Senate approves limits on dot-com database sales

ITworld.com |  Business

In a move that could have repercussions for the increasing number of failing dot-coms,
the U.S. Senate Thursday voted 83 to 15 to approve a bill that toughens rules
on when bankrupt companies can sell customers' personal information.

The legislation forbids companies from selling customers' personal information
at the time of bankruptcy if they had previously promised they wouldn't. A sale
or lease of the data can, however, go through if it is consistent with pre-existing
company policy or upon court consideration.

The U.S. House approved a similar bankruptcy bill two weeks ago. House and
Senate members will meet in a conference committee to work out differences between
the two measures. The final bill is expected to go to President George W. Bush
perhaps as soon as the next few weeks. He has said that he will sign the bill
into law.

The measure, part of a broad bill revamping U.S. bankruptcy laws, seems to
take aim at the widely used online business practice of collecting as much consumer
information as possible.

Internet companies, often valued by the number of users, find compiling a large
and detailed user database essential. In today's rougher times, with many dot-coms
going bust, the user databases are considered valuable assets.

The issue came up last year when online toy retailer Toysmart.com Inc. filed
for bankruptcy and attempted to sell its customer database to raise cash during
bankruptcy proceedings.

TRUSTe, the online watchdog group that accredited Toysmart's privacy policy,
complained and an online civil rights riot broke out. In late January of this
year, U.S. Bankruptcy Judge Carol Kenner gave Toysmart.com the green light to
destroy its customer list, ending the controversy.

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