Dissenting Statement of Commissioner Orson Swindle
in Toysmart.com, Inc., File No. X000075

Defendant Toysmart.com, Inc. ("Toysmart") represented that it would never disclose, sell, or offer to sell the personal information of its customers to a third party.  17 of the First Amended Complaint for Permanent Injunction and Other Equitable Relief. When faced with severe financial difficulties, however, Toysmart solicited bids for its customer lists, which include or reflect the personal information of its customers. Id. at  11. During the bidding process, Toysmart's creditors filed a petition for involuntary bankruptcy. Id. at  12. Toysmart has completed the bidding process but not yet sold its customer lists. Id. at  13.

The Commission filed a Section 13(b) complaint alleging that Toysmart's representation that it would never disclose, sell, or offer to sell the personal information of its customers was false because it had solicited bids for its customer lists. Id. at   17-18. The Commission sought an injunction against the sale of the customer lists and a declaration that "Toysmart's transfer of [its customer lists] to any third party [would] be a violation of the FTC Act." Id.

To resolve the allegations in the complaint, the Commission has agreed to allow Toysmart's customer lists to be sold to a third party, essentially so long as the buyer is in a similar line of business and agrees to abide by Toysmart's privacy policies.   2 and 3 of the Stipulation and Order Establishing Conditions on Sale of Customer Information ("Bankruptcy Order").

I agree that a sale to a third party under the terms of the Bankruptcy Order would be a substantial improvement over the sale that likely would have occurred without Commission action. Nevertheless, I do not think that the Commission should allow the sale. If we really believe that consumers attach great value to the privacy of their personal information and that consumers should be able to limit access to such information through private agreements with businesses, we should compel businesses to honor the promises they make to consumers to gain access to this information. Toysmart promised its customers that their personal information would never be sold to a third party, but the Bankruptcy Order in fact would allow a sale to a third party. In my view, such a sale should not be permitted because "never" really means never.(1)

I dissent.


1. If Toysmart had obtained the consent of its customers to a sale of the customer lists to a buyer that met the specific conditions spelled out in the Bankruptcy Order, I would have had no objection to the sale.