Category Archives: Marketing

The Nordstrom Case: What’s in an Email Address?

Personal Identification Information (PII), according to the US District Court (Eastern Dist. of California) applying California’s Song–Beverly Credit Card Act of 1974 (“Credit Card Act”) (Cal. Civ.Code §§ 1747 et seq).  In the class action case Capp v. Nordstrom, a customer alleged that Nordstrom requested his email address in connection with a credit card transaction at a Nordstrom retail store for the purpose of sending him an e-receipt.  The customer further alleged that Nordstrom then used his email address to send him unsolicited marketing materials in violation of the Credit Card Act.  The issue, among others, the court was faced with was whether an email address is PII under the Credit Card Act.

Attribution: Vrysxy
Attribution: Vrysxy

The Facts

According to the customer, a Nordstrom cashier asked him to provide his email address to receive an electronic receipt.  Believing it was required to complete the transaction, the customer provided his email address to the cashier.  The cashier then typed the customer’s email address into the portable sales device, at which point in the transaction the customer’s credit card number and email address were recorded in the same portable device.  As expected, the customer later received an email with his receipt; however, according to the customer, he also received marketing and promotional materials from Nordstrom “on a nearly daily basis.”

The Credit Card Act

Under the Song-Beverly Credit Card Act, a company that accepts credit cards for business transactions cannot “request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person … or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.”  As to the definition of PII, the statute states that PII means “information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder’s address and telephone number.”

The Credit Card Act imposes civil penalties for violations “not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation.”

The Decision

The statutory definition of PII makes no mention of email addresses. The district court noted that there is no published case deciding the question of whether an email address constitutes PII under the Credit Card Act.  Accordingly, without a controlling California Supreme Court decision on point, the district court was tasked with predicting how the California Supreme Court might decide the issue.

To do so, the district court pointed to a recent California Supreme Court case Pineda v. Williams–Sonoma Stores, Inc. (2011).  In Pineda, the California Supreme Court interpreted the words “personal identification information” to include a cardholder’s ZIP code.  The California Supreme Court’s analysis focused on the notion that a cardholder’s ZIP code can be used, together with the cardholder’s name, to locate his or her full address; and, importantly, a cardholder’s address and her ZIP code both constitute information unnecessary to the sales transaction that can be used for commercial purposes.  As the district court put it:

“In this case, an email address is within the scope of the statute’s broad terms concerning the cardholder as well because a cardholder’s email address pertains to or regards to a cardholder in a more specific and personal way than does a ZIP code.  Instead of referring to the general area in which a cardholder lives or works, a cardholder’s email address permits direct contact and implicates the privacy interests of a cardholder. Therefore, this Court predicts that the California Supreme Court would decide that an email address constitutes personal identification information as those terms are defined by section 1747.08(b) of the Credit Card Act.”

Nordstrom also argued that the Credit Card Act claim would be necessarily preempted by the CAN-SPAM Act if email addresses were determined to be PII.  The district court rejected this argument and held that the customer’s claims were not subject to CAN-SPAM’s preemption because the Credit Card Act applies only to email addresses and does not regulate the content or transmission of the underlying messages.

Do Not Track: How Impending California Law Will Affect All Commercial Web Sites

Do Not Track has found a home in California.  As of September 3rd, California Assembly Bill No. 370 (“AB-370”) sits upon Governor Jerry Brown’s desk awaiting his signature.  Once signed, this bill amends the California Online Privacy Protection Act (“CalOPPA” at Section 22575 of the California Business and Professions Code) and will require commercial website operators that collect personally identifiable information (“PII”) through the Internet to disclose how it responds to Do Not Track (“DNT”) signals.  Most mainstream web browsers have functionality that allows the user to signal her desire to not be tracked.  However, under current federal and state law, websites are not legally required to honor that signal.  While AB-370 does not make honoring a DNT signal a legal requirement, it does aim to inform consumers as to which websites have a practice in place to honor DNT signals.

Attribution:  Electronic Frontier Foundation
Attribution: Electronic Frontier Foundation

Background on the Existing CalOPPA Statute

In 2003, the California Legislature passed CalOPPA.  The law requires operators of “web sites and online services” that collect users’ PII to conspicuously post its privacy policy on its site and comply with the posted policy.  CalOPPA currently requires privacy policies to identify the categories of PII collected, the categories of third-parties with whom that PII may be shared, the process for consumers to review and request changes to his or her PII, the process for notifying users of material changes to the privacy policy, and the effective date of the privacy policy.  An operator has 30 days to comply after receiving notice of noncompliance with the privacy policy posting requirement. Failure to comply with the CalOPPA requirements may result in penalties of up to $2,500 for each violation.

It is important to note, CalOPPA has broad reach.  Virtually all commercial websites fall within its scope for two reasons.  First, it is hard to imagine any commercial website not collecting PII, which (for the purposes of CalOPPA) is defined under Section 22577 as “individually identifiable information about an individual consumer collected online by the operator from that individual and maintained by the operator in an accessible form, including […] (1) a first and last name, (2) a home or other physical address, including street name and name of a city or town, (3) an e-mail address, (4) a telephone number, (5) a social security number, (6) any other identifier that permits the physical or online contacting of a specific individual, or (7) information concerning a user that the Web site or online service collects online from the user and maintains in personally identifiable form in combination with an identifier described in this subdivision.”  Second, even though this is a California law, it applies to any website that collects PII from consumers residing in California.  As such, CalOPPA (including the AB-370 revisions) has a de facto nationwide reach.

