Toysmart, FTC Overruled on Sale of Customer Data

The U.S. Bankruptcy Court in Massachusetts today denied a motion by Waltham, Mass.-based to approve a settlement the company reached with the Federal Trade Commission (FTC) last month to sell its customer data.

Judge Carol Kenner put off a final decision on whether the customer list may be sold in the future and, if so, whether restrictions would be imposed.

Last month, the attorneys general of 39 states filed an objection to the proposed sale with the bankruptcy court. Any sale of the data, which Toysmart wants to sell in order to satisfy its creditors, would have to be approved by the court. Opponents of the sale say it would violate's stated privacy policy, which pledged that consumer data wouldn't be shared with third parties.

"The decision is a victory for consumers and everyone interested in Internet privacy," Massachusetts Attorney General Tom Reilly said in a statement today.

The settlement reached last month by Toysmart and the FTC would have allowed Toysmart to sell the information to a "successor company" that plans to buy Toysmart's entire Web site and business. Under the terms of today's ruling, any specific offer to sell the data will have to go back to the court for approval. went out of business in May and filed for bankruptcy protection in June.

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