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Dead Site? There Goes Privacy

Wired News Report

Privacy advocates who decry the collection of personal information online often point out that, even if a company promises not to disclose your data, it nevertheless might cough it up during a lawsuit or some other unforeseen circumstance.

Add financial desperation to the list of unforeseen circumstances. And set front and center as an example of how niggling concerns like user privacy go out the window when angry creditors come knocking.

After the Disney-backed toy-seller pulled the plug on operations in late May, it promptly put its customer database, one of its most valuable and liquid assets, up for sale -- this despite the privacy pledge still posted on the Toysmart website.

"Our promise: At, we take great pride in our relationships with our customers and pledge to maintain your privacy while visiting our site. 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 reads in part.

Toysmart isn't the only company violating its pledge, says TRUSTe, a nonprofit organization that monitors corporate privacy policies and hands out "seals" to companies that meet its privacy guidelines. Other failed retailers like and have also put their supposedly private user information on the block.

"As companies go belly-up during the dot com shakeout, it is ethically wrong and potentially illegal to sell personal, private information when it was promised to not be shared," said TRUSTe spokesman Dave Steer.

Toysmart's about-face is a particularly bitter pill for TRUSTe, because Toysmart had been awarded the TRUSTe seal, which supposedly "alleviates users' concerns about online privacy."

TRUSTe has responded by filing a complaint with the FTC, charging that Toysmart's broken pledge constitutes unfair and deceptive marketing. TRUSTe may also sue Toysmart for breaching the contractual obligations of the TRUSTe seal program.

"It's important that we send a signal to the industry that this is unacceptable," said Steer.

Regardless of what TRUSTe does, it won't be enough to sway the industry, said Jason Catlett, president of JunkBusters. Participation in TRUSTe is voluntary, and a participating company can drop out anytime it likes.

"The idea that TRUSTe can protect people's data when dot coms are dropping like flies is naive," said Catlett. "What's really needed is a law that protects consumers' data regardless of whether a company goes bankrupt or gets acquired."

Toysmart officials could not immediately be reached for comment.

. . . watch for more stories coming soon  


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