Online retailer Toysmart has temporarily removed its customer list from auction as part of its Chapter 11 bankruptcy proceedings, according to wire reports.
The e-tailer’s attempt to sell its list as part of its dissolution process has been shrouded in controversy regarding how such a sale would be reconciled with the company’s posted privacy policy.
A week ago, the Federal Trade Commission ruled that the sale could only go through as part of a sale to its Web site. The FTC additionally ruled that the Web site could only be sold to a marketer in a similar business who agreed to abide by the policy’s stipulations.
But a challenge to the sale by 39 states and territories spearheaded by the Massachusetts attorney general’s office created an additional complication. According to the challenge filed in the United States Bankruptcy Court, Massachusetts Division, such a sale would violate the Massachusetts customer privacy act.
The Disney Corp., which owned a 60% stake in the now-defunct Toysmart, had allegedly made a $50,000 bid for the list, with the stated intention of destroying it.
But a second bidder, Kennebunk, ME-based Digital Research Inc., also made a $16,000 offer for some of the site’s assets, including a one-time use of the list for the purpose of conducting an opt-in survey on Internet privacy. Reached by telephone yesterday, Digital Research president Bob Domine indicated that his offer was still on the table.
Representatives of Toysmart could not be reached at deadline.
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