The Need to Amend CalOPPA (via AB-370)

The impetus for introducing AB-370 is the growing concern over online tracking, which is also referred to as online behavioral targeting.  According to the good folks at Wikipedia,

“When a consumer visits a web site, the pages they visit, the amount of time they view each page, the links they click on, the searches they make and the things that they interact with, allow sites to collect that data, and other factors, create a ‘profile’ that links to that visitor’s web browser. As a result, site publishers can use this data to create defined audience segments based upon visitors that have similar profiles. When visitors return to a specific site or a network of sites using the same web browser, those profiles can be used to allow advertisers to position their online ads in front of those visitors who exhibit a greater level of interest and intent for the products and services being offered. On the theory that properly targeted ads will fetch more consumer interest, the publisher (or seller) can charge a premium for these ads over random advertising or ads based on the context of a site.”

And, by many accounts, the practice of online behavioral targeting is on the rise. Last year, the Wall Street Journal featured an article describing user-tailored advertising and the explosive demand for web-browser collected consumer data.  One practice is online auctions of consumer web browser data. The article notes that “[d]espite rising privacy concerns, the online industry’s data-collection efforts have expanded in the past few years. One reason is the popularity of online auctions, where advertisers buy data about users’ Web browsing. Krux [which sells a service for website publishers to protect their customer data] estimated that such auctions, known as real-time bidding exchanges, contribute to 40% of online data collection.”  The article tells of one study, where the average visit to a webpage triggered 56 instances of data collection.

And, so, here we have AB-370 to the rescue.  According to the bill’s author, Assemblyman Al Muratsuchi, AB-370 “would increase consumer awareness of the practice of online tracking by websites and online services, […] [which] will allow the consumer to make an informed decision about their use of the website or service.”

CalOPPA After AB-370

In addition to the requirements under the existing law outlined above, the amended CalOPPA will:

1)      Require an operator’s privacy policies to disclose how it responds to web browser DNT signals or “other mechanisms that provide consumers the ability to exercise choice regarding the collection of PII about an individual consumer’s online activities over time and across third-party Web sites or online services”; provided the operator engages in PII data collection;

2)      Require an operator’s privacy policies to disclose whether third parties may collect PII about an individual consumer’s online activities over time and across different Web sites when a consumer uses the operator’s site; and

3)      Permit an operator to satisfy the response disclosure requirement for DNT signals by providing a clear and conspicuous hyperlink in the privacy policy to an online location containing a description, including the effects, of any program or protocol the operator follows that offers the consumer that choice.

For all the non-techies out there, it may be useful to quickly explain how Do Not Track technology works.  It is actually relatively simple.  In practice, a consumer wishing to communicate a DNT signal to sites she is visiting would generally do so via her web browser controls.  By changing the setting in her browser properties, the browser enables the HTTP header field (known as the “DNT Header”) that requests that a web application disable its tracking of an individual user.  The header field name is DNT and it accepts three values: “1” in case the user does not want to be tracked (opt out), “0” in case the user consents to being tracked (opt in), or “null” (no header sent) if the user has not expressed a preference. The default behavior required by the standard is not to send the header (i.e., null value), until the user chooses to enable the setting via their browser.

Implications of AB-370

Before going into the implications of the bill, it should be made clear what AB-370 is not.  One thing that the text of the bill and supporting commentary make clear is that AB-370 is not a Do Not Track law.  Back in March 2012, the FTC finalized the “Protecting Consumer Privacy in an Era of Rapid Change” report, in which the FTC endorsed the implementation of a Do Not Track system.  The report is not a regulation and, as such, there remains (even after AB-370 is signed into law) no legal requirement for sites to honor the headers.

In contrast, AB-370 is a disclosure law.  Its aim is to promote transparency.  The logic goes something like this:  If a privacy policy discloses how an operator handles a Do Not Track signal from a browser, then individual consumers will make informed decisions about their use of the site or the service.  As the California Attorney General’s Office put it, “AB-370 is a transparency proposal, not a Do Not Track proposal. When a privacy policy discloses whether or not an operator honors a Do Not Track signal from a browser, individuals may make informed decisions about their use of the site or service.”

What Remains to Be Seen Through AB-370 Transparency

While on the surface of the bill, the disclosure requirement might seem simple.  However, the next logical question is “but, how exactly?”  Despite the best efforts of industry consortiums, such as the World Wide Web Consortium (W3C), there is still no clear consensus on how to handle DNT signals.  Even less clear is how best to handle DNT signals in the face of third-party tracking on the operator’s site.  So, by extension, how best to disclose the operator’s handling of DNT signals is likewise unclear.  Until an industry practice becomes standardized, the best way forward has to be for the operator of the site to simply (but, extremely accurately) state how it responds to the DNT Header.  By way of example, this could perhaps be achieved by adding the following sentence to the operator’s privacy policy:

  • If Operator Doesn’t Recognize Do Not Track Signals: “This Site does not receive or respond to the DNT Header”
  • If Operator Does Recognize Do Not Track Signals: “This Site receives the DNT Header and responds to a DNT:1 value by … {fill in the blank with how data collection by the operator and/or its third-parties is impacted}“

Lastly, even though AB-370 is a disclosure law and not a legal requirement to honor DNT signals, the practical effect could leave little distinction.  The Consumer Watchdog predicts, albeit somewhat cautiously, that “requiring transparency could well prompt companies to compete based on their privacy practices [and] will likely prompt more companies to honor Do Not Track requests […]”.  How website operators react to the full transparency impact of AB-370 will be interesting to see! (Pun entirely intended)