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On July 10, 2000 the FTC file suit alleging that Toysmart had misrepresented it would "never" disclose, sell, or offer for sale consumers' personal information to third parties. On July 21 st , the FTC announced that it would file an amended complaint alleging that Toysmart had also collected names, e-mail addresses, and ages of children under 13 without notifying parents or obtaining parental consent, as required under the Children’s Online Privacy Protection Act (COPPA), 15 U.S.C. §§ 6503 and 16 C.F.R. §§§§ 312.3-312.5. The FTC’s allegations arose after Toysmart began soliciting bids for its assets, including customer information, through its Web site and major newspapers.

The FTC settled its charges with Toysmart, proposing a federal district court order that would require Toysmart to delete any information collected in violation of COPPA, prohibit Toysmart from misrepresenting its information collection practices, and bar the company from disclosing customer information, except as allowed by a related Bankruptcy Order. As part of the settlement, a proposed Bankruptcy order would allow the company to sell its customer information to a "Qualified Buyer" that would take over Toysmart’s Web site and adhere to Toysmart’s privacy policies as its successor-in-interest. Customers would be required to give their affirmative consent ("opt-in") to any new uses for their information.

On August 17, 2000, the Bankruptcy Court rejected a motion by Toysmart to enter into a settlement with the FTC, stating that the court would impose no pre-set restrictions on the sale of Toysmart’s assets since no buyer had come forward. The Court indicated it would hear objections to an asset sale if a new buyer made an offer.

This page was last modified on July 22, 2007.

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