Truste offers privacy guidelines on bankruptcies

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By Linda Rosencrance

(IDG) -- Truste, a global privacy seal program, Wednesday released draft privacy guidelines for companies facing mergers, acquisitions and bankruptcies. The San Jose-based organization is accepting public comment on the guidelines until June 11.

"Our goal with these guidelines is to strike a reasonable balance between consumer privacy rights and expectations and the business need to realize the full value of corporate assets," Truste President and CEO Bob Lewin said in a statement. "In an economy valued by information, customer data is like gold and, as such, deserves enhanced protection."

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Specifically the guidelines (available online as a .doc file) call for a third party to oversee any transfer of personal information; recommend that companies give consumers notice about the transfer of their personal data and allow them to decide whether to allow that information to be transferred; and say that when companies go out of business they must still follow the privacy promises they made while in business.

Truste's announcement comes at a time of increased attention on privacy issues faced during a bankruptcy process.

Last year, online toy retailer Toysmart.com Inc. filed for bankruptcy and attempted to sell its customer database during bankruptcy proceedings.

In June, Truste ignited a controversy over the sale of the company's assets when it asked the bankruptcy court to block that sale.

Toysmart.com, which displayed a Truste seal, had promised consumers that it would never release their personal information to a third party.

At the time, San Jose-based Truste also filed a complaint with the U.S. Federal Trade Commission (FTC). The FTC also tried to block the sale of the customer list, as did the attorneys general of 39 states, including Massachusetts.

In late January, U.S. bankruptcy judge Carol Kenner allowed Toysmart.com to destroy its customer list, ending the controversy.

Andrew Shen, policy analyst at the Electronic Privacy Information Center in Washington, said he agrees there should be a discussion about what happens to personal information when a company goes bankrupt. But he's not sure that companies facing bankruptcy will feel compelled to comply with Truste's guidelines.

"What is Truste going to do to them, take away their seal?" Shen said. "They won't care about their reputation then, they'll just say, 'Good, take it away.' "

Truste spokesman Dave Steer said it's all about the value of a company's assets, even in bankruptcy.

"No company wants to be associated with a privacy abuser," Steer said. "They don't want it known that they're buying an asset from a company with a bad reputation. A company will buy a customer list so it can sell to those customers, but if those customers don't trust you because the way you obtained the customer list was questionable, [they won't buy from you]."

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