FTC vs. Toysmart

By: Daniel Bronski, Conway Chen, Matthew Rosenthal & Robert Pluscec

Last summer, Toysmart agreed to a settlement with the Federal Trade Commission concerning use of its customer information database. Under the terms of the settlement, the defunct Internet toy retailer was permitted to sell customer information without either providing its former customers notice or giving them an opportunity to block the sale or use of their personal information. This issue ignited a privacy-rights maelstrom, but ended anti-climatically for Toysmart; in January, Buena Vista Internet Group, a Disney subsidiary and 60% majority shareholder of Toysmart, agreed to compensate the company’s creditors $50,000 for the privilege of destroying the database. U.S. Bankruptcy Court Judge Carol Kenner approved this plan, subject to the limitation that Toysmart attorneys must retain the list and destroy it (rather than physically transfer it to Buena Vista) when all creditor claims are satisfied.

Cite: 2001 Duke L. & Tech. Rev. 0010