FTC to let Toysmart sell customer list
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The 3-2 vote came after the FTC's staff lawyers recommended that commissioners approve the settlement.
Friday was the deadline for the FTC to file any objections with the U.S. Bankruptcy Court in Boston, which is charged with disposing of the assets of Toysmart in the wake of the company's fling for Chapter 11 protection last month. Commissioners had asked the court to block the sale of the Waltham, Mass., company's customer list because of privacy concerns.
The settlement would allow a company to buy Toysmart's name, its Web site and the list of consumer information only if the company pledged to abide by Toysmart's earlier promises to safeguard the list. Lawyers handling the sale of Toysmart's assets are requiring a deposit of at least $25,000 from prospective bidders, suggesting that they value the customer list at much more than that.
One company, Digital Research Inc. of Kennebunk, Maine, said in a statement Thursday that it would bid on the customer list and agree to keep the names private. The company's president, Bob Domine, couldn't be reached for further comment.
Walt Disney (dis), which owns 60% of Toysmart, also has previously offered to buy the list of customers and "retire" it if permitted by the federal bankruptcy judge.
A bankruptcy-court hearing is set for Wednesday.
Also Thursday, a coalition of 39 state attorneys general asked the bankruptcy judge to block the sale of Toysmart's customer list as a violation of their respective states' consumer-protection acts. The attorneys general, who have been working closely with the FTC, argued that the Waltham, Mass., company shouldn't be permitted to sell its customer information because the company had pledged on its Web site that such details would never be disclosed to third parties.
"Toysmart's decision to sell its customer list breaks a promise to its customers, who thought their personal information would be safe," said Massachusetts Attorney General Tom Reilly, who led the filing. "We have joined with the other states to make sure that the privacy of these consumers is not jeopardized to benefit Toysmart."
Harold Murphy, a lawyer with Hanify & King of Boston, which is handling the disposal of Toysmart's assets, said the company always had intended that any buyer of the customer list agree to abide by Toysmart's privacy policies.
The controversy has been embarrassing for Disney, which has lobbied the FTC aggressively against encouraging passage of broader privacy laws covering Internet sites. Disney maintains that the technology industry is capable of protecting the privacy of its customers without government intervention.
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