Attorneys General Seek to Block Toysmart Data Sale

FRAMINGHAM (07/26/2000) - At a hearing Wednesday, Massachusetts and 38 other states will proceed with their plan to ask the U.S. Bankruptcy Court in Massachusetts to block the sale of Inc.'s customer data. The attorneys general of the 39 states filed an objection to the proposed sale with the bankruptcy court last week. Sale of the data, which Toysmart wants to sell in order to satisfy its creditors, must be approved by the bankruptcy court.

Opponents of the sale say it would violate's stated privacy policy, which pledged that consumer data would not be shared with third parties.

Speaking Tuesday night on Greater Boston, a news magazine show on public broadcasting station WGBH, Massachusetts Attorney General Tom Reilly said he and the other 38 attorneys general will continue their fight to stop the sale, despite a settlement reached last Friday by Toysmart and the Federal Trade Commission (FTC). The deal would allow Toysmart to sell the information to a "successor company" that plans to buy Toysmart's entire Web site and business.

Waltham, Mass.-based went out of business in May and filed for bankruptcy protection in June.

Reilly said that the FTC did the right thing by initially filing a complaint in U.S. District Court in Massachusetts seeking an injunction to block the sale but the commission dropped the ball by allowing the sale to a successor company. He argued that a successor company is still a third party. Reilly said that Toysmart's privacy policy was a promise -- in the form of a contract -- to consumers that it would never sell their personal information to a third party and that the company is now breaking that promise.

Reilly said the bankruptcy court would be setting a bad precedent by accepting the deal proposed by the FTC. For e-commerce to succeed, he said, consumers must be confident that their online privacy will be protected. Details to follow.

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