Marketers fear spread of CA ZIP code rules
Retail marketers are adjusting their data collection strategies after the California Supreme Court ruled in February that Williams-Sonoma could no longer collect ZIP codes during credit card transactions. Retailers are also concerned that the ruling, which has spawned similar lawsuits, will impact other types of data collection.
"We're shocked — we never expected a ruling that ZIP codes were personal information," said Bill Dombrowski, president of the California Retailers Association, a trade group that represents about 9,000 stores in the state.
California's highest court ruled in favor of plaintiff Jessica Pineda, who filed a class action suit claiming Williams-Sonoma used customer ZIP codes to find home addresses, market to consumers, and sell that data to other businesses. The court ruled unanimously that the gourmet food and cookware retailer violated the Song-Beverly Credit Card Act of 1971, which prohibits retailers from gathering customers' personal identification information during a credit card transaction.
Marketers were surprised by the ruling because similar lawsuits brought against other California retailers, such as Polo Ralph Lauren and Pottery Barn, were ruled against by lower courts. In a 2008 lawsuit brought against Party City, the California Fourth District Court of Appeals ruled that ZIP codes were too general to be considered personal identifiable information. "If I were a retailer, I'd probably stop requesting the ZIP codes [in California] altogether for the time being," said Ron Park, chief strategy officer of the retail vertical at Merkle, a CRM agency that works with retailers including Tommy Hilfiger and The Limited.
Since that ruling, more than 100 similar class action suits have been filed against dozens of other retailers, including online-only merchants Amazon.com and PayPal. Businesses named in the other suits include Big 5 Sporting Goods, Bed Bath & Beyond, Macy's, Lowe's, Office Depot and Walmart.
"I don't think the [California] Supreme Court had a clue about what they were unleashing," said David Faustman, an attorney at law firm Fox Rothschild who represented Party City in its case. "It's a very bad thing for California retailers."
Representatives from retailers including Macy's, Lamps Plus, Lowe's and The Container Store declined comment. Some retailers contacted for comment cited proprietary concerns when declining, while others cited pending legislation. However, Faustman said he does not expect to see the ruling impact retailers outside of the state.
Dombrowski said the California Retailers Association and its members are still determining what impact the ruling will have on their marketing strategies. He expects that many flexible retailers will be able to weather the change without major hurdles.
However, Jerry Cerasale, SVP of government affairs at the Direct Marketing Association, said it remains to be seen how the ruling and additional lawsuits will affect marketers. New lawsuits widen the possibility that other types of data collection could be considered violations of the Song-Beverly Act, he said.