Shopify's Legal Battle: Data Privacy Under Scrutiny
A recent decision by a U.S. appeals court has significant implications for Shopify Inc. (NYSE: SHOP), as it mandates the company face a lawsuit in California. The allegations against this Canadian e-commerce giant center on accusations of illegally tracking shopper data through cookies without obtaining proper consent. This case emphasizes the growing regulatory and legal focus on data privacy practices among major internet platforms and services.
The court's decision to allow the lawsuit to proceed brings into sharp focus the ongoing scrutiny that tech companies face regarding their data handling practices. Shopify is facing a data privacy class action lawsuit in the U.S. The proposed class action had previously been dismissed by a lower court judge and a three-judge 9th Circuit Court of Appeals panel but was revived on April 21, 2025, in a 10-1 decision by the full 9th Circuit, according to Reuters.
In the proposed class action, California resident Brandon Briskin alleges that Shopify installed tracking software on his iPhone without his consent when he made a purchase from a retailer. He claims the company then used his data to create a profile and sell it to other retailers. Shopify, a Canadian company that operates across the U.S., has argued that it should be sued in Delaware, New York, or Canada rather than California.
However, the court ruled that Shopify can be sued in California because it targeted residents of the state with its tracking software. Following the decision, a lawyer for Briskin stated that the court’s ruling will make internet-based companies accountable for their actions. In response, a Shopify spokesman expressed concerns, saying that the decision makes online retailers vulnerable to lawsuits anywhere and “attacks the basics of how the internet works.”
This ruling could make it easier for American courts to assert jurisdiction over online platforms, as noted by reports indicating that 30 states and Washington, D.C., sided with the plaintiff, asserting that they should be able to enforce their consumer protection laws against companies that do business in their marketplaces.
As this legal battle unfolds, it's crucial for investors to watch how this case might impact Shopify's operations and compliance strategies. The outcome of this case could have wider implications for how Shopify manages user data, potentially influencing its business strategy and customer trust.
In the backdrop of this legal challenge, Shopify has been experiencing significant growth. The company reported in February 2025 that during the fourth quarter of 2024, its unified commerce platform saw a 31% increase in revenue, reaching $2.81 billion. Additionally, full-year revenue rose by 26% to $8.88 billion, and subscription revenue increased by 9.1%.
“2024 was one for the books and further solidified us as a leader in unified commerce,” Shopify President Harley Finkelstein said during the company’s quarterly earnings call. He added, “I’m especially proud to share that in the U.S. alone Shopify is now over 12% of the eCommerce market share. And we continue to grow rapidly in places like Europe and Japan.”
The legal issues surrounding data privacy are becoming increasingly pertinent as consumers become more aware of how their information is being used. With growing public concern over data security, companies like Shopify must navigate these challenges carefully to maintain consumer trust and comply with evolving regulations.
As the case progresses, the potential ramifications for Shopify could extend beyond just legal fees and reputational damage. If the court rules against them, it could set a precedent that impacts not only Shopify's business model but also how other tech companies approach data privacy.
In conclusion, the ongoing legal battle highlights the critical intersection of technology, privacy, and regulation. As Shopify braces for this challenge, stakeholders will be keenly observing the implications for the broader tech landscape.
