Disney expected to pay Toysmart.com to destroy customer list

By Linda Rosencrance, InfoWorld |  Business

A SUBSIDIARY OF Walt Disney is expected to offer defunct online retailer Toysmart.com $50,000 to destroy its customer list.

The offer is being made as part of a bankruptcy court settlement designed to protect consumers' personal information, including their names, addresses, and buying habits. The money would be distributed among Toysmart's creditors. The Waltham, Mass.-based company went out of business in May and filed for bankruptcy the following month.

Attorneys for Toysmart.com are expected to present the offer from Disney's Buena Vista Internet Group to U.S. Bankruptcy Court Judge Carol Kenner in Boston within the next two days, according to Dave Steer, a spokesman for San Jose-based Truste, an organization that awards a seal of approval to companies that promise to adhere to online privacy guidelines.

Toysmart's lawyers "passed the offer through our attorneys, and I believe it's expected to be presented to the court in the next day or two," Steer said.

In July, Disney, which owns 60 percent of Toysmart, offered to purchase and destroy the customer list for $50,000, but Toysmart turned down the deal. The company also rejected an offer by Digital Research, in Kennebunk, Maine, to buy the customer list for $15,495. Both offers were rejected for being too low.

"The money is the same because sufficient time went by and no one came forward to offer more money," Steer said. But, he added, the latest offer "is different, because now Disney is saying [to Toysmart], 'We'll pay you $50,000 to hit the delete button.'"

Neither the Boston-based attorneys for Toysmart.com nor a spokeswoman for Disney's Buena Vista Internet Group returned numerous telephone calls requesting comment.

In June, Truste ignited a controversy over the sale of Toysmart when it asked the bankruptcy court to block the sale of the company's customer list. Toysmart.com, which displayed a Truste seal, had promised consumers that it would never release their personal information to a third party.

At that time, Truste also filed a complaint with the Federal Trade Commission (FTC), which also tried to block the sale of the customer list, as did the attorneys general of 39 states, including Massachusetts.

In August, Kenner denied a motion by Toysmart attorneys to approve a settlement with the FTC that would have allowed Toysmart to sell the information to a "successor company" that planned to buy Toysmart's entire Web site and business.

Kenner now must approve Disney's offer. According to court records, a hearing in the case is scheduled to take place Thursday at 10 a.m.

"We applaud this offer," Steer said. "It proves the strength of our program. We made this a public issue and we wanted this [result] all along."

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