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Williams-Sonoma Zip Code Ruling: Just In Time To Be Irrelevant

Written by Frank Hayes
February 17th, 2011

Collecting Zip codes from customers is now illegal in California—just in time to be irrelevant. Last Thursday (Feb. 10), the state’s Supreme Court ruled that Williams-Sonoma broke a 1991 law when the kitchenware chain’s associates asked customers for their Zip codes during credit-card transactions and then retained the information to use for marketing.

That spells trouble for many large retail chains that have been asking customers for their Zip codes for years. But ironically, this problem may already be history. Today, every time a customer does an online or mobile transaction, a retailer automatically gets detailed information on who the customer is. With loyalty programs and other CRM initiatives, customers voluntarily offer up detailed information on who they are. As a practical matter, retail chains were going to stop doing this soon anyway; the clock just ran out on it a little early.

Unfortunately for retailers, the California court ruled that collecting Zip codes during credit-card transactions has been illegal since 1991. “In light of the statute’s plain language, protective purpose, and legislative history, we conclude a Zip code constitutes ‘personal identification information'” as that phrase is used in the law, wrote Associate Justice Carlos R. J. Moreno in the unanimous opinion. “Thus, requesting and recording a cardholder’s Zip code, without more, violates the Credit Card Act.”

Predictably, more than a dozen class-action Zip-code lawsuits have been filed in the past week, including complaints against Wal-Mart, Target, Macy’s, Bed Bath & Beyond, Radio Shack, Old Navy, Crate & Barrel, Victoria’s Secret, The Container Store, Shell and Tiffany. Those past offenses could rack up hefty fines by the time the cases are resolved.

There are a pair of ironies here. One is that Williams-Sonoma insisted collecting Zip codes couldn’t be illegal because so many people live in the same Zip code. How could that be personally identifiable information? That argument didn’t sway the justices—possibly because Williams-Sonoma actually identified the addresses of customers based on just their names and Zip codes. That probably should have been a warning flag.

Williams-Sonoma “used customized computer software to perform reverse searches from databases that contain millions of names, E-mail addresses, telephone numbers, and street addresses, and that are indexed in a manner resembling a reverse telephone book,” the court wrote. “The software matched plaintiff’s name and Zip code with plaintiff’s previously undisclosed address, giving [Williams-Sonoma] the information, which it now maintains in its own database. [Williams-Sonoma] uses its database to market products to customers and may also sell the information it has compiled to other businesses.” Sounds pretty much like personal identification, doesn’t it?


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