The Massachusetts attorney general’s office, on behalf of 43 other states, two territories, and the District of Columbia, has filed a further objection to the proposed sale of the customer file for bankrupt e-tailer Toysmart (http://www.toysmart.com). The initial objection stemmed from a privacy policy posted on Toysmart’s Web site, which stated that the company would not share any information gathered with a third party.
The state’s current objection was filed in the U.S. Bankruptcy Court District of Massachusetts on Thurs., Aug. 3.
The action stems from the court’s approval of the sale under the rules set forth July 21 by the Federal Trade Commission, which stated that the list could only be sold to a firm in a similar line of business as Toysmart. The FTC ruling further stipulated the list had to be sold in tandem with Toysmart’s other Web properties, and only to a company that would abide by a stringent privacy policy.
The FTC settlement allows for the sale of the list to a third party, which the states oppose. According to the objection filed Thursday, under the FTC terms there is no requirement “that the customers on the list be notified of the sale and given an opportunity to consent to having their names and information be sold to a third party.”
The objection goes on to say that the consumer information collected via Toysmart’s site “likely includes information collected from children” and that under the Children’s Online Privacy Protection Act the list should be subject to the more-stringent requirements of opt-in consent.
The papers also allege that “opt-out” measures do not ensure that all consumers are actually notified, and that they may not opt out simply because they did not receive or read the notice.
Should the sale go through, the states have petitioned the court to adopt an “opt-in” consent, saying that “the only way to ensure that consumers are willing to agree to a change in the policy they understood was in effect when they provided Toysmart with their personal information is to obtain their affirmative consent.”
Toysmart temporarily removed the list from the bankruptcy procedures in late July, in hopes of finding more lucrative offers than the two made by potential suitors The Disney Co. and Kennebunk, ME-based Digital Research, Inc.
Joining Massachusetts in the current action were Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Hawaii, Idaho, Illinois. Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Northern Mariana Islands, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virgin Islands, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
New York and Texas have filed separate objections to the sale of the list.
Network
