Statement of Commissioner Sheila F. Anthony
The settlements attempt to satisfy both the privacy interests of consumers and the business needs of a failing firm by establishing the conditions on the sale of Toysmart's customer list. Specifically, the order proposed to be filed with the bankruptcy court limits to whom Toysmart may sell its customer list. Toysmart may only sell the customer list in connection with its goodwill, not as a stand-alone asset, and only to a qualified buyer. A qualified buyer is defined as one that is in the "family commerce market" and one that expressly agrees to be Toysmart's successor-in-interest as to its customer list. Further, the qualified buyer must abide by the terms of the privacy statement and may make material changes to the privacy statement only with the opt-in consent of consumers.
To accept the bankruptcy settlement would place business concerns ahead of consumer privacy. Although the proposed settlement's definition of a qualified buyer attempts to ensure that only an entity "similar" to Toysmart is eligible to purchase the list, I do not believe that this limitation is an adequate proxy for consumer privacy interests. In my view, consumer privacy would be better protected by requiring that consumers themselves be given notice and choice before their detailed personal information is shared with or used by another corporate entity -- especially where, as here, consumers provided that information pursuant to a promise not to transfer it.
1. There are two proposed settlements before the Commission; one to be filed with the bankruptcy court and the other to be filed in district court. The proposed district court settlement will be filed only if the bankruptcy court approves the conditions limiting the sale of the customer list. The district court settlement specifically addresses the allegations of the complaint and accordingly, prohibits Toysmart from making false or misleading statements about the disclosure of customer information to third parties and from selling or disclosing customer information to any third party except as expressly provided in the bankruptcy order.