Disney offers to buy Toysmart.com customer list

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July 14, 2000
Web posted at: 8:43 a.m. EDT (1243 GMT)

by Jennifer Disabatino

(IDG) -- On the heels of a federal lawsuit against Toysmart.com Inc., The Walt Disney Co. offered to buy the customer list of the failed toy e-retailer to maintain the privacy of the Web site's customers.

The Federal Trade Commission (FTC) this week filed suit in an effort to stop Toysmart from selling its customer list and related information on the grounds that such a sale would violate the privacy policy posted on the company's Web site.

Toysmart hasn't yet received a formal offer from Disney to buy the list, said Alex M. Rodolakis, a Boston-based attorney who is handling ongoing bankruptcy proceedings for Toysmart.

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But Disney said in a press release that it would retire the list to protect customers' privacy. In a statement, the entertainment giant said it is "absolutely committed to maintaining the privacy of any information it or any company in which it is a major shareholder receives under a promise of confidentiality."

Disney is a 60 percent owner of the bankrupt online toy store, which had guaranteed its customers that it wouldn't sell or otherwise divulge customer information to a third party.

Customer information for the site includes names, addresses and ages of both customers and their children.

That privacy policy, which is still on the Web site, says, "Personal information, voluntarily submitted by visitors to our site, such as name, address, billing information and shopping preferences, is never shared with a third party. ... When you register with Toysmart.com, you can rest assured that your information will never be shared with a third party."

However, Toysmart placed the customer list and other assets up for sale as part of a proposal submitted to the U.S. Bankruptcy Court in Boston.

"You can't just buy the customer list. You have to buy other assets," Rodolakis said. The intention is that a third party would buy Toysmart's assets essentially intact, he said.

As for the promise to Toysmart's customers, "Those are the things that we're hopefully resolving," Rodolakis said.

On Monday, the FTC filed suit in U.S. District Court in Boston to block the sale of the list.

The controversy over the proposed sale began late last month when TRUSTe, a San Jose-based organization that signs up companies to adhere to a set of online privacy guidelines, said it planned to submit a legal brief asking the bankruptcy court to withhold its approval for the proposed sale.

TRUSTe officials also registered a complaint with the FTC, which triggered the commission's investigation. TRUSTe had licensed Toysmart to put the organization's privacy seal on its Web site, provided that the Waltham, Mass.-based company never divulged customer information to a third party.

Disney said it's willing to buy the list subject to the approval of the bankruptcy court, which has jurisdiction over the matter. If Disney isn't allowed to buy the list, the company said it would urge the court to permit a sale only to a buyer that would maintain the confidentiality of consumers who submitted personal information to Toysmart.

Rodolakis said Toysmart had already been in negotiations with the FTC before the agency filed its suit, and he added that he still hopes to resolve the issues.

FTC spokesman Eric London wouldn't comment on the suit or the commission's investigation, but he did say negotiations are continuing with Toysmart.

Rodolakis said he expects most offers to buy the company's assets to come in near the deadline for bids July 21.

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Federal Trade Commission (FTC)
Toysmart.com Inc.
The Walt Disney Co.

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