This story was written by Keith Dawson for the Industry Standard's Media Grok email newsletter. It is archived here for informational purposes only because The Standard's site is no more. This material is Copyright 1999-2001 by Standard Media.

THE INDUSTRY STANDARD MAGAZINE
FTC to Toysmart: Define 'Never'
Jul 11 2000 12:00 AM PDT

Toysmart says that when it said it would never disclose customer data, it meant 'unless someone wants to buy it.'


What part of "never" don't you understand? That's the question embodied in the lawsuit the Federal Trade Commission filed Monday against toy retailer Toysmart, which filed for bankruptcy protection early last month. The company is trying to sell its customer records to the highest bidder, despite the promise in its privacy policy (audited and approved by privacy watchdog TRUSTe) that it would never do so. The Wall Street Journal's Glenn R. Simpson broke the story in Monday's edition, and Tuesday virtually everyone covered it.

Simpson's Journal story Monday introduced most of the main elements detailed in Tuesday's wider coverage; today's Journal ran just four paragraphs to follow up.

The Washington Post ran the story on its front page. While most outlets pointed out that Toysmart's privacy policy promises the company will never share customer data with any third party, the Post's John Schwartz thought to ask a Toysmart lawyer to define "never." The lawyer declined.

Toysmart's local papers, the Boston Globe and Boston Herald, both assigned a reporter to the story. But the Globe gave pride of placement to Stephanie Stoughton's other toy-retailing story, this one about SmarterKids.com (SKDS) gamely hanging on despite Wall Street's pessimism about its genre. The Boston Herald's Greg Gatlin centered his coverage on the essential conflict at the heart of the Toysmart affair: the tug between the rights of consumers and the rights of creditors.

FTC sources may have given the New York Times' Matt Richtel the reason the agency singled out this particular case. Toysmart's action, Richtel wrote, threatens to compromise "not just names, addresses and shopping preferences of online toy shoppers, but potentially also family profile information, including names and ages of children."

The Times pinned down the dates that were key to the early part of the drama, including the surprising revelation that Toysmart had taken out an ad in the Wall Street Journal on June 8, one day before it would file for bankruptcy. Reuters listed some of the items Toysmart was offering with that ad: "intangibles, i.e. URL name, databases, customer lists, marketing plans, Web site content."

This may turn out to have been the last time for such a maneuver. The Times, Post and Associated Press all noted the intention of Rep. Spencer Bachus (R-Ala.) to file legislation that would define as an unfair business practice the act that Toysmart is contemplating. - Keith Dawson

FTC Challenges Toysmart.com to Prevent Sale of Consumer Data
Wall Street Journal
(Paid subscription required.)

FTC Challenges Toysmart Plan To Sell Customer Information
Wall Street Journal
(Paid subscription required.)

FTC Sues Web Store Over Plan to Sell Data
Washington Post

FTC Sues Toysmart.com to Halt Data Sale
Boston Globe

Online Toy Store Riding Out the Storm
Boston Globe

Suit Holds Toysmart to Promise
Boston Globe

FTC Moves to Halt Sale of Database at Toysmart
New York Times
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FTC Sues Toysmart.com Over Privacy (Reuters)
ZDNet

FTC Sues Toysmart.com Over Customer Data (AP)
USA Today