Copyright 2000 Chicago Sun-Times, Inc.
Chicago
Sun-Times
July 11, 2000, TUESDAY, Late Sports
Final Edition
SECTION: FINANCIAL; Pg. 46
LENGTH: 408 words
HEADLINE:
U.S. sues Toysmart over privacy
BYLINE: BY ANNA MARIE
STOLLEY
DATELINE: BOSTON
BODY:
Toysmart.com Inc., majority owned by Walt Disney Co., was sued by the U.S.
Federal Trade Commission, which wants to block the bankrupt Internet retailer
from selling personal information about its customers.
The lawsuit filed
in U.S. District Court in Boston seeks a court order against Toysmart to halt it
from selling the names, addresses, billing information, family profiles and
buying habits of consumers who have visited the company's Web site.
Last
month, Toysmart filed for Chapter 11 bankruptcy. The Waltham, Mass.-based
Internet toy retailer promises on its Web site that customer data will not be
shared.
"Even failing dot-coms must abide by their promise to protect
the privacy rights of their customers," said FTC Chairman Robert Pitofsky in a
statement.
Disney spokeswoman Michelle Bergman declined comment.
The lawsuit paves the way for similar litigation against an expected
wave of failing Internet companies attempting to sell off their databases.
"For a lot of these companies, what do they have to sell when they go
bankrupt?" asked David Loundy, a Chicago attorney specializing in Internet law.
"A little bit of equipment. Maybe some intellectual property. The database may
be the most valuable thing they have."
Jonathan Hangartner, an
intellectual property and Internet law attorney in San Diego, said the FTC's
decision "sends a strong signal that the government will become much more active
in protecting the privacy of personal information disclosed to
Internet retailers."
The FTC commissioners voted 5-0 on Friday to go to
court against the company after settlement talks failed.
Since September
1999, the Web site has posted a policy stating information "will never be shared
with a third party." The Web site currently states that it is no longer taking
orders.
Toysmart, the 24th most-visited Web site last Christmas, stopped
taking orders in May when creditors forced it to seek bankruptcy protection.
This action came after Disney announced it was pursuing other Web priorities
after investing more than $ 50 million in the startup.
In June, Toysmart
advertised the sale of its customer list and database to help satisfy its
creditors, provoking a major outcry from privacy advocates. The TRUSTe
privacy-seal program, which certified Toysmart for complying with its
guidelines, asked the FTC to intervene, but Toysmart lawyers in Boston say
privacy policies don't apply to bankrupt e-tailers.
GRAPHIC: BLOOMBERG NEWS
LOAD-DATE: July 13, 2000 
