

Several federal court cases within the past year have ruled in favor of online retailers who had been charged with violating privacy laws that restrict the use of credit card information. The retailers include Zazzle.com and Symantec. The trend emerging in these cases appears to be a separation of online retailing from laws designed to protect customers while they're making credit card purchases in physical stores.

Yet, that these laws are undergoing new legal challenges in the courts puts online merchants in an uncertain legal position going forward, said Eric Goldman, a law professor and director of the High Tech Law Institute at the Santa Clara University School of Law. "The issue is what's the difference between online and offline interactions between customers and retailers, and how we should apply these laws to the online world," he explained. While some legal experts contend that Internet transactions should remain separate, others say the laws should treat online and offline the same. Still others think the Internet should have even stricter privacy laws because of the risk posed when information is exposed online, Goldman added.

Recent cases have involved complaints filed by consumers under the federal Fair Credit Reporting Act and California's Song-Beverly Credit Card Act. The Fair Credit Reporting Act prohibits retailers from printing receipts with a customer's full credit card number and card expiration date. The Song-Beverly legislation prohibits retailers from requiring customers to provide their home address and telephone number when making a credit card purchase.

In each court case, the consumer plaintiff contended two things: That an online retailer violated the law by either issuing an online receipt with too much credit card account information, or by requesting personal information in an online order form. In a case filed in January, Saulic v. Symantec, the plaintiff complained that the software retailer had violated California's Song-Beverly law by requiring the customer to enter a home address and phone number to complete an online purchase. The U.S. District Court for the Central District of California ruled in favor of Symantec, arguing that the law did not apply to online retailers who need that information to help verify a customer's identity.

There have been several cases brought under the Fair Credit Reporting Act. Not all of them resulted in court rulings that favored the retailers. In the case of Grabien v. 1-800-Flowers.com Inc., the U.S. District Court for the Southern District of Florida ruled in favor of the plaintiff. It decided that the law's prohibition against printing a receipt with credit card information extends to online receipts. That case was consistent with an earlier ruling by the U.S. District Court for the Central District of California in Vasquez-Torres v. StubHub Inc., which is an online tickets retailer owned by eBay Inc.

The following cases brought under the Fair Credit Reporting Act, however, have since ruled in favor of retailers. In Smith v. Zazzle.com Inc., the U.S. District Court for the Southern District of Florida ruled in favor of Zazzle in stating that the restriction on printing retail receipts applied only to brick and mortar retail operations, not to retail websites. That ruling supported earlier rulings in the Southern District of Florida in the cases Grabien v. Jupitermedia Corp., Haslam v. Federated Department Stores Inc. and Edwin King v. Movietickets.com.

Although these latest rulings bode well for online retailers, web merchants should be prepared for ongoing legal challenges, warned Goldman. "People still haven't thought through the broader implications for internet retailers," he said. Information in this article was edited from a story on InternetRetailer.com.

Topic: Wholesale News

Related Articles: privacy  retailers 

Article ID: 1059

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