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FTC v. Toysmart.com

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Citation Edit

Federal Trade Comm'n v. Toysmart.com, LLC, 2000 WL 34016434 (D. Mass. July 21, 2000).

Factual Background Edit

Through its website, Toysmart.com, an Internet retailer of children's toys, collected detailed personal information about its visitors, including name, address, billing information, shopping preferences, and family profiles, which include the names and birth dates of children. Toysmart.com had posted a privacy policy on its website stating that it would never share its customers' personal information with third parties. That policy stated that:

Personal information, voluntarily submitted by visitors to our site, such as name, address, billing information and shopping preferences, is never shared with a third party.

The policy continued:

When you register with Toysmart.com, you can rest assured that your information will never be shared with a third party.

When it ran into financial difficulties, however, it attempted to sell all of its assets, including its detailed customer databases. Soon thereafter, the Federal Trade Commission learned of Toysmart.com's possible violation of its own privacy policy from TRUSTe, a non-profit privacy seal organization that had licensed Toysmart.com to display its seal. The FTC staff investigated this information and discovered that Toysmart.com was offering its customer list for sale in violation of its own privacy policy.

Trial Court Proceedings Edit

The FTC filed a lawsuit to prevent the sale of the customer information and alleged that Toysmart.com had misrepresented its privacy policy. The FTC also alleged that Toysmart.com violated the Children's Online Privacy Protection Act of 1998 COPPA by collecting names, e-mail addresses, and ages of children under 13 without notifying parents or obtaining parental consent.

Settlement Agreement Edit

Toysmart.com agreed to settle the case. The settlement forbid the sale of the customer information except under very limited circumstances. The consumer information could be sold only to a qualified buyer that (a) was in a market related to Toysmart's market and (b) would abide by the terms of Toysmart.com's privacy statement. If the buyer sought to change that privacy policy, it would be required to obtain consumers' affirmative consent to the new uses. The settlement required Toysmart.com to immediately delete or destroy all information collected in violation of the Children's Online Privacy Protection Act COPPA.

The final consent decree was never entered because the case was dismissed when Toysmart's assets were sold and the purchaser (Disney) destroyed the consumer information.

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