FTC v. Toysmart.com

Citation: Federal Trade Comm'n v. Toysmart.com, LLC, Civ. Action No. 00-11341-RGS (D. Mass. 2000).

Factual Background
Toysmart.com had posted a privacy policy stating that it would never share its customers' personal information with third parties. When faced with severe financial difficulties, however, Toysmart solicited bids for its customer lists that included or reflected the personal information of its customers. The company's creditors filed a petition to place Toysmart into involuntary bankruptcy, and the customer information was considered an asset of the bankruptcy estate.

Trial Court Proceedings
The FTC filed a lawsuit to prevent the sale of the customer information and alleged that Toysmart had misrepresented its privacy policy. The FTC also alleged that Toysmart violated the COPPA by collecting names, e-mail addresses, and ages of children under 13 without notifying parents or obtaining parental consent.

Toysmart 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'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 to immediately delete or destroy all information collected in violation of the COPPA.

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