Office of the Attorney General News Release Archive

Monday, April 16, 2001


At Stake is Privacy of Bankrupt ''s' 3 Million Customers

AUSTIN - Texas Attorney General John Cornyn has asked a Delaware bankruptcy judge to prevent failed e-tailer from selling its customer list of nearly three million consumers. A hearing on this motion is set for June 1., a Los Angeles-based specialty toy company that filed for bankruptcy in Wilmington, Del., on March 7, had obtained bankruptcy court approval to sell off its assets. However, the company maintained that it would only sell its customer list to someone who purchased the stock of the reorganized company. enticed customers to its web site with a privacy policy that read in part:

"eToys respects your privacy. We do not sell, rent, loan or transfer any personal information regarding our customers or their kids to any unrelated third parties. Any information you give us about yourself or your kids is held with the utmost care and security and will not be used in ways to which you have not consented."

"If another company were to acquire as a going concern," said Attorney General Cornyn, "we might not have an objection if the buyer would then honor that same privacy policy these customers have relied on."

Cornyn's objection, though, is that a sale of eToys stock could be illusory. Someone could hypothetically buy the stock after all the other assets are sold and get a customer list with nearly three million names as a bonus for buying worthless stock.

"I have consistently maintained that companies need to honor their privacy agreements in or out of bankruptcy, and I will vigorously defend the rights of Texas consumers on this issue," Cornyn added.

In addition to blocking any proposed sale of the customer list , Cornyn asks the bankruptcy court to require eToys to give actual notice to its customers of its present intentions to allow the customer list to be transferred if its stock is sold, and to allow the customers an opportunity to exercise their option to preclude transfer of their personal information.

Cornyn's office has consistently been the first to object to proposed sales of customer lists by bankrupt dot-coms in order to protect the privacy of Texas consumers.

In the Boston, Mass., bankruptcy, the court ordered that the customer list be destroyed. In's Austin bankruptcy case, a settlement was reached with the Texas Attorney General in which all sensitive personal information was deleted and the customers received notice and an opportunity to voice their consent to the sale prior to the transfer of this information to the new owner, MarthaStewart Omnimedia.

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Contact: Mark Heckmann, Tom Kelley or Jane Dees Shepperd at (512) 463-2050.
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