Disney Offers to Buy Toysmart.com Customer List

FRAMINGHAM (07/12/2000) - 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 U.S. Federal Trade Commission is suing to stop Toysmart.com from selling its customer list and related information in violation of a privacy agreement.

Toysmart.com hasn't yet received a formal offer from Disney to buy the list, said Alex M. Rodolakis, a Boston-based attorney at law firm Hanify & King.

Rodolakis is handling bankruptcy proceedings for Toysmart.com.

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% 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."

As part of its bankruptcy proceedings, however, Toysmart.com placed the customer list and other assets for sale.

"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.com'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.

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

Truste, a nonprofit Internet advocacy organization, filed suit to block the sale of Toysmart.com's customer list last week. The agency had a contract with Toysmart.com to put its privacy seal on the Web site, provided that the Waltham, Mass.-based company never divulged its customer list information to a third party.

The San Jose-based advocacy group also registered its complaint with the FTC, which triggered that agency's investigation.

Disney said it will 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 those on the list.

Rotolakis said Toysmart.com had already been in negotiations with the FTC before the agency filed suit Monday, and he added that he still hopes to resolve the problems.

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

Rotolakis 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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